WAGERING CONTRACT

⇒ Agreements by way of wager

⇒ A promise to give money or money’s worth upon the
determination or ascertainment of an uncertain event is wager-
⇒ Where two persons hold the opposite view for a future uncertain
event to win money or a stake
⇒ Win loss to be dependent on the uncertain event
⇒ Ingredients- Uncertain event, Mutual chance of winning and
losing, neither party to have control of the event
⇒ No other interest in the contract other than be a mere wager to
win money or stake
⇒ Void contracts

A wagering agreement, says

Sir William Anson, “is a promise to give money or money’s worth upon
the determination or ascertainment of an uncertain event.”

Cockburn C.J. defined it as ‘A contract by ‘A’ to pay money to ‘B’ on the

happening of a given event in consideration of ‘B’s promise to pay
money to ‘A’ on the event not happening.”

Thus, a wagering agreement is an agreement under which

money or money’s worth is payable, by one person to another on the
happening or non-happening of a future, uncertain event.
The essence of gaming and wagering is that one party is to win and the
other to lose upon a future event, which at the time of the contract is
of an uncertain nature-that is to say, if the event turns out one
way A will lose but if it turns out the other way, he will win.
Examples

1. A and B bet as to whether it would rain on a particular day or not A

promising to pay Rs. 100 to B if it rained, and B promising an equal
amount to A, if it did not. This agreement is wager.

2. A and B agree to deal with the differences in prices of a particular

commodity. Such an
agreement is a wager.

Effects of Wagering Agreements. An agreement by way of wager is

void. Section 30 provides

“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 result of any game or other uncertain
event on which any wager is made”. Thus, in India all agreements by
way of wager are void.

Wagering Agreement Void and not Illegal. In India, unless the wager
amounts to a lottery, which is a crime according to Section 294-A of
the Indian Penal Code, it is not illegal but simply void. Thus, except in
case of lotteries, the collateral transactions remain enforceable.

Example

A borrows Rs. 500 from B to pay to C, to whom B has lost a bet.

Contract between A and B is valid.

LOTTERIES
‘Lottery’ is an arrangement for the distribution by chance among
persons purchasing tickets. The dominant
motive of the participants need not be gambling. Where a wagering
transaction amounts to a lottery,
it is illegal as per Sec. 294-A of the Indian Penal Code. where the
Government of India had sanctioned a lottery, the Court held that
the permission granted by the Government will not have the effect of
overriding Sec. 30 of the Indian
Contract Act and making such a lottery legal. Its only effect was that
the persons responsible for running
the lottery would not be punishable under the Indian Penal Code.

However, in H. Anraj v. Govt. of Tamil Nadu AIR 1986 SC 63, the

Supreme Court upheld lotteries with the prior permission of the
Government as legal, thereby conferring upon the winner of a lottery,
a right to receive the prize and the sale of lotteries subject to
payment of sales-tax. Supreme Court held that a sale of lottery ticket
confers on the purchaser thereof two rights
(a) a right to participate in the draw and
(b) a right to claim a prize contingent upon his being successful in the
draw.

Exceptions (Transactions Held ‘Not Wagers’).

The following transactions have been held not to be wagers:

1. Transactions for the sale and purchase of stocks and shares, or for
the sale and delivery of goods,
with a clear intention to give and lake delivery of shares or goods, as
the case may be. Notice that, where the intention is only to settle in
price difference, the transaction is a wager and hence void.

2. Prize competitions which are games of skill, e.g., picture puzzles,

athletic competitions. Thus, an agreement to enter into a wrestling
contest in which the winner was to be rewarded by the entire sale
proceeds of tickets, was held not to be wagering contract.

A crossword competition is not a wager since it involves skill. But, in

416 it was held that a crossword puzzle in which prizes depend upon
correspondence of the competitor’s solution with a previously prepared
solution kept with the editor of a newspaper is a lottery and
therefore, a wagering transaction. According to Prize Competition Act,
1955 prize competitions in games of skill are not wagers provided the
prize money does not exceed Rs. 1000.

3. An agreement to contribute a plate or prize of the value of above

Rs. 500 to be awarded to the winner of a horse race. (Section 30).