WAGERING

AGREEMENT
In everyday language, a wager means bet. An agreement wherein two parties
in which one of the parties agrees to pay money if some unknown event
occurs, with the understanding that if the event does not happen, the other
party must pay the same amount back, is called an agreement of Wager. In
simple terms, a wagering agreement is an agreement in which money or the
value of money is paid based on the occurrence or non-occurrence of any
potential, unpredictable event. Still, each form will exhibit the typical
characteristics of a bet
What is a wagering agreement?

• Ag reemen t b et ween t wo p a rt i es wh ere t h e m o n ey p a y a b l e b y t h e o n e p a rt y t o t h e o t h er p a rt y o n t h e

h a p p en i n g o f u n cert a i n ev en t s a n d t h e o t h er p a rt y t o f i rs t - p a rt y, wh en t h e ev en t d o es n ’ t t a k e p l a ce.
Th es e a g reem en t s a re k n o wn a s t h e wa g eri n g a g reemen t . Gen era l l y, wa g eri n g a g reemen t s a s p er l a w
a re v o i d . [ S ECTI ON 3 0 ]
 Example of wagering
agreement:

1. I f t h e re i s a n a g re e m e n t b e t w e e n P a n d Y t h a t
i f Te a m B l u e b e a t s Te a m Ye l l o w, Y w i l l g i v e
a n a m o u n t o f R s . 1 , 0 0 0 t o P. I n c a s e Te a m
Ye l l o w w i n s , Y w i l l re c e i v e R s . 5 0 0 b y P. S u c h
a n a g re e m e n t i s c o n s i d e re d a w a g e r i n g
a g re e m e n t i n t h e e y e s o f l a w a n d t h u s v o i d .

2. S h i l p a s e c u re s h e r a u t o m o b i l e a g a i n s t
d a m a g e b y p u rc h a s i n g a c a r i n s u r a n c e p o l i c y
and paying the associated insurance payment.
We c a n c o n c l u d e t h a t S h i l p a i s i n t e re s t e d i n
the car and that she will lose nothing in the
e v e n t o f a f u t u re u n p re d i c t a b l e o c c u r re n c e ,
s u c h a s a n a c c i d e n t . A s a re s u l t , i t i s n o t a
w a g e r.
CASE LAW
T h e e x p r e s s i o n “ w a g e r ” h a s n o t b e e n d e fi n e d i n t h e I n d i a n
C o n t r a c t A c t . A c l a s s i c d e fi n i t i o n i s h o w e v e r a v a i l a b l e i n
the case of Carlill v Carbolic Smoke Ball Co.[i]
“ 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 on
the determination of that event, one shall win from the
other, and that other shall pay or hand over to him, a sum
of money or another stake; neither of the parties having
any other interest in that contract than the sum or stake
he will so win or lose, there is no other consideration for
making of such contract by either of the parties. If either
of the parties may win but cannot lose, or may lose but
cannot win, it is not a wagering contract.”
ESSENTIAL CONDITIONS OF WAGER

THE FOLLOWING ARE THE CONDITIONS

O F T H E WA G E R I N G A G R E E M E N T :

1. I t m u s t d e p e n d o n a n u n c e r t a i n a c t .
1. M u t u a l p o s s i b i l i t y o f p ro f i t o r l o s s
• The subject matter of the agreement must rely
• Both parties have a chance of winning
on an uncertain event. It was held that, while a
wager is usually about a future occurrence, it or losing depending on the
can also be about an event that occurred in the u n p re d i c t a b l e e v e n t i s a n i m p o r t a n t
past, but the parties need to be unaware of the c o m p o n e n t o f a w a g e r i n g a g re e m e n t . A n
outcome or the time when it occurred.
a g re e m e n t c a n n o t b e c o n s i d e re d a
1. N e i t h e r o f t h e p a r t i e s h a s c o n t r o l o v e r t h e e v e n t . w a g e r i n g a g re e m e n t i f i t l a c k s t h e d e s i re

•
to win or lose. It is crucial that both
If one of the parties can affect the outcome,
the agreement will lack an essential component parties must stand to gain or lose based
o f a w a g e r. on the outcome of an unknown event.
EXCEPTIONS
1. I N S U R A N C E C O N T R A C T S

• A n i n s u r a n c e c o n t r a c t i s a n i n d e m n i t y c o n t r a c t u s e d t o p ro t e c t o n e p a r t y ’s i n t e re s t a g a i n s t d a m a g e a n d h a s
a n i n s u r a b l e i n t e re s t . O n t h e o t h e r h a n d , a w a g e r i n g c o n t r a c t i s a c o n d i t i o n a l c o n t r a c t t h a t h a s n o s t a k e i n
whether an event occurs or not.

• Wa g e r i n g c o n t r a c t s a re v o i d b y d e f i n i t i o n , a n d t h e p u r p o s e o f a w a g e r i n g c o n t r a c t i s t o e a r n m o n e y o r
m o n e y ’s w o r t h .

1. S k i l l c o m p e t i t i o n s

• S k i l l c o m p e t i t i o n s a re n o t c o n s i d e re d w a g e r i n g a g re e m e n t s b e c a u s e t h e y i n v o l v e a s i g n i f i c a n t s k i l l l e v e l t o
w i n a n d a re n o t b a s e d o n t h e p ro b a b i l i t y o f a n u n c e r t a i n o u t c o m e . C ro s s w o r d p u z z l e s , s p o r t s c o m p e t i t i o n s ,
a n d o t h e r s u c h a c t i v i t i e s a re e x a m p l e s . I f t h e c o m p e t i t i o n i s b a s e d o n l u c k o r c h a n c e l i k e t h e l o t t e r y o r
casino, it will be a wager and void.

1. S h a re m a r k e t t r a n s a c t i o n s

• T h e s a l e a n d p u rc h a s e o f s t o c k s a n d s h a re s a re n o t c o n s i d e re d a w a g e r. I t i s a v a l i d t r a n s a c t i o n b e t w e e n t h e
p a r t i e s a n d n o t a w a g e r.
CAN A WAGERING CONTRACT BE ENFORCED?

• The Effects and Enforceability of a wagering contract can be understood by the concept
that under the Indian Contract Act, it has been explicitly declared as a void ab initio and
thus even section 65 of the Indian Contract Act does not apply to it as the contract is void
but there is nowhere mentioned that these type of contracts have been forbidden by the
law, which again implies that except the state of Gujarat and Maharashtra, the wagering
contracts are void and are legal in the other states. Thus, these agreements by way of
wager are void, and thus no suit can be brought for recovering anything alleged to be won
on any wager or entrusted to any person to abide by the result of any game or any other
such uncertain event on which any wager is made. This was also seen in the case of
Badridas Kothari v. Meghraj Kothari AIR 1967 the court held that although a promissory
note was executed for the payment of the debt caused through a wagering transaction, the
note was not held enforceable. Thus, the winner cannot recover the money, but before it is
paid to him the depositor recovers from the stakeholder. Also, it was also seen in the case
of GherulalParekh v. MahadeoDas 1959 AIR 781 the honorable supreme court in its
judgment said that although a wager is not unlawful under Section 23 of the Indian
Contract Act and thus all the proceedings and transactions collateral to the main
transaction is as such enforceable.
CONCLUSION

• Th e I n d i a n Co n t ra ct Act o f 1 8 7 2 d o es n o t d ef i n e t h e wa g er; t h e j u d i ci a l s y s t em h a s b een d ea l i n g wi t h

wh a t g en u i n el y co n s t i t u t es a b et a n d wh a t h a s b een o u t s i d e t h e mea n i n g o f wa g eri n g req u i remen t s .
S ect i o n 3 0 j u s t i n d i ca t es t h a t a l l b et t i n g co n t ra ct s a re n u l l a n d v o i d , wh i ch l ea v es m u ch ro o m f o r
i n t erp ret a t i o n . Th e d ef i n i t i o n o f t h e wo rd wa g er s h o u l d t h u s b e a l t ered , a n d t h e s co p e o f t h i s s ect i o n
n eed s t o b e b ro a d en ed .

• A wa g eri n g a g reemen t i s cen t ered o n t h e rewa rd . As a res u l t , b o t h p a rt i es m u s t h a v e a rea s o n a b l e

p o s s i b i l i t y o f wi n n i n g , a n d b o t h s i d es m u s t b e g i v en eq u a l ch a n ces t o s u cceed o r f a i l .