Write critical note on Wagering Agreements.

Question: Write a critical note on Wagering Agreements. [BJS 2017, MPJS 1998]

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Answer

Section 30 of The Indian Contract Act,1872 defines wagering in very simple terms, as it is a bet on something which could bring a win or the opposite on the parties at the occurrence of uncertain future events. So it would be a wagering agreement.

SUBRA RAO J. in Gherulal Parakh v. Mahadeodas [AIR 1959 SC 781]said: Sir William Anson’s definition of “wager” As a promise to give money or money’s worth upon the determination or ascertainment of an uncertain event.

The most illustrative definition of “wager” is that given by HAWKINS J. in Carlill v. Carbolic Smoke Ball Co.[ (1893) 1 QB 256 (CA)] That 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 stakes; 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.

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. So in layman terms wagering agreements usually mean to bet on something and of which its result must be unknown to both the parties and after the outcome of the result or the occurrence of such uncertain event one party loses and the other wins.

ESSENTIAL FEATURES OF WAGERING:

UNCERTAIN EVENT: The first thing essential to the wager is that the event on which the betting is done must be uncertain in nature unknown to both the contracting parties. In the case of Jethmal Madanlal Jokotia v. Nevatia & Co [AIR 1962 AP 350,352]. It was held that a wager generally contemplates a future event, but it may even relate to an event that has already happened in the past, but the parties are not aware of its result or the time of its happening.

MUTUAL CHANCES OF GAIN OR LOSS: The second essential feature is that upon the determination of the contemplated event each party should stand to win or lose. If there are no such mutual chances of gain or loss, there is no wager. Thus in the case Babasaheb v. Rajaram [AIR 1931 Bom 264] it was held that the agreement could not be looked upon as one of wagering in law. “It is of the essence of wager that each side should stand to win or lose according to the result of the uncertain event”. A chit fund does not come within the scope of “wager”.

In the case of Narayana Ayyangar v. Vallachami Ambalam[ILR (1927) 50 Mad 696], it was so held by Madras Court “It is true that in most chit fund transactions, no subscriber loses the money he has contributed; and so long as getting back the actual amount of subscription is assured, the interval of time, however long it may be, is immaterial.” Thus, chit fund due to the absence of mutual chances of gain or loss for the contracting parties, does not come within the ambit of the wager. Thus mutual chances of gain or loss constitute an essential feature of wagering agreements.

BOTH THE PARTIES SHOULD HAVE NO OTHER INTEREST IN THE EVENT OTHER THAN BETTING: Lastly, neither party should have any interest in the happening of the event other than the sum or stake he will win or lose. So the sole purpose of the agreement must be betting. If either of the party has any interest other than that of betting the agreement would cease to be called wagering in nature, e.g., an insurable interest in the contract will not be called a wagering contract.

Issues Pertaining to Wagering Agreements

1. Wagering agreements are not illegal

Section 30 of The Indian Contract Act,1872 does not render wagering agreements as illegal rather it renders them as void agreements which means that it is not enforceable in the court. So the contract act does draw a distinction between an agreement that is only void and the one in which the consideration or object is also unlawful. An illegal agreement is one which is not allowed by the law or you can say that it is forbidden by the law whereas in the case of a void agreement it may not be forbidden, “the law may merely say that if it is made, the courts will not enforce it”. Thus what we can conclude that every illegal contract is void, but a void contract is not necessarily illegal.

2. Section 30 doesn’t include the definition of wager

Section 30 talks about agreements that are of wagering in nature being void. But the given section does not define the term wagering. Thus this depicts the vagueness of section 30 of The Indian Contract Act,1872. So there is a need to amend the given section and to make it more clear by defining the term “Wagering” and to avoid this ambiguity with clear terms.

3. Exceptions of the wagering agreements

Betting on horse racing is legal in the eyes of the law and that’s why it has been kept under the exception of wagering agreements. Thus if the principle of skill is being applied in horse racing and thus keeping it as an exception, the same should be applied to other sports as well, and hence the exception that has been given in section 30 of the Indian Contract Act must be amended and it must include those sports where involvement of skills are there.

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Law of Contract Mains Questions Series: Important Questions for Judiciary, APO & University Exams

1. Law of Contract Mains Questions Series Part-I
2. Law of Contract Mains Questions Series Part-II
3. Law of Contract Mains Questions Series Part-III
4. Law of Contract Mains Questions Series Part-IV
5. Law of Contract Mains Questions Series Part-V
6. Law of Contract Mains Questions Series Part-VI
7. Law of Contract Mains Questions Series Part-VII
8. Law of Contract Mains Questions Series Part-VIII
9. Law of Contract Mains Questions Series Part-IX
10. Law of Contract Mains Questions Series Part-X