AGREEMENTS

EXPRESSLY DECLARED
TO BE VOID
 Wagering Agreement
Agreements entered into between parties under the
condition that money is payable by the first party to the
second party on the happening of a future uncertain
event, and the second party to the first party when the
event does not happen, are called Wagering Agreements
or Wager.
There should be mutual chance of profit and loss in a
wagering agreement. Generally wagering agreements
are void. Wager means a bet. It is a game of chance
where the probability of winning or losing is uncertain.
The chance of either winning or losing is wholly
dependent on an uncertain event.
Parties involved in a wagering contract mutually agree
upon the nature of the agreement that either one will
win.
Each party stands equally to win or lose the bet. The
chance of gain or the risk of loss is not one sided. If
either of the parties may win but not lose, or may
lose but cannot win, it is a wagering contract. The
essence of a wagering contract is that neither of the
parties should have any interest in the contract
other than the sum, which he will win or lose.
Parties to a wagering contract focus mainly on the
profit or loss they earn. Illustrations A and B agree
with each other that if it rains on Tuesday, A will
pay Rs. 100 to B and if it does not rain on Tuesday,
B will pay A Rs. 100. Such an agreement is a
wagering agreement and hence is void.
ESSENTIALS OF A WAGER
Dependence on Uncertain Event

One of the important essentials of a wagering

agreement is that it must depend upon an uncertain
event. Event may be past, present or future, but the
parties must be unaware of its future or the time of
its results or the time of its happening. Example: A
football match between team A and team B is to start
at Mumbai on 30th June 2016. C and D enter into an
agreement that C will pay Rs. 500 to D if team A
wins, and if team B wins, D will pay Rs. 500 to C.
This is a wagering agreement and is void.
 MUTUAL CHANCE OF GAIN OR LOSS
Another element of wagering agreement is that each
party to the agreement should stand to win or lose
as per the result of the uncertain event. If there are
no such mutual chances of gain or loss, there is no
wager. Example: A cricket match is to start at
Hyderabad between India and South Africa. If India
wins the match, A agrees to pay B Rs. 500, whereas
if South Africa wins the match, B agrees to pay Rs.
500 to A. This is a wagering agreement. In this case.
each party has the chances to win or lose. Here the
gain of one party will be the loss of the other and
vice versa.
In the case of Babasaheb v Rajaram, two wrestlers
agreed to play a wrestling match on 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.1125 out of the gate money. The
defendant failed to appear in the ring and the
plaintiff sued him for Rs.500. It was held that the
agreement could not be of wager because neither
party to the said contract stood to lose according to
the result of the wrestling match. The winning
amount was to be given from the gate money and
not by the parties.
NO OTHER INTEREST IN THE EVENT
Neither party should have any interest in happening
or non-happening of the event other than the sum he
will win or lose. If either party has some other
interest other than the sum he will win or lose, it will
not be a wager. Example: A, a owner of a house,
insures his house against fire with GIC. A has to pay
an Insurance premium of Rs. 50 per month as per the
terms of contract. If the house is destroyed by fire,
GIC will pay the actual amount of loss suffered by
him. Here A has interest in his house. Further on the
happening of the event i.e. fire, A will not gain
anything. Hence, it is not a wager.
 NO CONTROL OVER THE EVENT
The parties to the contract should not have any
control over the happening of the event one way or
the other. If one party has the events in his hands,
the transaction will not be a wager.
Illustration
A and B enter into an agreement that if A resigns
his job, B will pay Rs. 500 to A and A will pay Rs.
500 to B if he does not resign his job. Here A has
the event under his control.
Hence the contract is not a wager.
Promise to Pay Money or Money’s Worth

The wagering agreement must contain a promise to

pay money or money’s worth.

The following transactions are not wagers:-

a) Contract of Insurance are not wagers

Insurance contracts are contracts of indemnity. They

are entered into, to safeguard the interest of one
party to the contract. In this contract, the insured has
insurable interest in the property or life Hence it is
not a wager.
Distinction between Wagering Agreement and
Contract of Insurance
i. In a wagering agreement, there is no insurable
interest, whereas contract of insurance has insurable
interest
ii. Wagering agreement is a void agreement, whereas
contract of insurance is a valid one.
iii. In a wagering agreement, neither party has any
interest in the happening or non happening of an
event. But in an insurance agreement, both the parties
are interested in the subject-matter.
iv. Wagering agreements are conditional contracts,
whereas insurance agreements are contracts of
indemnity except life insurance contracts which are
contingent contracts.
v. The object of a wagering contract is to speculate
for money or money’s worth, whereas an
insurance contract is to protect an interest.
vi. A wagering agreement is just a gamble,
whereas a contract of insurance is based on
scientific and actuarial calculation of risks.
Skill Competitions are not wagers
Skill plays a substantial part for the successful solution of
certain competitions. For example, crosswords
competitions, picture, puzzles etc. Here, the prizes are
awarded as per the merits of the solution. Such
competitions are not wagers. However, if prizes depend
upon a chance, that is a lottery and therefore a wager.
Example: A crossword puzzle was given in a newspaper
and it was stated in the newspaper that whose solution of
the crossword puzzle would correspond with the
solution kept with the editor, he would be given the first
prize. This is a game of chance and therefore a lottery.
And thus, is a wager. Further, as per law, the prize
competitions involving games of skill are not wagers. But
if the amount of prize exceeds certain amount, they will
be regarded as gambling and void.
 Horse Race Competition is not wager
State Governments may authorize the horse race
competition, if it is permitted by the local laws. In such
cases, any subscription or contribution of the value of
Rs.500 or upwards made towards any prize or sum of
money which is to be awarded to the winner of any
horse race, shall not be unlawful. In other words,
agreement to subscribe or contribute towards such
prize or sum of money is valid and enforceable.
Example: A entered into an agreement with the Race
Course Authority who was permitted to conduct the
race course competition, to contribute Rs. 600 towards
the money which was to be paid to the winner of the
horse race to be held on a particular day. This is not a
wager.
Share Market Transactions are not wagers
Transactions for the purchase and sale of
shares and stocks, with an intention to take
and give delivery of shares, is not a wager.
However, if the intention is only to settle the
price difference, the transaction is a wager and
hence void.
Sports Competitions are not wagers
Sports competitions such as Athletics,
Wrestling, Indoor games, Boxing, Football,
Cricket, Hockey etc. are not games of chance. It
is decided by skill. Hence, they are not wagers.
 EFFECTS OF WAGERING AGREEMENTS
In India, wagering agreements have been expressly declared to
be void. So it cannot be enforced in any Court of law. Sec. 30 of
the Act 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 by the
results of any game or other uncertain event on which any
wager is made. As a matter of fact, though a wagering
agreement is void and unenforceable, but it is not forbidden by
law. That is, the wagering agreements are void but not
unlawful. However, in the States of Gujarat and Maharashtra,
the wagering agreements have been declared to be unlawful.
As far as collateral transactions are concerned, as the wagering
agreements are void but not unlawful, they are not void.
Therefore, they are enforceable. For e.g., where a person lends
money to another person to enable him to pay a gambling
debt, the lender can recover the money so paid.