NATIONAL UNIVERSITY OF STUDY AND RESEARCH OF LAW

RESEARCH PAPER

AGREEMENTS AGAINST PUBLIC POLICY: WAGERING AGREEMENT

Submitted to: Submitted by:

M.R.S Murthy Mohit Sharma

Assistant Professor Roll No. - 118

Law of Contracts-I Sec. - B

Sem. – 2nd

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 INDEX

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 INTRODUCTION

A contract is an agreement enforceable by law. It becomes enforceable only when it is valid

contract. Thus there are five essentials mainly for forming a valid contract. These are:

 Free consent of parties.

 Parties should be competent to contract.
 For lawful consideration.
 With having lawful object.
 And should not be declared void by Indian contract act.

Here in this research paper I will be dealing with agreements against public policy which is
defined in section 30 of Indian Contract Act, 1872. This can be read as:

Section 30. 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 the result of any game or other uncertain events on which any wager is made.

Exception in favor 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 294A 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 294A
of the Indian Penal Code (45 of 1860) apply.

Section 30 only says that “agreements by way of wager are void”. The section does not define
“wager”. It can be defined by SUBBA RAO J:

“As a promise to give money or money’s worth upon the determination or ascertainment
event”.1

But the most illustrative definition of “wager” is that given by HAWKINS J:

“A wagering contract is one by which two persons professing to hold opposite views touching
the issues of a future uncertain event, mutually agree that dependent on the determination of that
event one shall pay or handover to him, a sum of money or other stake; neither of the
contracting parties having any other interest in that contract than the sum or 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,
1
Gherulal v Mahadeo (1959) 2 SCA 342

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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 loose, it is not a
wagering contract.”2

ESSENTIALS FOR WAGERING CONTRACT

1. Uncertain Event:
Uncertain event is one of the most essential elements for a wagering contract. It means
that the performance of the bargain must depend upon the determination of an uncertain
event. A wager generally contemplates with the future events, but it may even relate to an
event which has happened in past but parties are not aware of its result or the time of its
happening.

2. Mutual Chances Loss And Gain:

For a contract to be a wagering contract there should be equal and mutual chances of loss
and gain for both the parties. If there are no such chances then it is not considered as
wager. Thus in Babasaheb v Rajaram3 court held that this agreement cannot be looked
upon as one of wagering in eyes of law. Court held that it is the essence of contract that
essence of wager is that either of the side should stand to win or lose. But in this case
neither of the party stands wins nor loses.

3. Neither Parties to have Control over the Events:

Neither party should have control over the happening of the event in one way or other. “If
one of the parties has event in his own hands, the transaction lacks an essential ingredient
of wager.”4

4. No other Interest in the Event:

At last, neither of the parties should have any interest in the happening of the event other
than the sum nor stake he will win or lose. This is what marks the difference between a
wagering agreement and contract of insurance. If one of the parties has the event in his
own hands, the transaction lacks essential ingredient of wager.5

2
Carlill v Carbolic Smoke Ball Co. (1892) 2 QB 484,490
3
AIR 1931 bom 264
4
Dayabhai Tribhovandas v Lakshmichand,(1885)9 bom
5
Birdwood j in Dayabhai Tribhuvandas v. Lakshmichand, (1885)9 Bom 358,363

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 EFFECTS OF WAGERING AGREEMENT

A wagering agreement is void ab initio, and S. 65 has no application to it. 6 Money paid directly
by a third party to a winner of a bet cannot be recovered from the loser.7 Even if a loser makes a
new promise to pay for his losses in consideration of his not being posted, the promise cannot be
enforced; but if he gives a cheque in discharge of his liability, the cheque may not be tainted with
illegality because of the winner’s promise not to have the name posted. The cheques will not be
enforceable by the original payee, but may be enforced by a third party holder of the cheque,
even if he knew of the facts leading up to giving of the cheque. 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.

LAWS RELATED TO WAGER

This section represents the whole law of wagering now in force in India, supplemented by the
Bombay state by the act for avoiding wagers (amendments) act 1865, which amended the act for
avoiding wagers 1848. Before the act of 1848 the law relating to wagers in force in British India
was the common law in England. By that law an action might be maintained on a wager, if it was
not against the interest or feelings of third persons, did not lead to indecent evidence, and was
not contrary to public policy.8 The nature of gambling is inherently vicious and pernicious.9
Gambling activities which have been condemned in India since ancient times appear to have
been equally discouraged and looked upon with disfavor in England, Scotland, USA and
Australia. The Hindu law relating to gambling has not been introduced in the law of contract in

6
Dayabhai Tribhovandas v Lakhmichand Panachand (1885) ILR 9 Bom 358

7
CHT ltd v Ward [1963]3 ALL ER 835

8
 Ram loll Thackoorseydasss v. Soojunmull Dhondmull (1848) 4 MIA 339

9
 State of Bombay v. RMD Chamarboughwala [1957] SCR 874, AIR 1957 SC 699

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India.10 Gambling is not trade and commerce, but res extra commercial and therefore not
protected under art 19(1) or art 301.11

VARIATION: wagers distinguished from contract of insurance

A transaction of insurance resembles a wager. Every contract of insurance is a wager if the

insurer has no insurable interest in the event upon which insurance money is payable. The
insurance interest lies normally in that the event is one which is prime facie adverse to the
interest of the insurer.12 If insurer’s cargo which he has loaded on a vessel, his contract is not a
wager because his property is at risk during the voyage; but if has no cargo on board, the contract
is a wager; because if the vessel is not lost, he loses the amount of premium.

Section 6 of the Marine Insurance Act 1963, provides that every contract of marine insurance by
way of wager is void; and that a contract of marine insurance is deemed to be a wagering
contract where the assured has not an insurable interest. The (English) marine insurance act 1906
also provides that a contract or Marine Insurance is deemed to be a gaming or wagering contract
if the insured has no interest in the adventure.

A truck owned by a person who was transferred benami to b who got it insured in his own name.
The truck was involved in an accident and it seriously injured a young army officer who claimed
heavy damages from the owner, driver and the benamidar and the insurance company. It raised
the plea that an ostensible owner (a benamidar) had no insurable interest and that it was a wager
for that reason. But these pleas were negated by the high court.13

CONTRACT OF GAMING

A gaming contract consists of the mutual promises which the players of the game necessarily
make, express or by implication, in paying for a stake as to its transfer upon the result of the
game. Such contract may be a wager if the parties are two. In K.R. Lakshmanan (Dr) v State of

10
Gherulal Parakh v. Mahadeodas Maiya [1959] Supp 2 SCR 406, AIR 1959 SC 781
11
RMDC v. Union of India AIR 1957 SC 628,[1957] SCR 930
12
Prudential Insurance Co. v Commerce of Inland Revenue (1904) 2 KB 658.
13
Northern India General Insurance Co. Ltd. V Kanwarjit Singh Sobti, AIR 1973 All 357.

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Tamil Nadu14the Supreme Court had an occasion to decide whether horse racing amounts to
gaming as defined under the Madras City Police Act 1888, and the madras gaming act. It stated: 

“Gambling in a nutshell is a payment of a price for a chance to win a prize. Games may be of
chance or of skill and chance combined. A game of chance is determined entirely or in part by
lot or mere luck. A game of skill- although the element of chance necessarily cannot be entirely
eliminated- is one in which success depends principally upon the superior knowledge, training,
attention, experience and adroitness of the player”.

SPECULATIVE TRANSACTIONS

A speculative contract is not necessarily a wagering contract, and must be distinguished from
agreements by way of wager. This distinction comes into prominence in a class of cases where
the contracts are entered into through brokers. The modus operandi of the defendant in this class
of cases is, when he enters into a contract of sale, to purchase the same quantity before the vaida
day; and when he enters into a contract of sale, to purchase the same quantity before the vaida
day. This mode of dealing, when the sale and purchase are to and from the same person, has the
effect, of course, of cancelling the contracts, leaving only differences to be paid. When they are
different persons, it puts the defendant in the position vicariously to perform his contracts. This
is, no doubt, a highly speculative mode of transacting business; but the contracts are not
wagering contracts, unless it is the intention of both contracting parties at the time of entering
into the contracts, neither to call for nor give delivery from or to each other. “There is no law
against speculation as there is against gambling.” A fortiori, dealings between stockbrokers,
whose regular course of business is periodical settlement of differences, are not presumed to be
wagering agreements. It may well be that the defendant is a speculator who never intended to
give delivery, and even that the plaintiffs did not expect him to deliver; but that does not convert
a contract, otherwise innocent, into a wager. Speculation does not necessarily involve a contract
by way of wager, and to constitute such a contract a common intention to wager is essential. It is
in cases of above description that ‘there is a danger of confounding speculation, or that which is
properly described as gambling, with agreements by way of wager; but the distinction in the
legal result is vital.’ Every forward contract is to some extent speculative, but is not a wager or
gamble on that account. The distinction between the two is a narrow one.

14
AIR 1996 SC 1153.

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 AGREEMENTS COLLATERAL TO WAGERING AGREEMENTS

Contract collateral to a wagering agreement is not necessarily unenforceable 15Section 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 sec. 23 of the contract act. 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 compelled16. 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 enactment17there 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 brokerage18 commission, or the losses sustained by him, even
though contracts in respect of which the claim is made are contracts by way of wager.`

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 Anderson19 a betting agent, at the request of the

15
Ram Gopal v Govind Das AIR 1944 ALL 196 (held to be wager)
16
Hill v William Hill (park lane) ltd. [1949] 2 ALL ER 452.
17
Act for avoiding wagers (amendment) act 1856(born act 3 of 1856)
18
Firm Hagami Lal Ram Prasad v Bhuralal Ram Narain AIR 1961 Raj 52.
19
[1884] 13 QBD 779.

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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.

The act for Avoiding Wagers (amendment) act 1865 (Bombay act 3 of 1865)
The law is however, different in the state of Bombay. In that state, contracts collateral to or in
respect of wagering transactions are prevented from supporting a suit by the special provisions of
the act for avoiding wagers (amendment) act 1865 (Bombay act 3 of 1865). It was observed:

“That act was passed to close the doors of the courts of justice in the presidency to suits upon
contracts collateral to wagering transactions where such collateral contracts have been entered
into or have arisen since the act came into force, a purpose which it has effectually answered”.

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 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

Primary sources

 Pollock & Mulla, Indian Contract and Specific Relief Acts, thirteenth edition, volume
 Chitty on Contract, volume II, Thomson Reuters (Legal) Limited.
 Avatar Singh, Contract & Specific Relief, tenth edition, Eastern Book Company.
 Anson’s Law of Contract, 29th Edition, OXFORD.

Secondary sources

 Websites

 www.lexisnexis.com/academics
 www.manupatra.com
 www.legalindia.com
 www.parliamentofindia.com
 www.indialawjournal.com
 www.citeman.com
 www.preservearticle.com
 www.slideshare.net

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