WAGERING AGREEMENT

Written By :- Nishtha Anand (Amity Law School )

INTRODUCTION

An agreement between two persons under which money or money’s worth is payable by one person to another on the happen or non happening of a future uncertain event is called a wagering agreement.

  •  X promise to pay Rs. 1000 to Y if it is rained on a particular day, and Y promise to pay Rs.1000 to X if it did not.
  •  Wagering agreement is promise to give money or money’s worth upon the determination of uncertain event.- Sir Willian Anson

Essential elements of wagering agreements

  1. The must be a promise to pay money or money’s worth
  2. Performance of a promise must depend upon determination of uncertain event. It might have already happened but the parties are not aware about it.
  3. Mutual chancels of Gains or Loss.
  4. Neither party to have control over the events
  5. Neither party should have any other interest in event.
  6. One party is to win and one party is to lose.

Ex. 1:- Agreement to settle the difference between the contract price and market price of certain goods or shares on a particular day.

 Ex. 2:- A lottery is wagering agreement. Therefore, an agreement to buy and sell lottery tickets is a wagering agreement. Section 294 – A of  the Indian Penal Code declares that drawing of lottery is an offence. However, the government may authorize lotteries. The persons authorized to conduct lotteries are exempt from the punishment. But, the lotteries still remain a wagering transaction.

Ex. 3:- However, if the crossword puzzle prizes depend upon sameness of the competitor’s solution with a previously prepared solution kept with the organizer or newspaper editor, is a lottery and, therefore, a wagering transaction.

Ex. 4:- However, when any transaction in any commodity or in shares with an intention of paying or getting difference in price, the agreement is a wager.

Agreement not held as wagers

  • Horse race [500] – An agreement to contribute a plate or prize
  • Contract of insurance utmost in good faith eg. Favour in public policy.
  • Share market transaction. A commercial transaction should always be distinguished from a pure speculative transaction. A commercial transaction is done with an intention of delivery of goods (commodity or security) and payment of price. Therefore, it is not wagering agreement.
  • Crossword competition involving skill for its solution. If skill plays an important role in the result of a competition and prize depend upon the result, the competition is not Involve applications of skill and prizes are awarded to the participants on the basis of merit of their solutions and not on chance. Therefore, such competitions are valid and are not wagers.
  • Athletic Competitions also fall in the category of games of skill. Therefore, such competitions are valid and not wagers.

Example: A and B, two wrestlers, agreed to enter into a wrestling contest in Ahmedabad on a certain day. They further agreed that a party failing to appear on the fixed day was to forfeit Rs.500 and the winning party will receive a sum of Rs.1,000. Held, it was not a wagering agreement.Contribution to chit fund is not wager– contributions made by the members are refunded by draw of lots.

Effects of wagering agreements

  1. Agreement is void.
  2.  No suit can be filled for any recovery of the amount won on any wager.
  3.  It is not illegal. Any agreement collateral to wagering agreement is valid.
  4. However, it is illegal in state of Maharashtra and Gujarat.

ILLEGAL AGREEMENT

  • Agreement which is prohibited by law is illegal agreement. Example Agreement to commit crime.
  • Effects of illegal agreement:
    • It is always void.
    • Any collateral transaction to illegal agreement is also void.
    • No action is allowed on illegal agreement.

DIFFERENCE BETWEEN VOID & ILLEGAL AGREEMENT