Wagering Agreements under Indian Contract Act, 1872

Wagering Agreements under Indian Contract Act, 1872

Meaning of Wagering Agreements

The term ‘wager’ literally means ‘bet’. Wagering agreement is an agreement wherein one party promises to pay / receive money or money’s worth upon the happening or non happening of a future uncertain event. In other words, parties to a wagering agreement enters into an agreement upon happening or non happening of an uncertain event and if the uncertain event does/ does not happen as challenged, then the losing party will pay money or money’s worth to the winning party. Under this type of agreement, both the parties have equal chances of winning or losing the wager.

Indian Contract Act, 1872 does not define the term wager or wagering agreement. Section 30 of Indian Contract Act, 1872 states that agreements by way of wager are void. Hence, the parties to wagering agreements can not take any action against another party and can not claim any compensation from the other party under the wagering agreement.

Illustration: A and B were watching the India Pakistan Cricket match. A bets and states that India will lose the match but B bets that India will win the match. A and B enters into a wagering agreement wherein B will pay Rs.2000/- to A if India loses the match and A will pay B Rs.2000/- if India wins the match. This agreement is a wager agreement and is void.

Essentials of Wagering Agreements

Mutual Chance of gain or loss

It is an important essential under wagering agreement that both the parties to such agreement have mutual chances of gain or loss. One will win and the other party will lose the wager depending on the outcome of the uncertain event.
If one party can only win and not lose or can only lose and not win, then that is not a wagering agreement.

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Uncertain Event

Wagering agreements are dependent on happening or non happening on future uncertain events. Parties to the wagering agreement should not be aware of the results or outcome of the uncertain event.

No Other Interest in the Event

Parties to Wagering Agreement should have no other interest in the subject matter of the agreement except winning or losing the wager.

No Control over the Event

Wagering Agreement depends on chance. Parties to the wagering agreement should not have any control over happening or non happening of an uncertain event. If one party has control over the event, then it will not be an agreement of wager.

How is Wagering Agreement Different from Other Kinds of Agreement

Wagering Agreement vs Insurance Contract

S.No Wagering Agreement Insurance Contract
1 Wagering agreement is an agreement wherein one party promises to pay / receive money or money’s worth upon the happening or non happening of a future uncertain event. Insurance contract is an agreement between two parties(insurer and policyholder) in which the insurer promises to indemnify the losses caused to the policy holder of any loss caused to him or his property from unforeseen uncertain events.
2 According to section 30 of ICA, 1872,Wagering agreements are void Insurance Contract is a valid contract
3 Parties do not insurable interest Parties have insurable interest
4 Risk of loss is created by the parties Risk of loss is natural
5 It is not enforceable It is enforceable

Wagering Agreement vs Contingent Agreement

S No. Wagering Agreement Contingent Agreement
1 Wagering agreement is an agreement wherein one party promises to pay / receive money or money’s worth upon the happening or non happening of a future uncertain event. Contingent Contract is Contract to do or not to do something if some event collateral to such contract does or does not happen
2 According to section 30 of ICA, 1872, wagering agreements are void According to section 31 of ICA, 1872, Contingent Contracts are valid
3 Parties may not have any interest in the event except the wagering amount Parties may have interest in the event
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Enforceability of Wagering Agreement

Section 30 of the Indian Contract Act, 1872 clearly states that wagering agreements are void and party/parties to wagering agreement can not file a suit to recover or claim anything mentioned in the agreement.
However, Wagering agreements are illegal in India but are just void which means that parties can enter into a wagering agreement but will not be enforceable in any courts in India. Wagering agreements are void to maintain public policy and morality and to prevent activities like gambling and other illegal practices.

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Exceptions to Wagering Agreement

Horse Race Competition

Race Competitions are not wager because it does not solely depend on chance but also depends on the horse. It depends on the skills of the horse.

Contract of Insurance are not Wagers

A contract of Insurance is an indemnity contract. Insurance contract is an agreement between two parties(insurer and policyholder) in which the insurer promises to indemnify the losses caused to the policy holder. The main aim of insurance contracts are to indemnify the policy holder of any loss/ losses caused to the subject matter of the contract. Wagering is void whereas Insurance Contract is valid.
Illustration: X Insurance Co. Pvt Ltd. enters into an agreement with Mrs. Z to indemnify his house if any damage is caused to it by way of fire in return of regular monthly payment as insurance amount. This is not a wagering agreement

Skill Competitions are not Wagers

Skill Competition is not wagers because winning or losing depends on the skills of the person and it is not entirely dependent on happening or non happening of an event. Hence Skill Competitions like puzzles, crossword, etc are not wagers.

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Illustration: A and B enter into an agreement to see who wins the chess game. The person who loses the game will pay 1000/- bucks to the winning party. This is not a wager as it is not entirely dependent on winning and losing but also on the skills of both the parties.

Share Market Transactions are not Wagers

Transactions involving sale and purchase of shares and Stocks with an intention to give and take delivery of shares is not a wager. But if the mere intention is only to settle the price difference, the transaction will be a wager and will be void.

Sports Competitions are not Wager

Sports Competitions such as Boxing, Football, Cricket, chess etc are not solely dependent on chance but are also dependent on skills of the player.

Cases

Narayana Ayyangar v. Vallachami Ambalam (1927)

The court held that a chit fund cannot be called a wager even though some members have a chance to gain, yet none of them have a chance to lose as the recovery of the amount contributed is assured even if the time period is not known.

Jethmal Mandanlal Jakotia v. Nevatia & Co. 1962

The Court held that even though a wager is generally about happening or non happening of future events, it can also be about an event that happened in the past but the parties were not aware of its result or the time of its happening.

Rajshree Sugars & Chemicals Ltd. V. Axis Bank Limited

The Court held that the sequence of events in the present case reflected that the nature of the transaction was not in the form of a wager. Even though the plaintiff was susceptible to incurring huge losses yet that by itself could not deem the contract to be a wager.

References

https://blog.ipleaders.in/wagering-agreement-and-its-essentials/
https://accountlearning.com/wagering-agreement-meaning-essentials-exceptions-effects/
https://www.srdlawnotes.com/2017/07/essential-elements-of-wagering-contract.html
http://lawtimesjournal.in/agreements-by-way-of-wager/

Author: Shreya Rathor,
Bharati Vidyapeeth Deemed University, Pune, Final Year

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