Wagering Agreements

WAGERING AGREEMENT OR WAGER (Sec. 30)

A wager is an agreement between two parties by which one promises to pay money or money's worth on the happening of some uncertain event in consideration of the other party's promise to pay if the event does not happen. Wagering agreement is also called as betting agreement. It is a game of chance in which winning or losing is dependent on specified uncertain event. This agreement is void and not enforceable at law.

Essentials of a Wagering Agreement

1. Promise to pay money or money's worth.

The wagering agreement must contain a promise to pay money or money's worth.

2. Uncertain event.

The promise must be conditional on an event happening or not happening. A wager generally contemplates a future event, but it may also relate to a past event provided the parties are not aware of its result or the time of its happening.

3. Each party must stand to win or lose.

Upon the determination of the contemplated event, each party should stand to win or lose. An agreement is not a wager if either of the parties may win but cannot lose or may lose but cannot win.

4. No control over the event.

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.

5. No other interest in the event.

Lastly, neither party should have any interest in the happening or non-happening of the event other than the sum or stake he will win or lose. Thus, an agreement is not a wager if the party to whom money is promised on the occurrence of an event has an interest in its non-occurrence.

EXCEPTIONS:

1. Horse racing competition:

Though horse racing is permitted by the state government, the nature of the horse racing competition will remain as wager. Sometimes people make a subscription of money, which is to be awarded to the winner of any horse race. Such a subscription is lawful, provided the prize amount should be Rs. 500 or more. If the amount is less than Rs. 500, subscription is considered as unlawful or void.

2. Skill competitions:

Sometimes skill games like crossword competitions, puzzles and athletic competitions are conducted. Prizes are awarded according to the solution or the merits. Such prize competitions, which are games of skill, are not wager provided the amount of prizes does not exceed Rs. 1,000. if the amount of prize exceeds Rs. 1,000 they will be regarded as gambling or void.

3. Lotteries:

Lottery means distribution of prizes by lot. It is a game of chance. An agreement to buy a lottery ticket is a wagering agreement and is void. Government may give sanction for conducting lotteries but the sanction by the government does not change the nature of lotteries. It remains a wager. The only effect of the sanction is that the person conducting lotteries will not be liable for punishment.

4. Contract of insurance:

An insurance contract may be defined as the contract whereby a person, in consideration of a certain sum of money, undertakes to make good the loss of others arising on the happening of a specified uncertain event. An insurance contract may appear to be a wagering agreement because money is receivable on the happening of an uncertain event. But it is not a wagering agreement. It is perfectly valid.

5. Share market transaction:

Share market transactions in which there is a genuine intention to give or take delivery of shares and stocks are not wagers but valid transactions.

7. Chit fund plan:

A chit fund plan under which all subscribers are repaid their capital by a fixed date. Though some of the subscribers are determined by lot, it is not a lottery and so, is not a wagering plan.

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Redrafted for Educational Purpose.

Deekshith Kumar,
Assistant Professor of Commerce

Book Reference:

1. Elements of Mercantile Law by N. D. Kapoor
2. Principles of Mercantile Law by Avtar Singh
3. A Textbook of Business Law by Dr. Umesh Maiya
4. Business Law by B.S. Raman