UNIT 7 VOID AGREEMENTS

MODULE - 2
 Void Agreements
UNIT 7 VOID AGREEMENTS
Structure
NOTES
7.0 Introduction
7.1 Unit Objectives
7.2 Expressly Declared Void Agreements
7.3 Test Questions
7.4 Practical Problems

7.0 INTRODUCTION
“An agreement not enforceable by law is said to be void” [Sec. 2(g)]. Thus a void agreement
does not give rise to any legal consequences and is void ab-initio. In the eye of law such
an agreement is no agreement at all from its very inception.
We have already dealt with the following types of void agreements in the preceding units,
and will not therefore discuss them here again:
1. Agreements by a minor or a person of unsound mind (Sec. 11).
2. Agreements made under a bilateral mistake of fact material to the agreement (Sec. 20).
3. Agreements of which the consideration or object is unlawful (Sec. 23).
4. Agreements of which the consideration or object is unlawful in part and the illegal part
cannot be separated from the legal part (Sec. 24).
5. Agreements made without consideration (Sec. 25).

7.1 UNIT OBJECTIVE

Be familiar with the various agreements which have been ‘expressly declared’ void by the
Indian Contract Act.

7.2 EXPRESSLY DECLARED VOID AGREEMENTS

The last essential of a valid contract as declared by Section 10 is that it must not be one
which is ‘expressly declared’ to be void by the Act. Thus, there arises a question, as to
what are ‘expressly declared’ void agreements? The following agreements have been
‘expressly declared’, to be void by the Indian Contract Act:
1. Agreements in restraint of marriage (Sec. 26).
2. Agreements in restraint of trade (Sec. 27).
3. Agreements in restraint of legal proceedings (Sec. 28).
4. Agreements the meaning of which is uncertain (Sec. 29).
5. Agreements by way of wager (Sec. 30).
6. Agreements contingent on impossible events (Sec. 36).
7. Agreements to do impossible acts (Sec. 56).
At the very outset, it may be borne in mind that the law declares these agreements void ab-
initio and not illegal, and therefore transactions collateral to such agreements are not made

Self-Instructional Material 83
Void Agreements void. In fact it is for this reason that these agreements have not been discussed in the
preceding unit dealing with “unlawful or illegal agreements,” because otherwise, in effect,
these agreements are also ‘unlawful agreements’ as they are expressly declared void by the
Contract Act. It may be recalled that in the case of illegal agreements, transactions collateral
NOTES to them are also tainted with illegality and hence void.
1. Agreements in Restraint of Marriage: Every individual enjoys the freedom to marry
and so according to Section 26 of the Contract Act “every agreement in restraint of the
marriage of any person, other than a minor, is void.” The restraint may be general or partial
but the agreement is void, and therefore, an agreement agreeing not to marry at all, or a
certain person, or a class of persons, or for a fixed period, is void. However, an agreement
restraining the marriage of a minor is valid under the Section.
It is interesting to note that a promise to marry a particular person does not imply any
restraint of marriage, and is, therefore, a valid contract.
Illustrations. (a) A agrees with B for good consideration that she will not marry C. It is a void
agreement.
(b) A agrees with B that she will marry him only. It is a valid contract of marriage.
2. Agreements in Restraint of Trade: The Constitution of India guarantees the freedom
of trade and commerce to every citizen and therefore Section 27 declares “every agreement
by which any one is restrained from exercising a lawful profession, trade or business of
any kind, is to that extent void.” Thus no person is at liberty to deprive himself of the fruit
of his labour, skill or talent, by any contracts that he enters into.
It is to be noted that whether restraint is reasonable or not, if it is in the nature of restraint
of trade, the agreement is void always, subject to certain exceptions provided for statutorily.
Illustration. An agreement whereby one of the parties agrees to close his business in consideration
of the promise by the other party to pay a certain sum of money, is void, being an agreement is
restraint of trade, and the amount is not recoverable, if the other party fails to pay the promised
sum of money (Madhub Chander vs Raj Kumar1).
But agreements merely restraining freedom of action necessary for the carrying on of
business are not void, for the law does not intend to take away the right of a trader to
regulate his business according to his own discretion and choice.
Illustration. An agreement to sell all produce to a certain party, with a stipulation that the purchaser
was bound to accept the whole quantity, was held valid because it aimed to promote business
and did not restrain it (Mackenzie vs Striramiah2). But where in a similar agreement the purchaser
was free to reject the goods (i.e., was not bound to accept the whole quantity tendered) it was
held that the agreement was void as being in restraint of trade (Sheikh Kalu vs Ram Saran3).
Exceptions. An agreement in restraint of trade is valid in the following cases:
(i) Sale of goodwill. The seller of the ‘goodwill’ of a business can be restrained from
carrying on a similar business, within specified local limits, so long as the buyer, or any
person deriving title to the goodwill from him, carries on a like business therein, provided
the restraint is reasonable in point of time and space (Exception to Sec. 27).
Illustrations. (a) A, after selling the goodwill of his business to B promises not to carry on similar
business “anywhere in the world.” As the restraint is unreasonable the agreement is void.
(b) C, a seller of imitation jewellery in London sells his business to D and promises that for a
period of two years he would not deal: (a) in imitation jewellery in England, (b) in real jewellery in
England, and (c) in real or imitation jewellery in certain foreign countries. The first promise alone

1
(1874), 14 B.L.R. 76.
2
(1890), 13 Mad. 472.
3
84 Self-Instructional Material (1909), 13 Cal. W.N. 388.
was held lawful. The other two promises, namely (b) and (c), were held void as the restraint was Void Agreements
unreasonable in point of space and the nature of business (Goldsoll vs Goldman4).
(ii) Partners’ agreements. An agreement in restraint of trade among the partners or between
any partner and the buyer of firm’s goodwill is valid if the restraint comes within any of the
following cases: NOTES
(a) An agreement among the partners that a partner shall not carry on any business other
than that of the firm while he is a partner [Section 11(2) of the Partnership Act].
(b) An agreement by a partner with his other partners that on retiring from the partnership
he will not carry on any business similar to that of the firm within a specified period or
within specified local limits, provided the restrictions imposed are reasonable [Section
36(2) of the Partnership Act].
(c) An agreement among the partners, upon or in anticipation of the dissolution of the
firm, that some or all of them will not carry on a business similar to that of the firm
within a specified period or within specified local limits, provided the restrictions imposed
are reasonable (Section 54 of the Partnership Act).
(d) An agreement between any partner and the buyer of the firm’s goodwill that such
partner will not carry on any business similar to that of the firm within a specified
period or within specified local limits, provided the restrictions imposed are reasonable
[Section 55(3) of the Partnership Act].
(iii) Trade combinations. As pointed out earlier, an agreement, the primary object of which
is to regulate business and not to restrain it, is valid. Thus, an agreement in the nature of a
business combination between traders or manufacturers e.g., not to sell their goods below
a certain price, to pool profits or output and to divide the same in an agreed proportion,
does not amount to a restraint of trade and is perfectly valid (Fraser & Co. vs Bombay Ice
Company5). Similarly, an agreement amongst the traders of a particular locality with the
object of keeping the trade in their own hands is not void merely because it hurts a rival in
trade (Bhola Nath vs Lachmi Narain6) But if an agreement attempts to create a monopoly,
it would be void (Kameshwar Singh vs Yasin Khan7) Agreements tending to create monopolies
are now also governed by the provisions of the Monopolies and Restrictive Trade Practices
Act, 1969, which forbids certain types of trade agreements.
(iv) Negative stipulations in service agreements. An agreement of service by which a
person binds himself during the term of the agreement, not to take service with anyone
else, is not in restraint of lawful profession and is valid. Thus a chartered accountant
employed in a company may be debarred from private practice or from serving elsewhere
during the continuance of service (Maganlal vs Ambica Mills Ltd.8) But an agreement of
service which seeks to restrict the freedom of occupation for some period, after the
termination of service, is void. Thus, where S, who was an employee of Brahmputra Tea
Co. Assam, agreed not to employ himself or to engage himself in any similar business
within 40 miles from Assam, for a period of five years from the date of the termination of
his service, it was held that the agreement is in restraint of lawful profession and hence
void (Brahamputra Tea Co. vs Scarth9).
3. Agreements in Restraint of Legal Proceedings: Section 28, as amended by the
Indian Contract (Amendment) Act, 1996, declares the following three kinds of agreements
void:

4
(1915), 1 Ch. 292.
5
(1905), 29 Bom. 107.
6
(1931), 53 All. 316.
7
(1938), Pat. 473.
8
A.I.R. (1964) Guj. 216.
9
(1885), 11 Cal. 545. Self-Instructional Material 85
Void Agreements (a) An agreement by which a party is restricted absolutely from taking usual legal
proceedings, in respect of any rights arising from a contract.
(b) An agreement which limits the time within which one may enforce his contract rights,
without regard to the time allowed by the Limitation Act.
NOTES
(c) An agreement which provides for forfeiture of any rights arising from a contract, if
suit is not brought within a specified period, without regard to the time allowed by the
Limitation Act.
Restriction on Legal proceedings. As stated above Section 28 renders every agreement
in restraint of legal proceedings void. This is in furtherance of what we studied under the
definition of a ‘contract’, namely, agreement plus enforceability at law is a contract. Thus
if an agreement inter-alia provides that no party shall go to a court of law, in case of
breach, there is no contract and the agreement is void ab-initio. In this connection the
following points must also be borne in mind:
(a) The Section ‘applies only to rights arising from a contract. It does not apply to cases10
of civil or criminal wrongs or torts.
(b) This Section does not affect the law relating to arbitration e.g., if the parties agree to
refer to arbitration any dispute which may arise between them under the contract,
such a contract is valid (Exceptions 1 and 2 to Section 28).
(c) The Section does not affect an agreement whereby parties agree “not to file an appeal”
in a higher court. Thus where it was agreed that neither party shall appeal against the
trail court’s decision, the agreement was held valid, for, Section 28 applies only to
absolute restriction on taking the legal proceedings, whereas here the restriction is only
partial as the parties can go to a court of law alright and the only restriction is that the
losing party cannot file an appeal (Kedar Nath vs Sita Ram11).
(d) Lastly, this Section does not prevent the parties to a contract from selecting one of the
two courts which are equally competent to try the suit. Thus in A. Milton & Co. vs
Ojha Automobile Engineering Company’s Case12, there was an agreement which inter-
alia provided — “Any litigation arising out of this agreement shall be settled in the High
Court of Judicature at Calcutta, and in no other court whatsoever.” The defendants
filed a suit in Agra whereas the plaintiff brought a suit in Calcutta. It was held that the
agreement was binding between the parties and it was not open to the defendants to
proceed with their suit in Agra.
Curtailing the period of limitation. Any agreement curtailing the period of limitation
prescribed by the Limitation Act is also void under Section 28. Thus, if a clause in an
agreement between A and B provides that either party can sue for breach within a year of
breach only, the clause is void and despite the clause the parties have a right to sue in case
of breach by either party within the time allowed by the Limitation Act i.e., within three
years from the date of breach. It is relevant to state that agreements extending the period of
limitation prescribed by the Limitation Act are also void, not under this Section but under
Section 23, as the object will be to defeat the provisions of the law (Rama Murthy vs
Gopayya13).
Forfeiture of contract rights. Under Clause (c) of Section 28 (stated above) an agreement
which provides for forfeiture of any rights arising from a contract, if suit is not brought
within a specified time (say 3 months) is also void. This Clause was inserted by the Indian
Contract (Amendment) Act, 1996.
10
Such cases come under “Agreements Stifling Prosecutions” which have been discussed in the
preceding chapter.
11
A.I.R. (1969) Bom. 221.
12
A.I.R. (1931) Cal. 279. Also see Hakam Singh vs Gamman (India) Ltd., (1971) 1 S.C.C. 286.
86 Self-Instructional Material 13
(1917), 40 Mad. 701.
The distinction between Clause (b) and Clause (c) of Section 28 (stated above) may be Void Agreements
noted. Under Clause (b), the agreement limits the time within which one may enforce his
contract rights thereby curtailing the period of limitation prescribed by the Limitation Act,
whereas under Clause (c), the agreement limits the time within which one is to have any
contract rights to enforce. Thus, Clause (c) refers to an agreement which does not affect NOTES
the remedy for breach but which extinguishes the right itself after the specified time and
such a stipulation has also been declared void.
The background behind the passing of the Indian Contract (Amendment) Act, 1996 may be
briefly stated as follows. Prior to this Amendment Act, the insurance policy documents
issued by general insurance companies invariably provided that if a claim is rejected and a
suit is not filed within three months after such rejection, all benefits under the policy shall
be forfeited. Such a provision was held valid and binding on the ground that it is outside the
scope of Section 28 (Baroda Spinning Co. Ltd. vs Satyanarayan Marine & Fire Insurance
Co. Ltd.14). The learned judge observed: “... what the plaintiff was forbidden to do was to
limit the time within which he was to enforce his rights; what he has done is to limit the
time within which he is to have any rights to enforce; and that appears to me to be a very
different thing”. However, the Supreme Court in the Food Corporation of India vs New
India Assurance Co. Ltd. (1994) Case held that insurance contracts restraining the time
period within which one is to have any contract rights to enforce were violative of the
Limitation Act. The Parliament has therefore amended Section 28 by inserting a new clause.
Accordingly, henceforth general insurance companies cannot insist that suits for claims be
brought within a period of time shorter than the period provided under the Limitation Act,
otherwise all benefits under the policy shall be forfeited.
4. Uncertain Agreements: “Agreements, the meaning of which is not certain, or capable
of being made certain, are void” (Sec. 29). Through Section 29 the law aims to ensure that
the parties to a contract should be aware of the precise nature and scope of their mutual
rights and obligations under the contract. Thus, if the words used by the parties are vague
or indefinite, the law cannot enforce the agreement.
Illustrations (to Sec. 29). (a) A agrees to sell to B “a hundred tons of oil.” There is nothing
whatever to show what kind of oil was intended. The agreement is void for uncertainty.
(b) A, who is a dealer in coconut oil only, agrees to sell to B “one hundred tons of oil.” The nature
of A’s trade affords an indication of the meaning of the words, and A has entered into a contract
for the sale of one hundred tons of coconut oil.
(c) A agrees to sell to B “one thousand maunds of rice at a price to be fixed by C.” As the price is
capable of being made certain, there is no uncertainty here to make the agreement void.
(d) A agrees to sell to B “his white horse for rupees five hundred or rupees one thousand.” There
is nothing to show which of the two prices was to be given. The agreement is void.
Further, an agreement “to enter into an agreement in future” is void for uncertainty unless
all the terms of the proposed agreement are agreed expressly or implicitly. Thus, an agreement
to engage a servant some time next year, at a salary to be mutually agreed upon is a void
agreement.
5. 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.

14
(1914), 38 Bom. 344. Self-Instructional Material 87
Void Agreements In Thacker vs Hardy15 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 contract is of an uncertain nature — that is to say, if the event turns out one
way A, will lose; but if it turns out the other way he will win.”
NOTES Possibly the most expressive and all-encompassing definition of a “wagering agreement”
was given by Hawkins, J., in Carlill vs Carbolic Smoke Ball Co.:16
“A wagering contract is one by which two persons professing 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 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.”
Certain aspects of the above definition require to be emphasised. 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 to the parties. Thus a wager may be made upon the result of the
cricket match which is to take place next month in Calcutta, or upon the result of an
election which is over, if the parties do not know the 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
summarised 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

15
(1878), 4 QBD. 685.
88 Self-Instructional Material 16
(1892), 2 Q.B. 484.
Rs 100, either against the winner or against Z, the stake-holder, even if Z had paid after the Void Agreements
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
Vochalapu17 ). 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. NOTES
The Section makes an exception in favour of certain prizes for horse racing by providing
further that “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.” 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 States 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 business 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”18.
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 authorised
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 Lance19).
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 of skill and in which an effort is made to select the best competitor e.g., picture Check Your Progress
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 State whether the following are
True or False:
wagers as per the provisions of the Prize Competition Act, 1955.
1. An agreement to many a
Insurance contracts. Insurance contracts are valid contracts even though they provide particular person is a void
for payment of money by the insurer on the happening of a future uncertain event. Such agreement.
contracts differ from wagering agreements mainly in three respects: 2. Every agreement in restraint
of trade is void.
(a) The holder of an insurance policy must have an ‘insurable interest’ in the event upon
3. A suit can be filed for
which the insurance money becomes payable. Thus contracts of insurance are entered recovering anything which
into to protect an interest. In a wagering agreement there is no interest to protect and is won on a ‘wager’.
the parties bet exclusively because they can thereby make some easy money. 4. A lottery always remains a
‘wager’, though it may not
be illegal.
17
A.I.R. (1928) Mad. 434.
18
Pollock and Mulla, Indian Contract Act, 6th Ed., p. 234.
19 Self-Instructional Material 89
(1918), 42 Bom. 676.
Void Agreements (b) Contracts of insurance are based on scientific and actuarial calculation of risks, whereas
wagering agreements are a gamble without any scientific calculation of risks.
(c) Contracts of insurance are regarded as beneficial to the public, whereas wagering
agreements do not serve any useful purpose.
NOTES
6. Agreements Contingent on Impossible Events. “Contingent agreements to do or not
to do anything, if an impossible event happens, are void, whether the impossibility of the
event is known or not to the parties to the agreement at the time when it is made.” (Sec. 36)
Illustrations (to Sec. 36). (a) A agrees to pay B Rs 1,000 (as a loan) if two straight lines should
enclose a space. The agreement is void.
(b) A agrees to pay B Rs. 1,000 (as a loan) if B will marry A’s daughter, C. C was dead at the time of
the agreement. The agreement is void.
7. Agreements to do Impossible Acts. “An agreement to do an act impossible in itself is
void.” (Sec. 56 Para 1)
Illustrations. (a) A agrees with B to discover treasure by magic. The agreement is void [Illustration
(a) to Section 56].
(b) A agrees with B to run with a speed of 100 Kilometres per hour. The agreement is void.
No Restitution. The term ‘restitution’ means ‘return’ or ‘restoration’ of the benefit received
from the plaintiff under the agreement. As per Section 65 no restitution of the benefit
received is allowed in the case of expressly declared void agreemnts.20

7.3 TEST QUESTIONS

1. Discuss briefly expressly declared void agreements under the Indian Contract Act.
2. Discuss the law relating to (a) agreements in restraint of marriage, and (b) uncertain
agreements.
3. “An agreement in restraint of trade is void.” Discuss the statement giving exceptions to
it, if any.
4. What is a wager? Is an agreement by way of wager void or illegal? Is a contract of
insurance a wager?

7.4 PRACTICAL PROBLEMS

Attempt the following problems, giving reasons for your answers:
1. A agrees to sell all the goods manufactured by him in the ensuing season to B. In
breach of the said agreement A sold some goods manufactured during the said season
to C. Thereupon B sued A for breach of contract. Will B succeed?
[Hint. Yes, B will succeed because the agreement between him and A is valid as it aims
to promote business and does not restrain it.]
2. A agrees to sell his cow to B for Rs 500 if the cow gives 6 kg milk every day, but for
Rs 10 only if it fails to do so. The cow fails, whereupon B remands the cow for Rs. 10
as agreed. A refuses. B brings a suit against him. Will B succeed?
[Hint. No, B will not succeed as the transaction, though ostensibly a sale, is in reality
a wager (Brogden vs Marriott, 5 LJ (CP) 302).]
3. A lends money to B to enable him to pay off the loss which he has sustained in a
wagering transaction with C. Can A recover the money lent by him?

90 Self-Instructional Material 20
For details refer to unit 1.
 [Hint. A can recover, because an agreement collateral to a wagering agreement remains Void Agreements
valid except in Maharashtra and Gujarat States where wagering agreements are illegal.]
4. A and B are partners in a business. They enter into a wagering agreement with a third
party. On losing the bet A satisfies his own and also B’s liability under the agreement.
Can A claim from B the amount paid on his behalf? NOTES
[Hint. Yes, A can claim the amount from B because a wagering agreement is only void
and not illegal and therefore a collateral contract can be enforced.]
5. A and B enter into a wagering agreement and deposit Rs 500 each with C instructing
him to give the total sum to the winner. A wins. He sues C for the stake amount. B also
sues C for a return of the stake deposited by him with C. Decide.
[Hint. A cannot recover the bet amount from C because the law will not assist in the
enforcement of a wagering agreement. Both A and B, however, can recover the amount
deposited by them, because it is clear from the facts of the case that the sum is still in
the hands of C. Of course they cannot even recover their deposit money if the transaction
took place in Maharashtra and Gujarat States where a wagering agreement is not only
void but also illegal.]

Self-Instructional Material 91
Copyright © Author, 2010
All rights reserved. No part of this publication which is material protected by this copyright notice
may be reproduced or transmitted or utilized or stored in any form or by any means now known or
hereinafter invented, electronic, digital or mechanical, including photocopying, scanning, recording
or by any information storage or retrieval system, without prior written permission from the Publisher.

Information contained in this book has been published by VIKAS® Publishing House Pvt. Ltd. and has
been obtaine1d by its Authors from sources believed to be reliable and are correct to the best of their
knowledge. However, the Publisher, its Authors & Mahatma Gandhi University shall in no event be
liable for any errors, omissions or damages arising out of use of this information and specifically
disclaim any implied warranties or merchantability or fitness for any particular use.

Vikas® is the registered trademark of Vikas® Publishing House Pvt. Ltd.

VIKAS® PUBLISHING HOUSE PVT LTD
E-28, Sector-8, Noida - 201301 (UP)
Phone: 0120-4078900 Fax: 0120-4078999
Regd. Office: 576, Masjid Road, Jangpura, New Delhi 110 014
Website: www.vikaspublishing.com Email: helpline@vikaspublishing.com

UBS The Sampuran Prakash School of Executive Education

Gurgaon, Haryana, India
www.ubs .edu.in