WAGERING AGREEMENT

INTRODUCTION:

An agreement by way of wager is void (sec.30). But it is immortal. The word ‘wager’ means a ‘bet’. In a wagering agreement, two parties have opposite views regarding an uncertain event, and they stipulate that upon the determination of the event in a certain way the parties shall win or lose from each other a certain sum of money, and the parties have no other interest in the event except winning or losing a bet.

 

For instance, A and B may enter into a contract that if it rains today, B will pay him Rs. 1,000 or if it does not rain today, A will pay him Rs. 1,000, it will be a wagering agreement. If either of the parties may win but cannot lose, it is not a wagering contract.

 

Another example for this can be, There is an agreement between X and Y which states that if Indian Cricket Team beats England Cricket Team, X will pay Rs.2,000 and if England Cricket Team beats Indian Cricket Team, Y will pay Rs.1,000. The agreement is a wager.

 

CHARACTERISTICS:

1. Uncertain event- Such event generally is a future event, but may be a past event when the parties are not aware of its result or the time of its happening.

 

For Instance, A cricket match is to start at Banglore Between India and Pakistan. If India wins the match, B agrees to pay C Rs. 300, whereas if Pakistan wins the match, C agrees to pay Rs.300 to B. This is a wagering agreement as each party has the chance to win or lose. As, the gain of one party will be the loss of the other and vice versa.

 

2. Mutual chances of gain or loss- There should be a chance of one party winning and the other losing, on the determination of the event.

 

Brogden V. Marriott¹

A agrees to sell his cow to B for £500 if the cow gives 6kg milk everyday, but for £10 only if it fails to do so. The cow fails; but B will not succeed as the transaction, though ostensibly a sale, is in reality a wager.

 

Babasaheb V. Rajaram²

Two wrestlers agreed to play a wrestling match on the condition that the party failing to appear on the day fixed was to forfeit Rs.500 to the opposite party, and the winner was to receive Rs.1,125 out of the gate money. The defendant failed to appear in the ring and the plaintiff sued him for Rs.500. The defendant’s plea of a ‘contract by wager’ was rejected by the court on the ground that neither side stood to lose according to the results of wrestling match.

 

Diggle V. Hige³

In this, each one of the two parties in a walking match deposited of £200 with the stakeholder with the condition that the loser would forfeit the amount of £200 paid by him. The agreement was held to be a wagering one, as the stakes come out of the pocket of the loser.

 

Carlill V. Carbolic Smoke Ball Co.⁴

The defendant company agreed to pay £100 if a person contracted influenza after using the smoke ball manufactured by it, for a certain period according to a prescribed manner. The plaintiff used the smoke ball but contracted influenza. She was held entitled to recover the amount. It was not held to be a wagering agreement because the plaintiff was not to lose anything if she did not contract influenza and the defendant company was not to gain anything from the plaintiff if the ball had the desired effect.

 

3. Neither party to have control over the event. A wager is a game of chance.

 

4. No other interest in the event – Lastly, neither party have any interest in the contract than the sum or stake he will so win or lose and there is no other real consideration for the making of such contract. This distinguishes a wagering contract from a contract of insurance which requires an “insurable interest” i.e. an interest in the existence and preservation of the thing insured. A wife, for example, has an insurable interest in her husband’s life and she can take an insurance policy on her husband’s life.

 

SPECULATIVE TRANSACTIONS:

One of the forms of wagering agreement is an agreement to pay differences (between contract price and market price of goods) only, rather than actually making or taking the delivery of goods. Such transactions are not the commercial one but a wager on the rise or fall of the market which comes within the connotation of ‘gaming’. A ‘chit’ is not a wager.

 

EFFECTS OF WAGERING AGREEMENTS AND COLLATERAL TRANSACTIONS:

A wagering agreement is non-enforceable, thus the amount won on a wager cannot be recovered. A and B entered into wagering transactions in shares. B became indebted to A. B then executed a promissory note in favour of A to pay the amount. A could not recover the amount.

 

Though a wagering agreement is void and unenforceable, it is not forbidden by law, and therefore transactions collateral to the main transaction are enforceable. Thus, the plaintiff who lent money to the defendant to enable him to pay off a gambling debt could recover the same from the defendant.

 

Gherulal Parekh V. Mahadeo Das⁵

Supreme Court held that a partnership to enter into wagering transactions is not illegal, and therefore a partner who has paid the losses on such transactions may recover proportionate indemnity from his co-partners.

In states like Maharashtra and Gujarat, wagering agreements have been declared illegal also. Thus in these states the collateral transactions to wagering agreements are also void.

 

EXCEPTIONS:

1. Contract of insurance are not wagers
2. Skill competitions are not wagers
3. Horse race competition is not wager
4. Share market transactions are not wagers
5. Sports competitions are not wagers

 

EFFECTS OF WAGERING AGREEMENTS:

In India, wagering agreements are expressly declared to be void. Hence, it can not be enforced in any Court of law. Section 30 of the Act states that though the this agreement is void but still it is not forbidden by law. These agreements are not illegal. However, in the states of Gujarat and Maharashtra, this has been declared to be illegal.

 

1  5LJ (CP) 302

²(AIR 1931 Bom 264)

³(1877) 2 ExD. 422

⁴(1892) 2 QB 434

⁵(AIR 1959 SC 781)

Author: AKANKSHA CHHABRA,
School of Law,IIMT