Short essay on Wagering Agreements

What is a wager? Literally the word ‘wager’ means a ‘a bet’: something stated to be lost or won on the result of a doubtful issue, and, therefore, wagering agreements are nothing but ordinary betting agreements. Thus where A and B mutually agree that if it rains today A will pay B Rs. 100 and if it does not rain B will pay A Rs. 100 or where C and D enter into an agreement that on tossing up a coin, if it falls head upwards C will pay D Rs. 50 and if it falls tail upwards D will pay C Rs. 50, there is a wagering agreement.

In Thacker vs. Hardy Cotton, L.J., 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 say, if the event turns our own way, A will lose; but if it turns out the other way, he will win.”

Possibly the most expressive and all-encompassing definition of a. “wagering agreement” was given by Hawkins, J., in Carlill vs. Carbolic Smoke Ball Co.

“A wagering contract is one by which two person profession to hold opposite views touching the issue of a future uncertain event mutually agree that, dependent upon the determination of that event, one shall win from the other, and the other shall pay or hand over to him, a sum of money or other stake; neither of the contracting parties having any other interest in that contract than the sum of 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 under it may 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. If either of the parties may win but cannot lose, or may lose but cannot win, it is not a wagering contract.”

Certain aspects of the above definition require to be emphasized. In the first place, wager is a game of chance in which the contingency of either gain or loss is wholly dependent on an ‘uncertain event.’ An event may be uncertain, not only because it is a future event, but because it is not yet known the parties.

Thus a wager may be made upon the result of the cricket match which is to take pi next month in Calcutta, or upon the result of an election which is over, if the parties do not know result. Secondly, the parties to a wager must have no interest in the event’s happening or non-happening except the winning or losing of the bet laid between them. It is here that wagering agreements differ from insurance contracts which are valid because parties have an interest to protect the life or property, and have, for that very reason, entered into the contract of insurance.

Essential features of a wager:

The essentials of a wagering agreement may thus be summarized as follows:

(a) There must be a promise to pay money or money’s worth.

(b) The promise must be conditional on an event happening or not happening.

(c) The event must be an uncertain one. If one of the parties has the event in his own hands, the transaction is not a wager.

(d) Each party must stand to win or lose under the terms of agreement. An agreement is not a wager if one party may only win and cannot lose, or if he may lose but cannot win, or if he can neither win nor lose.

(e) No party should have a proprietary interest in the event. The stake must be the only interest which the parties have in the agreement.

Agreements by way of wager:

Void. Section 30 lays down that ‘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.” Thus, where A and B enter into an agreement which provides that if England’s cricket team wins the test match. A will Pay B Rs. 100, and if it loses B will pay Rs. 100 to A, nothing can be recovered by the winning party under the agreement, it being a wager.

Similarly, where C and D enter into a wagering agreement and each deposits Rs. 100 with Z instructing him to pay or give the total sum to the winner, no suit can be brought by the winner for recovering the bet amount from Z, the stake-holder. Further, if Z had paid the sum to the winner, the loser cannot bring a suit, for recovering his Rs. 100, either against the winner or against Z, the stake-holder, even if Z had paid after the loser’s definite instructions not to pay. Of course the loser can recover back his deposit if he makes the demand before the stake-holder had paid it over to the winner (Ratnakalli vs. Vochalapu). But even such a deposit cannot be recovered by a loser in the States of Maharashtra and Gujarat where such an agreement is void and illegal.

The Section makes an exception in favour of certain prizes for horse 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 awarded to the winner or winners of any horse race.” Thus, a bet on a horse race carrying a prize of Rs. 500 or more to the winners has been made valid under the exception. But with a view to protecting the poor persons from gambling, a bet on a horse race carrying a prize of less than Rs. 500 remains a wager.

It is important to note that in the State of Maharashtra and Gujarat wagering agreements are, by a local statute, not only void but also illegal. As a result in these states the collateral transactions to wagering agreements become tainted with illegality and hence are void.

Special cases :

We now turn to certain special cases in order to examine as to whether they are wagers:

Commercial transactions:

Agreements for sale and purchase of any commodity or share market transactions, in which there is a genuine intention to do legitimate businesses i.e., to give and take delivery of goods or shares, are not wagering agreements. If there is no such genuine intention and parties only want to gamble on the rise or fall of the market by paying or receiving the differences in prices only, the transaction would be a wagering agreement and therefore void. “In order to constitute a wagering contract, neither party should intend to perform the contract itself, but only to pay the differences.”

Lotteries:

A lottery is a game of chance. Hence the lottery business is a wagering transaction. Such a transaction is not only void but also illegal because Section 294-A of the Indian Penal Code declares ‘conducting of lottery’ a punishable offence. If a lottery is authorized by the Government, the only effect of such permission is that the persons conducting the lottery (i.e., the persons running the lottery and the buyer of lottery ticket) will not be guilty of a criminal offence, but the lottery remains a wager alright (Dorabji Tata vs. Lance).

Crossword puzzles :

Where prizes depend upon a chance, it is a lottery and therefore a wagering transaction. Thus a crossword puzzle, in which prizes depend upon correspondence of the competitor’s solution with a previously prepared solution, is a wager. But if prizes depend upon skill and intelligence, it is a valid transaction. Thus prize competitions which are games or skills and in which an effort is made to select the best competitor e.g., picture puzzles, literary competitions and athletic competitions are not wagers. Even in such competitions the amount of prize should not exceed Rs. 1,000, otherwise they shall be wagers as per the provisions of the Prize Competition Act, 1955.