Essentials and Exception of

Wagering Agreement

SCHOOL OF LAW

SUBMITTED TO:

SUBMITTED BY:

Mrs. ABHILASHA

AKSHAY HAWAN

ASSISTANT PROFFESOR

14GSOL101011

SCHOOL OF LAW

LLB (H), 1ST YEAR

SUBJECT: CONTRACT -1

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Table of Contents
Acknowledgement................................................................................................. 2
Meaning................................................................................................................... 3
Validity In Law........................................................................................................... 4
Essentials of wagering agreement.................................................................................... 5
Essentials of Section 30:..................................................................................... 5
Effect of wagering transactions....................................................................................... 6
What is the effect of this Section on various kinds of betting and wagering
activities?........................................................................................................... 6
Agreements Collateral to Wagering Agreements...................................................7
Exceptions................................................................................................................ 8
Horse Race............................................................................................................. 8
Suggestions and Conclusion.................................................................................. 9
Bibliography......................................................................................................... 10
Websites........................................................................................................... 10
http://indiankanoon.org/................................................................................ 10
http://www.legalservicesindia.com/...............................................................10
http://glaws.in................................................................................................ 10
Books................................................................................................................ 10

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Acknowledgement

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Wagering Contracts
Meaning
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] 1. 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) 2 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.)3Said: 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.

1 (1949) AC 530
2 [1878] 4 Q. B. D. 685
3[1892] 2 Q. B. D. 484
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Validity In Law
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 racingThis 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 affectedNothing 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. Mahadeo4 said: Sir William Ansons definition of wager as a
promise to give money or moneys 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.

4 1959 AIR 781, 1959 SCR Supl. (2) 406

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Essentials of wagering agreement:

Essentials of Section 30:
Mutual chances of gain and loss
There must be two parties, or two sides, and mutual chances of gain and loss, 5 i.e., one party is to win
and the other to lose upon the determination of the event. It is not a wager where one party may win
but cannot lose, or if may lose but cannot win, or if he can neither win nor lose, if one of the parties
has the event in his own hands, the transaction lacks an essential ingredient of wager. 6 It is of the
essence of the wager that each side should stand to win or lose according to the uncertain or
unascertained event in reference to which the chance or risk is taken. 7

Two parties
There must be two persons, either of whom is capable of winning or losing.

.you cannot have two parties or more than two sides to bet. You may have a multi partite
agreement to contribute to a sweepstake (which may be illegal as a lottery if the winner is determined
by skill), but you cannot have a multipartite agreement for a bet unless the numerous parties are
divided in to two sides, of which one wins or the others loses, according to whether an uncertain event
does not happen.8
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

The first thing essential to wager is that the performance of the bargain must depend upon the
determination of an uncertain event. A wager generally contemplates future events; but it may even
5Ansons law of contract, twenty seventh edn , p 337; Sobhagmal Gianmal v.
Mukundchand Balia AIR 1926 PC 119
6 Dayabhai Tribhuvandas v Lakshmichand Panachand (1885) ILR9 Bom 358(after
citing the passage from ansons law of contracts , as it stood in an earlier edition)
7 E Sassoon v Takersey Jadhawjee (1904)ILR 28 Bom 616;Tote Investors Ltd v.
Smoker[1967]3 ALL ER 242
8 Ellesmere v. Wallace [1929]2
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relate to an event which has already happened in the past, 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. 9

No interest other than stake

Neither party should have any interest in the happening of the event other than the sum or stake he
will win or lose. To constitute a wager, the parties must contemplate the determination of the
uncertain event as the sole condition of their contract. The stake must be the only interest which the
parties have in the contract.10

Neither party to have control over the event

Lastly, neither party should have control over the happening of the event one way or the other. If one
of the parties has the event in his own hands, the transaction lacks an essential ingredient of a wager.
11

Effect of wagering transactions

What is the effect of this Section on various kinds of betting
and wagering activities?
Firstly, the Contract Act applies to formation and operation of contracts, which are private
agreements, and have no penal effect. Section 30 merely makes a contract which is entered into by
way of a wager unenforceable in law; that is, you cannot go to the court suing your counter-party for
breaching any agreement that relates to a wager. However, this does not render the contract illegal.

Secondly, where a transaction happens upfront that is money or transferable instruments which are
treated like money, such as cheques/drafts are handed over to full fill the obligations under a wagering
agreement, we can say that the transaction was complete on the spot. After this, if the party required to
the under the wagering agreement wants to reverse the transaction, or do not honour the cheque or
draft issued, this provision will not protect her.
9 PRINCIPLES OF THE ENGLISH LAW OF CONTRACT, 22nd edition by A.G. Guest,
(1964), p. 301
10 Carlill v Carbolic Smoke Ball Co [1891-1894] ALL ER Rep 127.
11 Birdwood j in Dayabhai Tribhuvandas v. Lakshmichand, (1885)9 Bom 358,363
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Thirdly, this provision necessitates that any commercial gambling activity in India, even if legal and
held under licenses granted by the government or otherwise, cannot let anyone participate on credit. If
someone wants to play, they should be required to pay on the spot before participating in the wager.
It is theoretically possible to receive payment in cheque or draft, but these are more likely to be
withheld or litigated upon, and given the cost and time taken in India to resolve any legal dispute, it is
not an advisable to take payment though these instruments.
Payment through credit cards in India is banned by Reserve bank of India.

Agreements Collateral to Wagering Agreements

Contract collateral to a wagering agreement is not necessarily unenforceable. 12 Section 30 of the
Contract Act is based upon the provisions of S. 18 of the (English) Gaming Act 1845, and though a
wager is void and unenforceable, it is not forbidden by law. Therefore the object of a collateral
agreement is not unlawful under s 23 of the contract act. 13 But it is otherwise under the (English)
Gaming acts of 1845 and 1892, the acts being wider and more comprehensive in phraseology, because
they expressly render void even collateral transactions. As a result, though an agreement by way of
wager is void, contract collateral to it or in respect of a wagering agreement is not void except in
Bombay state. There is nothing illegal in the strict sense in making bets. They are merely void and
there would be no illegality in paying them or giving a cheque, but payment cannot be compelled. But
an arbitration clause in a wagering contract is a part of the contract and not collateral to it and cannot
therefore be enforced.
A collateral agreement is not unlawful under s 23 of the contract act.

Apart from Bombay enactment, there is no statute declaring void agreements collateral to wagering
contract. Nor is there anything in the present section to render such agreements void. The policy of
law in India has been to sustain the legality of wagers and not to hit at collateral contracts. It has
accordingly been held that a broker or an agent may successfully maintain a suit against his principal
to recover his brokerage, 14commission, or the losses sustained by him, even though contracts in
respect of which the claim is made are contracts by way of wager.15

12 Ram Gopal v Govind Das AIR 1944 ALL 196

13 Gherulal Parakh v Mahadeodas Maiya [1959] supp 2 SCR 406, AIR 1959 SC
781
14 Firm Hagami Lal Ram Prasad v Bhuralal Ram Narain AIR 1961 Raj 52
15 Shibho Mal v Lachman Das (1901)ILR 23 ALL 165
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The Supreme Court has held that if agreement collateral to another or of aid in facilitating the carrying
out of the object of the other agreement, which though void, is not in itself prohibited within the
meaning of s 23 of the contract act, may be enforced as collateral agreement. If on the other hand it is
part of a mechanism to defeat what the law has actually prohibited, courts will not countenance a
claim based upon the agreement because it will be tainted with an illegality of the object sought to be
achieved, which is hit by s 23 of the contract act. An agreement cannot be said to be forbidden or
unlawful merely because it results in a void contract. a void agreement when coupled with other facts
may become part of a transaction which creates legal rights but this is not so if the object is prohibited
or mala in se.

In England also, agreements collateral to wagering contracts were not void before the enactment of
the gaming act 1892. Thus in Read v Anderson16 a betting agent, at the request of the defendant, made
bets in his own name on behalf of the defendant. After the bets were made and lost, the defendant
revoked the authority to pay conferred upon the betting agent. Notwithstanding the revocation, the
agent paid the bets, and sued the defendant having empowered the agent to bet in his name, the
authority was irrevocable, and that the agent was entitled to judgment. The statute of 1892, passed in
consequence of this decision, is almost to the same effect as the Bombay act. It is interesting to note
that the statute was not passed until 27 years after the Bombay act. It is hoped that in future, the
revision of the contract act will corporate provisions of the Bombay act in the present section, so as to
render the law uniform on this subject in the whole of India.

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
MP17 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.

16 [1884] 13 QBD 779

17 AIR 2000 MP 109
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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.

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Suggestions and Conclusion

As section 30 of the Indian Contract Act 1872 reads about agreements by way of wager, void.
Further The Contract Act does not define what constitutes a wager or a wagering agreement. It only
mentions that such agreements will be void and unenforceable and no action can lie to either recover
anything that is due under a wager or for performance of a contract that is in the nature of a wager. A
wager is in the nature of a contingent contract but is prevented from being enforceable by Section 30.

Therefore, the Contract Act should provide an express definition that would clarify as to what
constitutes a wager, thereby removing any ambiguity with regard to legality of derivative contracts
which are in the nature of wagering agreements.

Also through the, in depth analysis of various cases, books and views of the learned scholars in this
project it can be said that Section 30 of Indian Contract Act, 1872 needs to be reviewed critically.

Hence Section 30 should be amended to define the word wager. Since a lot of inconvenience and
ambiguity have been faced by the judiciary while dealing with the issue of wagers, specifically as to
what all constitute wagers and what all comes under the ambit of wagers. As different jurists and in
different judgments the ambit of wagers is defined in different ways. In other words the scope of
section 30 needs to be widened.

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Bibliography
Websites
http://indiankanoon.org/
http://indiankanoon.org/doc/930662/
http://indiankanoon.org/docfragment/1599610/?formInput=Carlill%20v.
%20Carbolic%20smoke%20Ball%20Co.
http://indiankanoon.org/docfragment/786123/?formInput=Hill%20v.%20William
%20Hill%20%28park%20lane%29%20Ltd
http://indiankanoon.org/docfragment/1783676/?formInput=Subhash%20Kumar
%20Manwani%20v.%20State%20of%20MP
http://www.legalservicesindia.com/
http://www.legalserviceindia.com/article/l376-Wagering-Contracts.html
http://www.legalservicesindia.com/article/article/wagering-agreements-2831.html
http://glaws.in
http://glaws.in/2011/08/wagering-agreements-are-non-enforceable-undersection-30-of-contract-act-what-are-the-practical-implications-on-the-indiangambling-industry/

Books
Bare Act: Contract Act, 1872, Publisher: Universal Law Publishing Co. Pvt. Ltd.
The Indian Contract Act, R. K. Bangia, Allahabad Law Agency

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