Wagering Agreements.
In simple words, an agreement between two parties by which one promises to pay money or money's worth on the happening of some uncertain event, in consideration of the other party's promise to pay if the event does not happen, is called a wagering agreement.
For example-If A and B enter into an agreement under which A shall pay to B Rs. 100 if it rains on Sunday evening, and that B shall pay the same amount to A if does not rain, it is a wagering agreement. Section 30 of the Indian Contract Act has declared wagering agreements as void; but it has not defined the term.
Definitions as laid down by Judiciary.
According to Lord Justice Cotton, "The essence of gambling 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. If the event turns out one way one will lose but if it turns out the other way one will win." [Case: Thacker v/s Hardy (1878) 4 O.B.D. 68]
According to Justice Hawkins, "It is essential to a wagering contract that each party may under it either win or lose, whether he will win or lose being dependent on the issue of the event and therefore remaining uncertain until that issue is known. [Case: Carlill vis Carbolic Smoke Ball Co. (1892) 2 QB. 484].
Features of Wagering Agreements.
1. Uncertain events: An important feature of a wagering is that the agreement to do or not to do any act should be based on an uncertain event and the parties are not aware of its result or the time of happening.
2. Equal opportunity for each party to win or lose: Each party have equal opportunity either to win or to lose. In a contract where either of the parties may win but can not lose or vice-versa cannot be a wager.
3. Neither party have control over the happening of the event: Neither the party can have control or influence over the happening or non-happening of the uncertain event for which the agreement is made.
4. No other interest in the event: There should not be any other interest in the agreement except to win or lose the money promised on the occurrence or non-occurrence of uncertain event. This is the reason that a contract of insurance is not a wagering agreement.
5. A promise to pay money or money's worth: An agreement to become a wager must contain a promise to pay money or money's worth by the party losing the agreement.
Consequences of Wager Agreements.
1. A wagering agreement is void from the very beginning and not enforceable.
2. Right to receive money deposited with stakeholder. Money paid to a stakeholder to retain, pending the result of a wager can be recovered from the stakeholder by the payer, at any time before he has handed it over to the winner of the wager, but the winner cannot sue the stakeholder for the money.
3. The promissory note executed for the payment of a wager cannot be recovered. 4. Subscriptions or contributions or agreements to subscribe or contribute for plate or sum of money or prize of the value or amount of Rs. 500 or above for the benefit of the winner of any horse race is not a wager. These are the exceptions to the rule of wagering. Agreements resembling like those of wagering agreements but are not wagering.
1. Crossword competitions: A crossword competition involving a good measure of skill for its successful solution is not a wager.
2. Lotteries: A lottery is a game of chance, and therefore, an agreement to buy a lottery ticket is of wagering nature. If the lottery is uthorised by the government, the person conducting the lottery is exempted from criminal prosecution. (Dorabji v/s Lance, 42 Bom. 676)
3. Chit Fund: A chit fund plan in which all the subscribes are repaid their capital by a fixed date, is not a lottery and therefore, valid and enforceable. Moreover, it contains the elements of investment and therefore not void.
4. Commercial transactions: The intention of the parties at the time of entering into the agreement is an important factor to decide the transaction is a genuine commercial transaction or a wagering. If the intention of both the parties to the contract was not to give or take delivery of the goods, and the purpose was only to share the difference of prices, the agreement would be considered as that of a wagering nature. If the real intention to the contract was to give and take delivery of the goods, the contract would be considered as a genuine commercial transaction though it might be settled later on by taking or paying the differences in prices.
5. Option dealings: An option dealing or a 'Teji-Mandi' transaction is not a wagering transaction, unless it is proved that both parties intend not to take or give delivery. Option dealings in securities on a stock exchange are prohibited by Securities Contract (Regulation) Act, 1956.
6. Speculative transactions: Speculative transactions are not wager provided that the purpose was not to take or give the profits out of the transactions.
7. Contracts of horse race: Contracts of horse race are of wagering nature, but exception to Sec. 30 of the Contract Act approves it as valid contract. As per provision of this Section a subscription or contribution or an agreement to subscribe or contribute to the winner or winners of a horse race is not a wager.
8. Insurance contract: A contract of insurance, though dependent on the happening of an uncertain event in future, is not a wagering agreement on account of the following reasons:
(1) The assured has an insurable interest in the subject-matter.
(2) The parties to the agreement are interested in the protection of the subject-matter.
(3) Except life insurance, a contract of other kinds of insurance is contract of indemnity whereas in wagering agreement no such indemnity is guaranteed.
(4) Insurance contracts are beneficial to the people whereas wagering agreements are of speculative nature.
(5) In a contract of insurance, the actual risk is assessed in advance on the basis of scientific method whereas wagering agreements are gambling.
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