Agreements by way of wager are agreements between two parties that depend on a future occurring event which is uncertain. The agreement entered depends on the happening of the future event. The first party has to pay money to the second party if an event occurs and the second party has to pay money to the first party if the event does not occur. Wager means bet. The chances of winning or losing the bet are uncertain and depend on the uncertain future event. The sole interest of the two parties is the sum of money which either one would win or lose.
REQUISITES OF AGREEMENT BY WAY OF WAGER:
1.Dependence on an uncertain event
It is a necessity that both parties should be dependent on an uncertain event in a wagering agreement. Parties should not be aware of what is going to be the result in future in the event.
2.Equal chance of winning or losing to both parties
Both parties should stand an equal chance of winning or losing the wagering agreement.
3.Only one interest in the event
The two parties should have only one interest, and no other interest, in the event which is the sum of the money that any one of the two would win. Any other interest of the two parties in the event would not amount to a wagering agreement.
4.Should not have control over the event
Not even a single party among the two should have any type of control over the event occurring in future. If any of the parties have control over the future occurring event, the agreement would not be considered wager.
5.Promise to pay the amount
Promise to pay the sum of money is a necessity among the two parties otherwise the wagering agreement would not be complete.
ENFORCEMENT OF AGREEMENTS BY WAY OF WAGER
According to Section 30 of the Indian Contract Act, any agreement entered by the way of wager is void ab initio. Wagering agreements are not valid or legally binding under Indian Contract Act. Therefore, no suit shall be filed by the first party for not abiding by the rules of the wagering agreement by the second party. No recovery would be provided to any of the parties, which was supposed to win the sum of money according to the rules of the game, or if any party does not abide by the results of the game, as stated in Section 30 of the Indian Contract Act.
Also, agreements by way of wager do not satisfy with the application of Section 65 of the Indian Contract Act which clearly states that recovery of the advantage would not be provided to the parties if the parties were aware of the agreement being void or if the agreement was void ab initio (Void from the starting).
Wagering agreements were termed to be unenforceable in the landmark case Gherulal Parakh v. Mahadeodas (1959 AIR 781, 1959 SCR Supl. (2) 406) and were declared as void under Section 30 of Indian Contract Act, 1872. The actual legal position which the wagering agreements hold was termed in this case. Though according to Section 30 of the Contract Act, wagering agreements are termed to be void but are not supposed to be illegal according to the law, there is no law in India which states wagering agreements to be illegal.
As per Section 23 of the Indian Contract Act, something which is void by law does not necessarily mean is also forbidden by law. Therefore, wagering agreements are unenforceable by law according to Section 30 of the Contract Act but, not considered to be illegal according to Section 23 of the Indian Contract Act.
EXCEPTIONS OF AGREEMENTS BY WAY OF WAGER
Though according to Section 30 of the Indian Contract Act, all agreements by way of wager are void, some of the agreements according to it are valid and enforceable and not considered to be void. Some of the types of agreements are as follows:
- CONTRACTS OF INSURANCE
Coming into a wagering agreement creates the risk of non-payment of money and is therefore considered to be void. Whereas a contract of insurance is used to compensate for the risk. Though a contract of insurance involves payment of money and depends on a future uncertain event, it is not considered to be void because the sole purpose of the contract is in good faith and is entered into to compensate the actual loss suffered by the party. In the contract of insurance, the occurrence of the future event is not sure but in a wagering agreement, the future event is bound to happen.
- TALENT COMPETITIONS
Talent competitions and contests are not considered to be wagers where there is a showcase of skill and talent. For instance, sports competitions, culture and art competitions where the prizes are given based on merit. Whereas competitions that depend on chances like lottery are considered to be wagers.
- HORSE RACE
As stated in Section 30 of the Contract Act, any contribution of money of Rs. 500 or more for the prize money to be awarded to the winner of any horse race shall not be considered void. Therefore, the contribution of money for such prize values is all considered to be valid and enforceable.
Transactions that take place in share markets are not considered to be wager where shares and stocks are bought and sold and delivery of shares take place between parties.
Agreements by way of wager are agreements between two parties who contribute the amount of money the sum of which is won by either of the parties depending on a future uncertain event. The sole interest of the two parties is the sum of money. The requisites of wager agreements are the dependence of uncertain events, equal chance of winning or losing, only one interest in the event, should not have control over the event and promise to pay the money. Any agreement entered by way of wager is considered to be void ab initio according to Section 30 of the Indian Contract Act, 1872. Therefore, no suit can be filed for the recovery of the advantage taken by either party by not paying the sum of money. Wagering agreements do not satisfy the conditions of Section 65 of the Indian Contract Act according to which no recovery would be provided for agreements that are void ab initio. Some of the exceptions of wagering agreements are share market, horse riding, talent competitions, contracts of insurance and many more. Though, wagering agreements are considered to be void, under Section 23 of the Contract Act they are not considered to be illegal. Something which is forbidden by law not necessarily be illegal in the eyes of law.