Wagering
Contracts
The meaning of ‘wagering’ is staking
something of value upon the result of some future uncertain event, such as a
horse race, or upon the ascertainment of the truth concerning some past or
present event. In UK “ All contracts or agreements, whether by parole
or in writing, by way of gaming or wagering ,shall be null and void; and no
suit shall be brought or maintained in any court of law or equity for
recovering any sum of money or valuable thing alleged to be won upon any
wager”.
The effect of these words is that a wagering contract is
‘struck with invalidity at the outset, i.e. before the event
contemplated by the wager has occurred’ [Hill v. William Hill (park
lane) Ltd: All ER 452[1949]. It is void though not illegal. It confers no
rights upon either party. If the loser fails to pay, recovery cannot be
enforced by action.
The contract Act does not define a wagering agreement.
Cotton, L.J. (Thacker v. Hardy) said: “The essence of gaming and
wagering is that one party is to win and other to lose upon a future event
which at the time of contract is of an uncertain nature, i.e., that if the
future event turns out one way A will lose, but if it turns out the other
way, he will win”. Hawkins, J. (Carlill v. Carbolic smoke Ball
Co.)Said: “It is essential to a wagering contract that each party may
under it 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”. In this case the defendants
promised to pay 100 pounds to anyone who caught influenza after using the
smoke ball manufactured by them. It was held not to be a wager because the
user could not lose anything if he failed to catch influenza. The important
points to be noted here is that there should be equal chances of gain or loss
to the parties and it should be regarding an uncertain event. The most
striking feature of wager is that each party has the chance of winning or
losing.
Section 30 of the Indian Contract Act 1872
declares wagering agreements as void. The section is 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 by 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 render 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.
Section 294-A 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 294-A of the Indian Penal Code apply.
Section 30 only says that “agreements by way of
wager are void”. The section does not define ‘wager’. Subba
Rao J in Gherulal v. Mahadeo said: Sir William Anson’s definition of
‘wager’ as a promise to give money or money’s worth upon
the determination or ascertainment of an uncertain event, brings out the
concept of wager declared void by section 30 of the contract act.
Essentials of wagering agreement :
firstly, uncertain event. Uncertainty in the minds of
the parties about the determination of the event in one way or other is
necessary. A wager generally contemplates a future event; but it may even
relate to an event which has already happened in the past, but the parties
are not aware of its result or the time of its happening
Secondly, equal chances of gain or loss to the
parties’ .There is no wager if there are no mutual chances of gain or
loss, each party should stand to win or lose. If one party wins and there
weren’t any chances of them losing, then in that case there is no
wager. If winning or losing is completely based on skill there will be no
wager (Cole v. Odhams press) it should be dependent on chance.
Thirdly, neither party to have control over the event.
Neither party should have control over the happening of the event one way or
the other. Birdwood J in (Dayabhai Tribhovandas v. Lakshmichand) “If
one of the parties has the event in his own hands, the transaction lacks the
essential ingredient of wager”.
Lastly, no other interest in the event. Neither party
should have any interest in the happening of the event other than the sum or
stake he will win or lose.
Effect of wagering transactions:
Wagering agreement being void cannot be enforced in any
court of law. The Calcutta High Court in (Badridas Kothari v. Meghraj
Kothari) held that although a promissory note was executed for the payment of
the debt caused through wagering transaction, the note was held not to be
enforceable. Similarly, money deposited with a person to enable him to pay to
the party winning upon a wager cannot be recovered. The winner cannot recover
the money, but before it is paid to him the depositor may recover from the
stake holder. But where the money has already been paid over, it cannot be
recovered back (Bridger v. Savage).
Wagering agreement not unlawful
It has been laid down by the Supreme Court, in Gherulal
Parekh v.Mahadeo Das that though a wager is void and unenforceable it is not
forbidden by law .Hence a wagering agreement is not unlawful under section 23
of the Contract Act and therefore the transactions collateral to the main
transaction are enforceable.
Exceptions
Horse Race
This section does not render void a subscription or contribution,
or an agreement to subscribe or contribute, toward any plate, prize or sum of
money, of the value or amount of five hundred rupees or upwards to the winner
or winners of any horse race.
Crossword competitions and lottery The supreme court of
India in B.R Enterprises V. State of U.P. held that even the state sponsored
lotteries have the same element of chance with no skill involved in it and it
comes under wagering contracts as the very nature of agreement has not
changed and thus be void. If chance does not play a role and victory is
completely dependent on skill, the competition is not a lottery .Otherwise it
is. The Madhya Pradesh High Court in Subhash Kumar Manwani v. State of MP has characterized
lotteries as wager and the court held that agreement for payment of prize
money on a lottery ticket was held to be coming within the category of
wagering agreement as contemplated by section 30.
The principle and purpose behind Sec. 30 to treat an
agreement by way of wager as void is that, the law discourages people to
enter into games of chance and make earning of trying luck instead of
spending their time , energy and labour for more fruitful and useful work for
themselves, their family and society
Article by Roshni Manuel, Pune University.
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