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AGREEMENTS BY WAY OF WAGER: LANDMARK CASES


Author: Yashika Mishra, Nirma University









INTRODUCTION

The word, ‘Wager’ literally means a bet, gamble or a risk. However, the Black’s Law dictionary defines Wager as something staked, such as a quantity of money on an uncertain occurrence in which the parties have no actual interest other than shared odds of "income or loss". Therefore, A wagering contract is one in which the first party pays a predetermined quantity of money to the second party if an uncertain future event occurs, and the second party pays the first party if the event does not occur. Both sides have an equal probability of winning or losing the wager, and the possibility of winning or the danger of losing is not one-sided. As a result, other than the mutual odds of winning or losing, the parties have no tangible interest in the unknown occurrence. Wagering thus necessitates the presence of three elements: consideration (an amount wagered), risk (chance), and a prize. The outcome of the wager is typically instantaneous, such as a single roll of the dice, a spin of the roulette wheel, or a horse crossing the finish line, but longer time frames are also popular, enabling wagers on the outcome of a future sports match or even an entire sports season. The Indian Contract Act does not hold any stance on the definition of a Wagering Agreement, but according to Section 30 of Indian Contract Act, 1872, Wagering contracts cannot be enforced in any court of law.


The section reads out as follows,

Agreements by way of wager, void.—Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made. —Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made."


Exception in favour of certain prizes for horse-racing—This section shall not be deemed to rendered unlawful a subscription or contribution, or agreement to subscribe or contribute, made or entered into for or toward any plate, prize or sum of money, of the value or amount of five hundred rupees or upwards, to be rewarded to the winner or winners of any horse-race.


Section 294A of the Indian Penal Code not affected— Nothing in this section shall be deemed to legalize any transaction connected with horse-racing, to which the provisions of section 294A of the Indian Penal Code (45 of 1860) apply.




ESSENTIALS OF A WAGERING AGREEMENT


1. Mutual chances of gain and loss

There must be two parties, or sides, with mutual gains and losses, i.e., one party will win and the other will lose depending on the outcome of the event. It is not a wager in which one party can win but not lose, or in which one party can lose but not win, or in which neither party can win nor lose. If one of the parties holds the event in his hands, the wagering element is missing from the transaction. There must be mutuality in a wagering contract, in the sense that if the unknown event that is the subject of the wager occurs, one party's gain will equal the other's loss. Speculation does not always imply a wagering contract, and a shared desire to gamble is required to form such a contract.


2. Two Parties

There must be two people, each of whom has the ability to win or lose. A bet cannot have more than two parties or sides. A multipartite agreement to donate to a sweepstakes might exist (which may be illegal as a lottery if the winner is determined by chance, but not if the winner is determined by skill)However, you cannot have a multipartite agreement for a bet unless the multiple participants are split into two sides, one of which wins or the other loses depending on whether or not an unknown event occurs.


3. Uncertain Event

An event might be unknown, yet it does not have to happen in the future. Parties may gamble on the traits or attributes of existing items, or the outcome of previously occurring events, if they are both unaware of these. The wager is thus based on the accuracy of each person's assessment rather than the outcome of the event.


4. No Interest other than the Stake

To be considered a wager, the parties must consider the outcome of the uncertain event to be the only condition of their agreement. The stake must be the parties' only vested interest in the contract. A real wager can therefore be distinguished from a conditional pledge or a guarantee. Neither side should have any financial stake in the outcome of the transaction other than the amount he will gain or lose. The transaction must "entirely rely on the risk under consideration," with neither party looking to anything other than the payment of money based on the resolution of an uncertainty. This is what separates an insurance contract from a bet. In certain ways, every insurance contract is a gamble on the result of a future unknown event, and it would be a wager if the insurer did not have an insurable stake in the occurrence for which insurance money is due.



LANDMARK CASES

1.Carlill v. Carbolic Smoke Ball Co. [1]

This case is famous for general offer; however, it defines what wagering agreements are in a clear and concise manner. The court held that a wagering contract is one in which two people who pretend to hold opposing viewpoints on a future uncertain event mutually agree that, depending on the outcome of that event, one will win from the other and the other will pay or hand over an amount of money or other stakes to him. There is no other consideration for either party making such a contract except the money or stake he will gain or lose. It is not a wagering contract if either party can win but cannot lose, or if either party can lose but cannot win.


2.Gherulal Parekh v. Mahadeo Das:[2]

The Supreme Court ruled in Gherulal Parekh v. Mahadeo Das that, while a wager is invalid and unenforceable, it is not illegal. As a result, a wagering agreement is not prohibited by Section 23 of the Contract Act, and the transactions collateral to the primary transaction are enforceable.


3. Jethmal Madanlal Jokotia v. Nevatia and Co.(1962):[3]

It was decided in the case of Jethmal Madanlal Jokotia v. Nevatia & Co(1962) that, while a wager is typically about a future event, it can also be about an event that happened in the past but the parties were unaware of the outcome or the timing of its occurrence.


4. K.R. Lakshmanan v. State of Tamil Nadu (1996):[4]

Some state governments may permit horse racing, and contributions in excess of Rs 500 for the award of such events are not deemed illegal. The Supreme Court ruled in K. R. Lakshmanan v. State of Tamil Nadu (1996) that horse racing was a game of talent and that playing for stakes in a game of skill was not unlawful.


5. Andhra Pradesh v. Satyanarayana, AIR 1968:[5]

In this case it was found that rummy is primarily a skill-based game since the order of the cards must be learned and talent is necessary in keeping and discarding cards. As a result, we cannot argue that rummy is purely a game of chance. However, if the court discovers proof that the game is being played for profit by the owner of the home or club, the owner might be hauled to court. However, it is not a crime for a group of individuals to play rummy at a Diwali celebration.




CONCLUSION

After looking over the entire wagering agreement, there are still several gaps that need to be addressed. The first and important point is that while gambling was formerly deemed immoral, that is no longer the case anymore. As society evolves, so does its thinking, and so should the laws, and not allowing gambling would not alleviate the problem, but rather exacerbate it. It should be authorised so that money made via gambling does not go undetected, but rather is accounted for and recognised, as individuals have begun to use wagering in a good way that is more of a skill-based task rather than a chance-based one. Also, aside from horse races, there are a plethora of other games that are solely dependent on talent, and in all of those games, the person who is betting may be aware of the skills of the player on whom he is betting. Here, the idea of futuristic uncertainty may reduce since he knows how the player will play, and the key aspect of betting, uncertainty, will decrease. Thus, cricket and other sports can be considered sports based on skill rather than chance, but section 30 of the Indian Contract Act has not exempted any other sport other than horse racing, resulting in a very narrow definition. There are amendments that need to be made in order to broaden the scope of sports covered by this definition.


Hence, after going through the section, various judgements and opinions of the court, section 30 of Indian Contract Act needs to be clearer about its stance, and shall enhance its purview in order to move steadily with the developing society.




















REFERENCES

1. Pollock & Mulla The Indian Contract Act,1872, 15th ed / The Indian Contract Act, 1872

2. https://indianlegalsolution.com/wagering-agreement/

3. https://www.legalbites.in/analysis-wagering-agreements/

4. Indian Contract Act, 1872

5. Anson’s law of contract, twenty seventh edn.


[1] [1893] 1 QB 256 [2] (1921) 2 KB 351 [3] 1973 AIR 2330 [4] AIR 1996 SC 1153 [5] 1968 AIR 825

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