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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: All ER 452. 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) 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.)Said: “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.
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 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 294-A 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 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. Mahadeo said: Sir William Anson’s definition of ‘wager’ as a promise to give money or money’s 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.
Essentials of wagering agreement:firstly, 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.
Secondly, equal chances of gain or loss to the parties’ .There is no wager if there are no mutual chances of gain or loss, each party should stand to win or lose. If one party wins and there weren’t any chances of them losing, then in that case there is no wager. If winning or losing is completely based on skill there will be no wager (Cole v. Odhams press) it should be dependent on chance.
Thirdly, neither party to have control over the event. Neither party should have control over the happening of the event one way or the other. Birdwood J in (Dayabhai Tribhovandas v. Lakshmichand) “If one of the parties has the event in his own hands, the transaction lacks the essential ingredient of wager”.
Lastly, no other interest in the event. Neither party should have any interest in the happening of the event other than the sum or stake he will win or lose.
Effect of wagering transactions:Wagering agreement being void cannot be enforced in any court of law. The Calcutta High Court in (Badridas Kothari v. Meghraj Kothari) held that although a promissory note was executed for the payment of the debt caused through wagering transaction, the note was held not to be enforceable. Similarly, money deposited with a person to enable him to pay to the party winning upon a wager cannot be recovered. The winner cannot recover the money, but before it is paid to him the depositor may recover from the stake holder. But where the money has already been paid over, it cannot be recovered back (Bridger v. Savage).
Wagering agreement not unlawfulIt 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.
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 MP 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.
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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