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Wagering Agreements

 


INTRODUCTION

Wager is a risk (a sum of money or valued item) against someone else's on the basis of the outcome of an unpredictable event. It is also known as bet. Something risk such as sum of money on an uncertain event in which the parties have no material interest other than mutual chances of gain or loss.

Eg- A teacher and student agree with each other that if the student clears his judiciary exam, the teacher will pay Rs. 10,000 to the student and if he is unable to do so, the student will pay Rs. 5000. The agreement is wagering agreement. According to section 30 of the Indian Contract Act, 1872, Wagering agreements have been expressly declared to be void. 

ESSENTIALS OF A WAGERING AGREEMENT

Here are the basic essentials of an agreement to be a wagering one.

  • DEPENDENCY OF AN UNCERTAIN EVENT – The event may have happened in future or had already been happened in the past but it must be uncertain.

  • MUTUAL CHANCE OF GAIN OR LOSS – There must be equal chances or probability of winning and losing between the two parties.  In a case of Narayan Ayyangan V. Ambakam, the court held that a chit fund cannot be called as a wager because although some members have a chance of winning, yet none of them have a chance to lose as the recovery of amount contributed is assured.

  • NEITHER OF THE PARTIES MUST HAVE CONTROL OVER THE EVENT – The parties to this contract must have zero control over the event. For instance, J and V enter into an agreement that if J resigns from her job, V will pay 10,000 and vice versa. This is not a wagering agreement because either of the parties have control.

  • MUST HAVE NO OTHER INTEREST OTHER THAN STAKE- If either of the parties have some other interest, then it will not be called a wager.

EXCEPTIONS TO WAGERING AGREEMENTS

  • Insurance contracts- are a contract of indemnity which is used to safeguard the interest of one party against the damage and also has an insurable interest. A wagering contract, on the other hand, is a conditional contract and has no interest in the happening or non-happening of an event.

  • Competitions involving skill – The winning of such events require a substantial amount of skill and are not dependant on the probability of an uncertain event. E.g.- Crossword puzzles, sports competition etc:- 

In the case of Moore v. Elphick, it was held that wherever skill plays a major part in the result and the results are awarded according to the merit of the solution, then the agreement is not wagering.

 For instance, Horse racing competition involves skills and therefore is an exception to the wagering agreements.

  • Share Market Transactions- The purchase and sale of stocks with the mere intention to give and take delivery of shares do not amount to a wager except if the only intention is to settle the price difference. In that case, it will be called a wager.
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