Table of Contents
Introduction to Wagering Agreement
The primary meaning of ‘wagering’ is staking something of value upon the result of some future uncertain event, such as a horse race, or upon the ascertainment of the truth concerning some past or present event, such as the population of a city. Section 30 of the Contract Act, of 1872, expressly declares wagering agreements void.
Relevant Provision
Section 30 of the Contract Act, 1872
According to Section 30:
“Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made.”
Meaning and Definition of Wager
According to Merriam-Webster Dictionary:
“Wager is something on which bets are laid and stakes (as a sum of money) are risked on an uncertain event.”
According to Anson:
“A wager is a promise to give money or money’s worth upon the determination of an uncertain event.”
Case Law Definition:
Justice Hawkins defined a wager in Carlill vs. Carbolic Smoke Ball Co. as:
“One by which two persons professing to hold opposite views touching the issue of a future uncertain event mutually agree that dependent upon the determination of that event, one shall win from the other, and the other shall pay or hand over to him a sum of money or another stake; neither of the contracting parties having any other interest in that contract than the sum of stake he will so win or lose, there being no other real consideration for the making of such a contract by either of the parties.”
Essentials of a Wagering Contract
A contract is a wagering contract if it fulfills the following conditions:
- There must be a promise to pay money or money’s worth.
- The promise must be conditional on the happening of an event.
- The event must be uncertain, and neither of the parties must know the result of the event.
- Neither party has control over the happening or otherwise of the event.
- There must be equal chances of winning or losing the event; each party must stand to win or lose.
- The winning of one party must be the loss of the other party.
- The parties should have no interest in the happening or non-happening of the event other than the stake.
Note: It is essential to a wagering contract that each party under it either wins or loses, depending on the issue of the event, and therefore remains uncertain until the issue is known. If either of the parties may win but cannot lose, or lose but cannot win, it is not a wagering contract.
Characteristics of a Wager
Several case decisions, such as Kong Lee Lone & Co. vs. Lowsee Manjee, Motilal vs. Govindram, and Bashir Ahmad vs. Government of A.P., have highlighted the characteristics of a wager.
Uncertain Event
The foremost essential characteristic of a wager is that the performance of the bargain must depend upon an uncertain event. An uncertain event can also be understood as an event in the past, but the parties are unaware of its occurrence and results. A wager generally contemplates a future event, an event whose result or time of occurrence is unknown and uncertain to the parties.
Mutual Chances of Gain or Loss
The second essential characteristic is that both parties involved in the wager should have mutual chances of gain or loss. In the event of the occurrence of an uncertain event, one party should win while the other should lose.
Neither Party to Have Control Over Event
The third essential characteristic is that in order to make the agreement a wager, neither party should have any control over the event. It should remain an uncertain event for both of them.
No Other Interest in the Event
The parties should not have any real interest in the occurrence of the event other than the stake or money they are going to win or lose. The wager is on a subject in which the parties have no peculiar interest.
Common Intention to Wager
Both parties should have a common intention to wager. It does not matter what kind of a wager it is, as long as both parties have the intention to wager.
Real Intention
It has to be ascertained what the real interest of the parties is before it can be called a wager. Whether the parties intended to have the goods delivered or whether they only wanted to pay the differences after the due date.
Legal Standing of Wagers
Some wagers do offend public policy; however, wagering contracts are not illegal unless prohibited by law. They are void contracts, which are unenforceable by law but are not forbidden by law. Therefore, it can be said that wagers are:
- Void.
- Unenforceable by law.
- Not forbidden by law.
- No suit can be brought for the recovery of anything alleged to be won on any wager.
- This section does not consider a subscription, contribution, or agreement to subscribe/contribute anything unlawful which may have been made or entered into for or towards any plate, prize, or sum of money of the value or amount of five hundred rupees or upwards to be awarded to the winner of any horse race.
Kinds of Wagers
Some of the most recognized kinds of wagers are:
- Speculative Transactions
- Collateral Transactions
- Lottery
Speculative Transactions
Speculation is not necessarily gambling or wagering. However, in speculative transactions, risks of gain or loss exist and are transferred from one party to the other, but no new risk is being created by the transaction itself. Speculation contracts are not wagering agreements unless it is the intention of both parties at the time of entering into the agreements that they will not call for or give delivery from or to each other.
Collateral Transactions
A wagering contract can lead to a collateral transaction, which need not be illegal in nature. The money employed in a collateral transaction due to a wagering contract can be recovered through a suit.
Lottery
When a judgment in a distribution of prizes by lottery or chance in a game takes place due to chance and not due to skill, it is known as a lottery. A lottery is therefore a wager and is considered a void agreement.
Exceptions to Section 30
The following are the exceptions to Section 30 of the Contract Act, of 1872:
Horse Racing (Section 30)
Horse racing does not render void the winning of bets on horse racing. However, this exception will not legalize any provision of Section 294A of the PPC.
Crossword Competitions
If skill plays a substantial part in the result and prizes are awarded according to the merits of the solution, it is not a wager, e.g., crosswords.
In conclusion, a wagering agreement is generally made on a future uncertain event between two persons. It can equally be well made on a past event which is uncertain to the parties, e.g., which horse won the Derby last year. An agreement is a wager if one party is to win and the other to lose. There is no other real consideration except the money or some other thing agreed to be done by the losing party.