Wagering Agreement & Contingent Contract

WAGERING AGREEMENT The word “Wager” means a “BET” A wager is an agreement by which money is payable by one person to another on the happening or non happening of a future, uncertain event. Example:  ‘A’ & ‘B’ agree with each other that if it rains tomorrow, ‘A’ will pay ‘B’ Rs.100 and if does no train tomorrow, ‘B’ will pay ‘A’ Rs.100. Now this is a wagering agreement, as the event:  “If it rains tomorrow” is an uncertain event and there is mutual chance of a gain and loss for both for A and B.

Characteristics The characteristics of a wager agreement are as follows:  The consideration for the promise under a wagering agreement is to pay or get money.

 The money is payable on the happening or the non-happening of an event.  The agreement depends on a future and uncertain event.

 The essence of gaming and wagering is that one party is to win and the other to lose.  In wagering agreement no party has control over the event.

 Commercial transactions are valid, but to pay price differences in a wagering agreement is void.

Special Cases Following are the transactions that are not wagers:  Shares. Agreements for sale and purchase of any commodity or share market transactions in which there is a genuine intention to do legitimate business are not wagering agreements.  Games of Skill. For a game to be considered a game of skill under Indian law, the position of law has been so far that it need not be a 100% skill based game, but predominantly a skill based game. A game of mere skill is simply one in which the element of skill predominates the element of chance.  Contract of Insurance. Here the contract of insurance seeks to compensate the loss faced by the insured on happening of an event which is uncertain. In case of life insurance, the amount payable on happening of death of the insured is agreed and decided in advance.

Exceptions Lotteries:  A lottery is a game of chance and hence is a wagering transaction.  It is not only void but also illegal because Section 294-A of the I.P.C declares ‘conducting of lottery’ a punishable offence.  EXCEPTION: If a lottery is authorized by the government, the only effect is that the persons conducting the lottery will not be guilty of a criminal offence, but it will remain a wager alright.

Crossword Puzzles:  Crossword puzzles in which prizes depend upon correspondence of the competitor’s solution with a previously prepared solution is a wager.  EXCEPTION: But if the prizes depend upon skill and intelligence then it is a valid transaction. Hence prize competitions which are a game of skill and in which effort is made to select the best competitor are not wagers.  However amount prize in such competitions should not exceed Rs.1000.

CONTIGNENT CONTRACT A Contingent Contract is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen. Example:  ‘A’ promise to pay ‘B’ a sum of money if a certain ship returns within a year.  The contract may be enforced if the ship returns within a year, and becomes void if the ship does not come within a year.

Characteristics The characteristics of a contingent contract are as follows:  The performance of such contract depends on a contingency, i.e., on the happening or non happening of the future event.

 The event must be collateral i.e., incidental to the contract.  The contingency is uncertain.

DIFFERENCE Subject

Wagering Agreement

Contingent Contract

Validity

A wagering agreement is void.

A Contingent contract is valid.

Dependency

It depends on happening or non happening of an event, but the contract is void.

It depends on happening or non happening of an event, but the contract is valid.

Reciprocal Promise

It consists of certain reciprocal promises.

It may not contain reciprocal promises.

Interest of the Parties

The parties have no interest in either getting or paying money.

Either party or both may have an interest in the subject matter of the contract.

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