Position of Wagering Agreements in India

Validity of an agreement by way of wager: According to Section 30 of the Indian Contract Act, 1872, wager agreements are void, i.e., they are not enforceable by law. A person cannot sue to recover the amount won by way of wager, or non-compliance of any party to abide by the results of the wager.

Illustration: If A agrees to pay B Rs.1000 in case Team X wins and B agrees to pay A Rs. 1000 in case Team X loses, then it is a wagering agreement and shall be rendered void. A cannot sue B to ask for money won by way of a wager.

Definition of a wagering agreement: The word ‘wager’ literally means ‘a bet’. No clear definition of a wagering agreement has been given in the Indian Contract Act. However, an explanation regarding the same has been enunciated by Hawkins J. in the case of Carlill v. Carbolic Smoke Ball Co., [1].

“A wagering contract is one by which two persons professing to hold opposite views touching the issue of a future uncertain event, mutually agree that, dependent on the determination of that event, one shall pay or hand over to him, a sum of money or other stake; neither of the contracting parties having any other interest in that contract than the sum or stake he will so win or lose, there being no other real consideration for the making of such contract by either of the parties.”

From the above statement, it can be inferred that the wagering agreement is one that includes the following attributes:

  • The parties to the agreement hold opposite views regarding an uncertain event.
  • A party may gain or loss on the basis of results of the uncertain event concerned.
  • The parties to the agreement have no other interest except the money or stake they have put as a wager.

Essentials of a wagering agreement:

  • Uncertain Event: There must be an uncertain event on which the parties bet their money or stake. In most of the cases, an uncertain event implies a future event, however it is not necessary as there might be an event which has taken place in the past but the parties aren’t aware of its result [2]. The important factor is the uncertainty in the minds of the parties to the agreement.
  • Chances of gain or loss: In an agreement by way of wager, it is essential that parties have the mutual chances of gain or loss. One party wins and the other loses as per the result of the uncertain event on which money or stake was put. In Babasaheb v. Rajaram [3], it was held if one party has a chance of winning but another party is not losing then it will not be a wagering agreement. 
  • No other interests: The parties who have entered into the wagering agreement must not have any other interests except in the amount or stake they will win or lose. This is an essential feature that distinguishes the wagering agreement from an insurance contract. While having insurance, parties tend to have ‘insurable interest’ in the person or property they are insuring. The purpose of the insurance contract is to gain protection against an uncertain event to avoid loss. However, in wagering agreement parties have no secondary interests other than losing or winning the wager.
  • Neither party has control over the event: The event on which the wager has been decided must be of such nature that it cannot be controlled by the parties to the agreement. “If one of the parties has the power to influence the results of the wager, the agreement will lack an essential ingredient of a wager.”[4] Illustration: A and B come into an agreement where B will pay A Rs. 5000 if A bought a new car next week. If he didn’t he will give B Rs. 5000. Here A has a control over the event of buying a car therefore this agreement will not amount as a wagering agreement.

Exceptions:

  • Collateral Transactions: It must be observed that wagering agreements are despite being void and unenforceable are not forbidden by law. The wagering agreement is not unlawful under Section 23 of the Indian Contract Act; thus collateral transactions to the wagering agreements are enforceable. In Gherulal Parakh v. Mahadeodass [5] parties A and B entered into an agreement to carry wagering transactions. When party A incurred certain loss on behalf of the firm, he brought an action against party B to recover the same. The Supreme Court in this instant case held party A to be liable for recovering his share of loss. The Nagpur High Court has stated when two parties make a contract of wager with another party and one of the party satisfies the liability of his own and his co-partner’s, such partner who paid the amount is legally liable to recover the same from his co-partner.[6]
  • Horse Racing: Section 30 of the Indian Contract Act provides that the subscription or contribution to the prize or sum of money, of five hundred rupees or more, to the winner/s of horse race shall not be rendered void.
  • Competitions requiring skills: Lotteries have been regarded as a wager. However, the competitions which include skills as their major ingredient are valid hence not a wager. “If skill plays a substantial part in the result and prizes are awarded according to the merits of the solution, the competition is not a lottery. Otherwise it is.” [7].

Conclusion: The term ‘wager’ has not been defined clearly in the provisions of the Contract Act. However, trends can be observed in the judicial judgments regarding what constitutes a wagering agreement and what contracts are out of its scope. By far, the position of wagering agreements in India can be concluded as void as enunciated in Section 30 of the Indian Contract Act; the parties to such agreement cannot sue each other for its enforcement. However, the practice of wagering being void has not been forbidden by law. Since wagering is a recurring instance in India, a better and more precise definition of the term is needed. People should be encouraged towards productive activities rather than trying their ‘luck’. Lotteries, deciding wager on the result of popular sports like cricket are ubiquitous in India; there is a need for stringent guidelines and provisions to digress people involved in these types of activities to rather be an asset for the country.

References:

Dr Avtar Singh, Contract Act and Specific Relief, EBC, 12th Edition, 2017

R.K. Bangia, The Indian Contract Act, Allahabad Law Agency, 15th Edition, 2016

  1. (1892) 2 Q.B. 484.
  2. Jethmal Madantal Jokotia v Nevatia & Co, AIR 1962 AP 350, 352.
  3. AIR 1931 Bom. 264.
  4. Birdwood J in Dayabhai Tribhovandas v Lakshmichand, ILR (1885) 9 Bom. 358, 363
  5. AIR 1959 SC 781.
  6. Gulam Mustaffakhan v. Padamsi, AIR 1923 Nagpur 48.
  7. Lord Heward CJ in Coles v Odhams Press Ltd, (1936) 1 KB 416 (DC).

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