Wager: In the term ‘Wagering Agreements’, the word ‘Wager’ means an equal probability of winning or losing a bet on the occurrence of something.
Agreement: An agreement is a type of a deal in which two parties agree on completion of some work. Agreements are made when there is no intention of creating a legal relationship. If there would be any intention of creation of a legal relationship, then it would not be an agreement, it would be a contract.
Wagering Agreement: Hence, wagering agreements are nothing but some normal betting deals without any intention of legal relationship. An example of a wagering agreement is: A cricket match between team A and team B is to start in Mumbai on 31st May 2021. C and D enter into an agreement that C will pay Rs. 5000 to D if team A wins, and if team B wins, D will pay Rs. 5000 to C. This is a wagering agreement and is void.
The “Section 30” under “Void Agreements” in chapter two named “CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS” in the “Indian Contract Act, 1872” deals with Wagering Agreements. “Section 30” states that “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.”
In the case CARLILL v CARBOLIC SMOKE BALL CO. (1893) 1 QB 256 (CA)– Wagering agreements are defined as: “ 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 dependant on the determination of that event, one shall win from the other, and that other shall pay or hand over to him, a sum of money or other stakes; neither of the parties having any other interest in that contract than the sum or stake he will so win or lose, there is no other consideration for the making of such contract by either of the parties. If either of the parties may win but can not lose, or may lose but can not win, it is not a wagering contract.
There are some essentials to establish the agreements as wagering agreements, which are described below:-
ESSENTIALS OF WAGERING AGREEMENTS
- Uncertain event: In wagering agreements, the two parties usually bet on the result of the future event which is yet to happen. However, it is not uncommon for parties to bet on a past event that has already occurred, but the parties are unaware of the results, and they bet on the result.
- Mutual chances of gain or loss: According to the concept of wager, there should be an equal probability of both the parties of winning or losing the bet. In any circumstance, if there is an unequal probability of winning or losing, then it will not establish a wagering agreement.
BABASAHEB v RAJARAM, AIR 1931 BOM 264- In this case, the facts were, two wrestlers had a scheduled wrestling match and they agreed on a deal. If either of them failed to appear on that, then that person would pay RS.500 to the other wrestler and the deal winning wrestler would get a total sum of RS.1125 from the gate money. One of them failed to appear and lost the deal and the other wrestler sued him for RS.500. The Defendant contended that the agreement was a wagering contract, but the court ruled that it was not because it lacked the wagering agreement’s main requirement of mutual gain or loss.
- Neither party to have a control over the event: According to this essential, neither party should have any control over the event. If there is any party who can control or who has the control of the happening of the event, then it would be total injustice to the other party and this will also violate the second essential “mutual chances of gain or loss.”
- No other interest in the event: Lastly, for establishing a wagering agreement, there should not be any other interest in the happening of the event except the money or the stake which the party will win or lose depending on the results and the bet.
EXCEPTIONS TO WAGERING AGREEMENT
As stated above, wagering agreements are void agreements, but still there are some exceptions to it.
- Horse Race Competition: Section 30 of the Indian Contract Act, 1872 is not applicable to any subscription or contribution, agreement to subscribe or contribute, made for any prize or sum of five hundred rupees or more than that to be awarded to the winner or winners of the horse race.
- Crossword Competitions and lottery: The aforementioned Section 30 prohibits the activity of lottery, in which a person’s chance of winning is solely dependent on luck and not on any skill. However, the same section does not prohibit any competition which solely depends on skills, not on luck. If skill plays a very important role in the competition and the result depends only on skill, then it can not be called a wager, but if the result depends on luck and charm then it will be a wager.
In India, wagering was seen in ancient times also. If we take Mahabharata times, for example, the ability of the opponent was tested by a game of board, not by the battle. Wagering agreements are invalid pursuant to section 30 of the Indian Contract Act, 1872 and these agreements are not enforceable at all, so nothing can be claimed.
The Hindu law netting has not been implemented in India’s contract act. As gambling is a trade or deal not at an individual level, therefore, not covered under article 19(1) or article 301. In the Indian constitution, states have been granted the power to frame some specific state laws on gambling and betting.
EFFECTS OF WAGERING CONTRACT
According to section 30, any wagering agreement is not enforceable in law, it is void. However, section 23 of the same act says that the wagering agreement is not unlawful and any transaction which is collateral to the main transaction is enforceable.
- GHERULAL PARAKH v MAHAHDEODAS, AIR 1959 SC 781– In this case, both the people entered into a contract and decided to carry on the wagering contracts with two firms of Hapur (Messers). It was decided that the contracts would be entered into solely by the respondent (Mahadeosdas), and that any loss would be borne solely by him. The appellant (Gherulal Parakh) was not ready to share the loss and the respondent filed to recover the half of the loss incurred by him in the transaction. The appellant took the defence of section 23 of the Indian Contract Act, 1872 and Section 69(1) of the partnership act to invalidate the contract.
The district court judge held that the agreement was void under the section 30 of the Indian Contract Act. Later on, the appeal was filed before the high court and the high court held that the agreement was void under section 30 but it is unlawful under the section 23 of the same act, and therefore it is enforceable between the parties.
Hence, after the judgement of this case, it is found that all wagering agreements are void but some are lawful and enforceable in the court.
DIFFERENCE BETWEEN WAGERING AGREEMENTS AND INSURANCE AGREEMENT
- Wagering agreements are void agreements whereas insurance agreements are legally binding.
- Parties have an insurable interest in insurance agreements but in wagering agreements parties do not have an insurable interest.
- The risk of loss in an insurance agreement is natural, whereas the risk of loss in a wagering agreement is unnatural.
- In wagering agreements, parties have opposing views on the happening and outcome of an event, and they bet on the future uncertain event’s outcome that one party will win a sum of money from the other, and the parties have no other interest other than this, whereas in insurance agreements, two parties, the insurer and the policyholder, enter into an agreement, and the insurer promises to pay the benefits/damages to the policyholder if any uncertain future accident happens.
DIFFERENCE BETWEEN WAGERING AGREEMENTS AND CONTINGENT AGREEMENT
- Wagering agreements are void agreements whereas contingent agreements are valid.
- In the contingent agreements, parties might have interest only in the happening of the event, but in the wagering agreements, parties only have interest in the money they have bet on.
- Contingent agreements are defined in Section 31 of the Indian Contract Act as a contract to do or not do something if some event, collateral to such contract, occurs or does not occur, whereas wagering agreements depend solely on the event’s occurrence and the result of it.
Thanking you for giving it a read and your valuable time.
Written By Anurag Gupta