Wagering Agreement

WAGERING AGREEMENT

Author: Ms. Shweta Samant, ICFAI Dehradun.

INTRODUCTION

Wager, the dictionary meaning of the word is ‘something risked on an uncertain event’ and Wagering is a type of gambling, which involves betting on the outcome of an external event or fact, such as a sporting event or a piece of trivia. The wagering of money or something of value (referred to as “the stakes”) on an event with an uncertain outcome, with the primary intent of winning money or material goods. Wagering thus requires three elements to be present: consideration (an amount wagered), risk (chance), and a prize. The outcome of the wager is often immediate, such as a single roll of dice, a spin of a roulette wheel, or a horse crossing the finish line, but longer time frames are also common, allowing wagers on the outcome of a future sports contest or even an entire sports season.

Thousands of years ago, rolling two sixes was called the ‘throw of Aphrodite’ and would indicate victory in a game. Gambling has its origin in Greece, as the game has been referred to in the ancient texts of HOMER. Dice games, heads and tails and many more games depended on luck were played by Greeks, even established places were also there specifically for this game. In Greek mythology, it is said that Zeus, Hades, and Poseidon played ‘throw the dice’ to split the universe between them. But later on, as society developed government realized gambling is eating there state as it was obvious if gambling exists cheating will go hand by hand, they tried to put restraints on gambling.

In ancient Rome, the slaves and the masters used to practice gambling even in some of the biblical texts it’s also mentioned that roman guards used ‘casting of lots’ to decide the garment of the Jesus during crucification. And also gambling was used to settle disputes and also to reveals gods’ answers to questions.

WAGERING AGREEMENT

Wagering Agreement is not defined in the Indian Contract Act of 1860. Cotton, L.J. in Thacker v. Hardy said: “The essence of wagering and gaming is that one party is to win and other is to fall upon an upcoming event which at the time of the contract is of an uncertain nature, i.e., that if the future event sets out one way A will lose, but if it turns out another way, he will win.”

In Carlill v Carbolic Smoke Ball Co.,[1] wagering agreements are defined as

“ 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 dependant 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 other stakes; 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 the 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.

On the basis of the above definition, Wagering agreement is an agreement between two parties for an uncertain future event, where both parties without any considerations decide to pay a certain sum of the money, to the party according to whose assumption the uncertain event has turned out. Wagering agreement has not been defined in any of the clauses of The Indian Contract Act, 1872.

ILLUSTRATION –   A and B are two F1 car racers. Ram Said that he’ll pay 1000 bucks to Shayam if A wins and Shyam said he’ll pay 1000 bucks to Ram if A loses. This is a wagering agreement between Ram and Shyam.

ESSENTIAL FEATURES OF WAGERING AGREEMENT

1. WAGERING AGREEMENT IS BASED ON UNCERTAIN EVENT

The most essential element of a wagering agreement is the uncertainty of the future event. The parties must not be familiar with the result of the uncertain event. The requirement herein is that the parties must not have any idea about the result even if the event has held in the past. This means the future event is not essential rather the parties must not be aware of the result. In the case of Jethmal Madanlal Jokotia v. Nevatia & Co,[2] The parties must not be aware of the happening of the event or of the, even if the event has happened in past.

• EQUAL CHANCES OF GAIN OR LOSS

The wager is based on chance. And therefore it is necessary that both parties should get an equal chance of winning and mutual opportunity must be given to both the parties to gain or lose. Agreements in which the results are determined towards one party then it not wager agreement. There must be two outcomes of the event then only a fair chance will be given to the parties. If winning or losing is completely based on skill there is no wager.

In Baba sahib V.  Raja ram[3], in this case, it was held that an agreement cannot be looked upon a wagering agreement if it lacks the desire of winning or losing. The essence of the wager is that both parties must stand to win or lose to the result of an uncertain event.

In the case of Narayana Ayyangar v. Vallachami Ambalam[4], Chit fund cannot be a wagering agreement, was held in this case. As in the chit fund, there is a chance of rain, but there is no chance of losing as the actual subscription amount will be returned. So there is no loss and the mutual chance of losing or gaining is absent. Therefore chit fund is not a wagering agreement.

• NO OTHER INTEREST IN THE EVENT

The parties to the agreement must only be focused on the outcome on which they have staked their money. The parties must not have any other interest in the event other than winning or losing. So the sole purpose must be betting. An insurable interest in the contract will not be called a wagering contract. There must be the absence of any kind of consideration from the parties in order to make it a wagering agreement.

• NO CONTROL OVER THE EVENT

Neither of the party shall have any control over the happening of the event in one way or any other. If one of the parties gets the hold of the event this will hamper the essential element of water that is CHANCE. BIRDWOOD J in the case Dayabhai Tribhovandas v Lakshmichand[5] held that if the result in the hands of one party then there is no wagering agreement. Due to this essential of wagering agreement, skill-based events are exempted from the wagering agreement.

WAGERING AGREEMENT IS DIFFERENT FROM OTHER KIND OF AGREEMENT

• INSURANCE AGREEMENT v.  WAGERING AGREEMENT

1. Insurance Agreement is an agreement between two parties i.e. Insurer and Policyholder, in this the insurer promises to pay the benefits to the policyholder if an uncertain future event happens or affects the policyholder. Whereas a wagering agreement is an agreement by which two persons, professing to hold opposite views touching the issue of a future uncertain event mutually agreed dependent upon the determination of the event that one shall win from the other a sum of money, neither of the contracting parties having any other interest.

2. And also insurance contract is a valid contract and parties have insurable interest whereas wagering agreement is void and also does not have an insurable interest.

3. In insurance agreement, the risk of loss is natural, whereas in wagering agreement it is created by the parties.

• CONTINGENT AGREEMENT  v. WAGERING AGREEMENT

1. Section 31 of the Indian Contract defines “contingent contract” as a contract to do or not to do something, if some event, collateral to such contract, does or does not happen whereas wagering agreement is an agreement which only depends only on the happing of an event in one way other.
2. In the contingent agreement, the promisor may have some interest in the event whereas in wagering agreement the parties only have interest in the amount of money they have bet on.
3. The contingent agreement is valid and enforceable whereas wagering agreement is not.

ENFORCEABILITY OF WAGERING AGREEMENT

Section 30 of the Indian contract Act,1872 act directly states that the wager agreements are void, and the parties to the agreement cannot file a suit for the recovery of any award regarding the agreement. But the thing is wagering agreement is not illegal rather they are void which means they can be made but are not enforceable in the court of law.

In Badridas Kothari  V.  Meghraj Kothari[6], two-person entered into wagering transactions in shares and one became indebted to others. A promissory note was executed for the payment of that debt. The note was held to be not enforceable. In other words, a new promise to pay money won upon a wager is equally void.

The reason due to which wagering agreement is void is due to public policy and morality. If they are made valid, it would promote gambling and other illegal practices people. And this can also promote the people to earn without working. Thus such agreements are prohibited.

COMPARISION WITH ENGLISH LAW

UK Gaming Act, 1845 is the main act that has inspired other nations to form wagering laws. Section 18 of the UK Gambling Act,[7] 1845 provides that all the wagering agreement is null and void. No suit can be initiated in any court of law regarding the recovery of wager money. But this section exempts certain dealing in investment by way of business from being invalid. Section 30 of the contract act is influenced by the said act. But there is a minor difference in wager law of India to that of wager law of England that is; In India primary wager agreement is void but collateral agreement valid and enforceable. And in England all collateral agreement to wager agreement are void.

EXCEPTIONS TO WAGERING AGREEMENT

As wagering agreement is a void agreement, but there are still certain exemptions to it-

1. HORSE RACE COMPETITION – Section 30 of the Indian Contract Act,[8] provides that the wagering agreement based upon the winning or losing of the horse will not be a void agreement. The 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 races. The reason horses are exempted from the list is because horse races are not only dependent on chances or luck rather it depends more on the prior preparation of the horse that includes practice, food, maintenance. The horse races are based more on the skills of the horse rather than the luck.

In the case of Moore v. Elphick[9], it was held that “If skill plays a substantial part in the result and prizes are awarded according to the merits of the solution, the competition is not a lottery. Otherwise, it is.” Thus literary competitions involve the application of skill and in which an effort is made to select the best and most skillful competitor are not wagers.

State of Andhra Pradesh   V. Stayanarayan[10]

In this case, the court differentiated horse racing as “a game not based on chance rather game based on skills.”And also said that horse racing substantially and preponderantly depends on skills. And also held that rummy is also the game based on skills as it needs memorizing the fall of cards and skill is required in holding and discarding cards.

CONCLUSION

And last after going through the whole wagering agreement, there are some there are still some loopholes that need to be sorted out. The first and the foremost thing is though and gambling was considered against morality but that was a case of past as the society develops so it’s thinking also develops and so should be the laws, and not legalizing gambling will not solve the problem, rather it increases more because one who is into gambling will do it, even if it is not legalized. So it should be legalized least money earned through gambling will not go unnoticed rather it will account and registered as nowadays people have started using wagering in a positive way which is more of a skill-based task rather than chance.

And also if we talk about the exception not only horse race there are so many other games that are based on skill and merely on skills and in all those games the person who is betting might know about the skills of the player on whom he’s betting and here the concept of the uncertainty of future may decrease because he knows in what manner player going to play and the essential element of wagering that is uncertainty will go down. And thus cricket and other sports can be considered sports based on skills and merely on luck but section 30 of the ICA, have not exempted any other sport other than horse racing, making the definition very narrows there are amendments that need to be done in order to increase the ambit of sports this definition covers.

And also in case of share markets, the betting on the company’s share is not based on mere chance rather it is based on a deep analysis of patters of shares belonging to different companies, and the study to the pattern suggests which share companies share will raise high, and this analysis is a skill. And section 30 is again silent about this. And this shows that section 30 has a limited scope maybe it was due to the time when the act was formulated but now wagering has become a vast concept and thus contract act needs to enhance the scope of its wagering agreement.

And if we are talking about wagering it is still an ambiguous concept as there is no straight jacket definition of the word in the Indian contract act, which makes it vague and confusing. So a proper definition must be given to the word in order to remove the chances of ambiguity.

And thus after going through all the case laws, opinions of the jurists and problem s faced by the court while dealing with the wager agreements and based on my above-mentioned analysis, I have reached to a conclusion that there is a need to amend the section 30 of Indian contract act making it more clear, enhancement in its scope, and other changes according to the developments the society need to be looked upon.

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[1]  1891-94 All ER Rep 127

[2] https://www.casemine.com/

[3]  AIR 1931 Bom 264.

[4]  ILR (1927) 50 Mad 696.

[5]  ILR (1885) 9 Bom 358,363.

[6] https://www.lawyerservices.in/Badridas-Kothari-Versus-Meghraj-Kothari-1966-04-01

[7] http://www.legislation.gov.uk/ukpga/Vict/8-9/109/contents/enacted

[8] https://indiankanoon.org/doc/1295756/

[9]  (1945) 2 All ER 155 (CA)

[10] [13] 1968 AIR 825, 1968 SCR (2) 387