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VOLUME I ISSUE IV July 13, 2021

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NATIONAL SOCIAL AND LEGAL RESEARCH JOURNAL

{VOLUME I ISSUE IV}

WAGERING AGREEMENTS AND THEIR ENFORCEABILITY UNDER THE INDIAN CONTRACT

ACT, 1872

By

RADHIKA JHANWAR

UNIVERSITY OF PETROLEUM AND ENERGY STUDIES, DEHRADUN

ABSTRACT

The word ‘wager’ means a bet. In the Indian Contract Act,1872 it is nowhere mentioned what is a wagering

agreement. In layman’s terms, a wagering agreement usually means 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. In India, Agreements by way of wager are void.

The researcher in this paper aims to study wagering agreements and their essentials features, the distinction

between speculative transactions and wagering agreements; wagering transactions are speculative in

nature but not every speculative transaction need to necessarily be a wager , legal status and effects of

wagering agreements in India; a wagering agreement being void is not enforceab le in any court of law,

however, it is not declared illegal by law, exceptions to wagering agreement under the Indian Contract Act

and collateral transactions to wagering agreements being enforceable if they are lawful in nature.

Keywords: Wager, Wagering Agreement(s), Void, Indian Contract Act.



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RESEARCH OBJECTIVE:

• To understand the meaning of a wagering agreement and become aware of its essentials.

• To understand the distinction between speculative transactions and wagering agreements.

• To become aware of the legal status of wagering agreements in India.

• To become aware of the exceptions of wagering agreements.

• To understand the transactions collateral to the wagering agreements.

• Lasty, concluding the research paper by analyzing the research paper.

RESEARCH METHODOLOGY:

The research methodology used in this research paper is based on the analysis of both primary and

secondary sources. The primary sources include legislation and judicial interpretations from various case

laws. The secondary sources include books and various online sites, blogs and articles.

RESEARCH QUESTIONS:

1. Whether every speculative transaction needs to be necessarily a wager?

2. Whether a wagering agreement is illegal and prohibited by law?



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INTRODUCTION

The word ‘wager’ means a ‘bet’. When two or more parties have opposite views regarding a future uncertain

event, and they stipulate that upon the determination of the event in a certain way the parties shall win or

lose from each other a certain sum of money, it is called wager. For instance, A and B make a bet as to

whether it would rain on a particular day or not promising to pay Rs. 100 to A, if it rained and A to pay B, if

it did not rain.

Cotton, L.J. in Thacker v Hardy1, described a ‘wager’ as follows: “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 on tract, is of an

uncertain nature – That is to mention, if the event turns our own way, A will lose; but if it turns out the other

way, he will win.”

A wagering agreement in simple terms usually means 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.

WAGERING AGREEMENTS AND ITS ESSENTIALS

What is a wagering agreement is nowhere defined in the Indian Contract Act. To give clarity to the term

‘wager’, HAWKINS J in Carlill v Carbolic Smoke Ball Co.2 defined wager; “A wagering contract is the one

when two people who claim to have opposite opinions on the subject of an uncertain future event , agree to

each other, dependent on the determination of that event, one will win from the other and the other will pay

or hand over to him, a sum of money or other stakes; apart from the sum of money he will win or lose, no

party to the contract has any other interest in the contract and no other party has any real consideration f or

the execution of the contract.”

1 Thacker vs. Hardy, (1878) 4 Q.B.D. 685. 2 Carlill v Carbolic Smoke Ball Co., (1893) 1 QB 256 (CA).



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Essential features of a wagering agreement

1. Uncertain event:

The first thing essential to the wager is that the event on which the betting is made must be uncertain in

nature and unknown to both the contracting parties. A wager usually considers future events, but it may

even be related to events that have occurred in the past, but the parties do not know its outcome or when

it occurred.

2. Mutual chances of gain or loss:

The second essential element is that there must be two parties or two sides and mutual chances of gain

and loss, i.e., one party is to win and the other to lose upon the determination of the event. If either of the

parties may win, but cannot lose, it will not constitute a wagering agreement.3

3. Neither party to have control over the event:

The third thing essential to the wager is that neither of the two parties should have control over the

happening of the event, one way or the other. ‘The transaction will lack a crucial ingredient if one of the

parties has the event in his own hands.’4

4. No other interest in the event:

The last essential feature of a wagering agreement is that other than the sum or stake, the parties will win

or lose, they should have no interest in the happening of the event. The only purpose of the agreement

should be betting. If either of the party has any interest other than that of wager, the agreement would

cease to be called a wagering agreement. This is the difference between a wagering agreement and a

contract of insurance. Without an insurable interest, insurance is no more than a wagering agreement and

therefore, void.5

3 Jethmal Madanlal Jokotia v Nevatia & Co, AIR 1962 AP 350, 352. 4 Dayabhai Tribhovandas v Lakshmichand, ILR (1885) 9 Bom 358, 363. 5 Alamiani v Positive Govt Security Life Insurance Co, ILR (1898) 23 Bom 191.



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SPECULATIVE TRANSACTIONS

Wagering transactions are speculative in nature but not every speculative transaction needs to necessarily be

a wager. It is because sometimes speculative transactions fail to meet some of the perquisites required f or

being a wagering transaction. Like, in a wagering agreement, one party stands to win and the other to lose,

but in the case of a speculative transaction, even after losing, the party gets recompensed by hedging and

vice versa. Also, in a wagering agreement, the parties have no interest in the event other than winning or

losing the bet, but in the case of speculative transactions, the parties have an actual interest in the exchange

rate hitting high or low. The intention of the parties acts as the only deciding factor to conclude which

speculative transactions qualify for being wagering agreements. This was ruled by the Privy Council in

Kong Lee Lone and Company v. Lowjee Nanjee (Rangoon)6 that a contract for the sale and purchase of the

goods at a given price and for being delivered at a given time can be constituted by the parties, but if the

circumstances show that the parties only intended to pay and receive the money within themselves according

to the rise and fall in the market price and the intention was never to have the actual transfer of goods

between them, it is not a commercial contract but a wagering contract depending upon a future uncertain

event.

The distinction between the wagering contracts and speculative transactions was further established by the

Privy Council in the case of Bhagwandas Parasram v Burjorji Ruttonji Bomanji7 in which it was held that

common intention to wager is an important element to hold a speculative transaction to be a wagering

agreement. It was clearly said that one-sided speculation cannot be said to be a wager as there is no common

intention and hence stands valid and enforceable and the amount can be recovered by the plaintiff. Similarly,

in the case of Doshi Talacshi v Shah Ujarsi Velsi 8 where a contract was executed for the sale of goods in the

market which never appeared there, the common intention of the parties being present for a wager, the

contract was held to be void and unenforceable for wager.

Applying the differences between the wagering contracts and speculative transactions, in another case

of Richards v Starck 9 the contract was held to be void for wager as the common intention of the parties was

to provide an option of demand delivery to the buyer after a series of transactions involving the payment of

6 Kong Lee Lone and Company v. Lowjee Nanjee (Rangoon), (1900-01) 28 IA 239: ILR (1902) 29 Cal 461. 7 Bhagwandas Parasram v. Burjorji Ruttonji Bomanji, ILR (1918) 42 Bom 373. 8 Doshi Talacshi v. Shah Ujarsi Velsi, ILR (1899) 24 Bom 227. 9 Richards v Starck, (1911) 1 K.B. 296.



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the difference between the market price and the price on the day of contract and not to have the actual

transfer of the subject matter and the money.

LEGAL STATUS OF WAGERING AGREEMENTS IN INDIA

Section 2(g) of the Indian Contract Act states that agreements that are declared to be unenforceable by the

law are termed as void agreements.10 This unenforceability of the agreements by the law extends to eight

types of agreements that are thereby declared void by the law.

An agreement by way of wager is one such type of agreement that is declared void and unenforceable by the

law under section 30 of the Indian Contract act.

Section 30 of the Indian Contract Act states that agreements by way of wager are void and no suit shall be

brought for recovering anything claimed to be won on wager or entrusted to any person to obey the result of

any game or other uncertain event on which any wager is made.11

In the case of Badridas Kothari v Meghraj Kothari12, two people entered into wagering transactions in

shares and one became indebted to the other. A promissory note was carried out for the payment of that

debt. The note was held to be not enforceable.

A following substituted agreement of the same consideration, namely, the amount won on a wager, is also

unenforceable.13 To put it differently, a new promise to pay the sum of money won upon a wager is equally

void. Likewise, a sum of money deposited with an individual to entitle him to pay to the winning party upon

a wager can’t be retrieved. The party who wins cannot reclaim the money, but before it is paid to him, the

depositor may recover from the stakeholder.14 But, the money cannot be recovered back where the money

has already been paid over. 15

Though a wagering agreement is void and unenforceable, however, it is not prohibited by law. That is, the

agreements of wager are void but not illegal. However, within the States of Gujarat and Maharashtra, the

wagering agreements are declared to be unlawful.

10 Section 2(g) of The Indian Contract Act, 1872. 11 Section 30 of The Indian Contract Act, 1872. 12 Badridas Kothari v Meghraj Kothari, AIR 1967 Cal 25. 13 Hill v William Hills (Park Lane) Ltd, 1949 AC 530 (HL). 14 Ratnakalli Guranna v Vachalipu, AIR 1923 Mad 434. 15 Bridger v Savage, (1885) LR 15 QB 363, 367.



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EXCEPTIONS TO WAGERING AGREEMENT

Section 30 of The Indian Contract Act, 1872 declares the contracts by manner of wager to be void, however

at the same time states an exception to wagering agreements, thereby declaring it to be valid and

enforceable.

The following transactions are not wagering agreements:

1. Horse race [Section 30 of The Indian Contract Act,1872 (exception)]:

The State Governments may authorize the horse race competition, if it is permitted by the local laws. In

such cases, any subscription or contribution worth Rs.500 or upwards created towards any prize or sum

of money which is to be awarded to the winner of any horse race, shall not be illegal. That is to say,

agreements to subscribe or contribute towards such prize or amount of money are also valid and

enforceable.

For instance, a person entered into an agreement with the Race Course Authority, who was allowed to

conduct the race course competition, to contribute Rs. 1500 towards the money which was to be paid to

the winner of the horse race to be held on a specific day. This is not a wager.

In the case of K. R. Lakshmanan v State of Tamil Nadu16, the Supreme Court had held that horse racing

was a game of skill and playing for stakes in a game of skill was not illegal.

2. Crossword competitions and Lottery:

‘If in the result skill plays a substantial part and prizes are awarded according to the merits of the

solution, the competition is not a lottery. Otherwise, it is.’17 Thus, literary competitions, in which an

effort is made to select the best and most skilful competitor and which involve the application of skill,

are not wagers.18 But, where prizes rely upon a chance, that is a lottery.19 An agreement to pay the prize

money on the lottery ticket is held to be a wager and thus, void and not enforceable. Accordingly , any

suit for an agreement being a wagering contract.

16 K. R. Lakshmanan v. State of Tamil Nadu, AIR 1996 SC 1153. 17 Coles v Odhams Press Ltd, (1936) 1 KB 416 (DC). 18 Moore v Elphick, (1945) 2 All ER 155 (CA). 19 Boucher v Rowsell, (1947) 1 All ER 870 (DC).



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3. Contracts of Insurance:

An insurance contract is a contract of indemnity which is used to safeguard the interest of one party

against damage and has an insurable interest. On the other hand, a wagering contract is a conditional

contract and has no interest whether the event occurs or not. In this contract, the object of an insurance

contract is to secure an interest. Thus, it is not a wager.

In the case of Northern India General Insurance Co. Ltd. Bombay v Kanwarjit Singh Sobti20, the owner

of a truck transferred it benami i.e., illegally to another party. Later the truck met with a major accident

due to which a young army officer got injured, who later asserted heavy damages from the owner, the

benamidar, and the insurance company. A plea was raised that the benamidar had no insurable interest

which is the reason, it was a wager. These pleas were dismissed by the court and it was held that

insurable interest was present and the benamidar was liable to pay the damages to the young army

officer.

4. Share market transactions:

Transaction for the purchase and sale of shares and stocks, with an intention to give and take delivery of

shares, is not a wager. If the parties only want to gamble on the rise or fall of the market by paying or

receiving the differences in prices only and there is no such genuine intention, then the transaction would

be a wagering agreement and therefore, void.

TRANSACTIONS COLLATERAL TO WAGERING AGREEMENTS

A transaction subsidiary to the main transaction is called a collateral transaction. For example, where money

is given to an individual to enable him to pay a debt of wagering, the wager is the main transactio n and the

loan is subsidiary to it. Now, the wagering agreements being held void and not enforceable became

important to confirm the legal status of the collateral transactions to wager under the contract act. Thus, in

the case of Gherulal Parakh v Mahadeodas21 it has been laid down by the Supreme Court that “though a

wager is void and not unenforceable, it is not forbidden by law”. Hence, a wagering agreement is not

unlawful under Section 23 of The Indian Contract Act.22 Therefore, the transactions collateral to the main

agreement are enforceable.

20 Northern India General Insurance Co. Ltd. Bombay v Kanwarjit Singh Sobti, AIR 1973 All 357. 21 Gherulal Parakh v Mahadeodas, AIR 1959 SC 781: (1959) 2 SCR 406. 22 Section 23 of The Indian Contract Act, 1872.



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Similarly, an agent who paid the losses on wagering transactions was allowed to recover the amount paid by

him from his principal.23 In another case, the plaintiff who lent money to the defendant to enable him to pay

off a gambling debt was given a decree to recover the same from the defendant.24

If the main transaction is illegal, for example, smuggling, a collateral transaction like money given to enable

a person to smuggle, will also be tainted with the same illegality and the money will be irrecoverable but, if

the main transaction is only void, its collateral transaction will remain enforceable. In other words, the

agreement being not tainted with illegality, the transactions collateral to it hold a lawful position and are

declared enforceable by the law.

In Pratapchand Nopaji v Firm of Kotrike Venkata Setty and Sons25, it was held that where a transaction

collateral to the wagering agreement is also tainted with illegality, then the same cannot be enforced, relying

on the decision of Gherulal Parakh’s case.

COMPARISON WITH ENGLISH LAW

Under the English Gaming Act, 184526 the wagering agreements were declared to be void. Even so, the

courts held that though a wagering contract was void, it was not illegal and therefore, an agreement

collateral to the wagering agreement could be enforced. Only after the enactment of the Gaming Act, 189227,

the collateral transactions also became unenforceable by reason of the express words of that Act, whereas, in

India, collateral transactions to the wagering agreements are not necessarily unenforceable because the

object of that wagering contract may not necessarily be unlawful.

CONCLUSION

A lot of inconvenience is faced by the judiciary while dealing with what precisely constitutes a wager and

what comes within the ambit of wagers since Section 30 of The Indian Contract Act, 1872 does not define

what forms a wager. It only mentions that all wagering agreements shall be void and unenforceable leaving

its interpretation subject to a great deal of vagueness. Therefore, the definition of the term wager ought to be

made clear in the amendment of Section 30 of The Indian Contract Act, 1872 which will widen its scope.

23 Shibho Mal v Lachman Das, ILR (1901) 23 All 165. 24 Beni Madho Das v Kaunsal Kishore Dhusar, ILR (1900) 22 All 452. 25 Pratapchand Nopaji v Firm of Kotrike Venkata Setty and Sons, (1975) 2 SCC 208. 26 8 & 9 Vict. c. 9. 27 55 Vict. c. 9.



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Bibliography

Statutes

The Indian Contract Act, 1872, No. 9, Acts of Parliament, 1872.

Books

Avtar Singh, Contract & Special Relief 336-342, 348 (12 ed. 2017, Reprinted 2020).

Internet Sources

Akanksha Chhabra, Wagering Agreement, LAW COLUMN (May 28, 2020),

https://www.lawcolumn.in/wagering-agreement/.

Ashish Srivastava, A Brief Analysis of Wagering Agreements, LEGAL BITES (July 25, 2018),

https://www.legalbites.in/analysis-wagering-agreements/#_ftnref9.

Srishti Chawla, Wagering Agreement and Its Essentials, I PLEADERS (March 13, 2019),

https://blog.ipleaders.in/wagering-agreement-and-its-essentials/.

Sudhir Singh, Short essay on Wagering Agreements, PRESERVE ARTICLES, accessed on (January 14,

2020), https://www.preservearticles.com/short-essays/short-essay-on-wagering-agreements/19214.

Wagering Agreement | Meaning | Essentials | Exceptions | Effects, ACCOUNT LEARNING, accessed on

(January 14, 2020), https://accountlearning.com/wagering-agreement-meaning-essentials-exceptions-

effects/.

https://www.lawcolumn.in/wagering-agreement/

https://www.legalbites.in/analysis-wagering-agreements/#_ftnref9

https://blog.ipleaders.in/wagering-agreement-and-its-essentials/

https://www.preservearticles.com/short-essays/short-essay-on-wagering-agreements/19214

https://accountlearning.com/wagering-agreement-meaning-essentials-exceptions-effects/

https://accountlearning.com/wagering-agreement-meaning-essentials-exceptions-effects/

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