Wagering Agreements And Their Enforceability Under Indian Contract Law

Introduction

An agreement enforceable by law constitutes a valid contract. In the case of a contract, each party is legally bound between both parties. Under section 2(h) of the Indian Contract Act, 1872 (ICA), the term contract has been defined as an agreement enforceable by law. The term agreement has been defined under section 2(e) of the ICA, 1872 as “every promise and every set of promises forming consideration for each other becomes an agreement.” An agreement involves a promise from both sides, and when an agreement becomes enforceable under the law, a valid contract arises. A critical essential element of a valid contract is the offer and subsequent acceptance to form an agreement. An offer is the manifestation of the promisor’s mind, and an offer can be both positive and negative, that is, to do or not to do something. Towards this offer, consent should be signified and communicated by an act or omission. The promisee or the party accepting the offer intends to express their consent, and this consent is known as acceptance. Once a proposal is accepted by the other party and timely communicated to the party who proposed appropriately, it becomes a binding contract, if consideration and object are legal. The parties do have the intention to create legal relationships. 

Void Agreements under the Indian Contract Law

An agreement enforceable by law constitutes a valid contract. In the case of a contract, each party is legally bound between both parties. Under section 2(h) of the Indian Contract Act, 1872 (ICA), the term contract has been definedas an agreement enforceable by law. But some agreements are expressly declared to be void under the ICA, 1872. Because of this, even if such agreements satisfy all the conditions of a valid contract, they are not enforceable. The agreements which have been declared void under the Indian Contract Act, 1872 are:

1. Agreements with unlawful object or consideration (section 24).
2. Agreement without consideration (section 25).
3. Agreement in restraint of marriage (section 26).
4. Agreement in restraint of trade (section 27). 
5. Agreement in restraint of legal proceedings (section 28).
6. Ambiguous agreements (section 29).
7. Agreement by way of the wager (section 30).
8. Agreement to do an impossible act/Doctrine of Frustration (section 56).

Wagering Agreements

The word ‘wager” means ‘a bet’, that is, something stated to be lost or won on the result of a doubtful issue, and, therefore, wagering agreements are nothing but ordinary betting agreements. Under the Indian Contract Act, 1872, section 30 elaborates upon the validity of wagering agreements. It states that Wagering agreements are void, and no action can be brought to recover something allegedly won on a wager or delegated to another party to abide by the outcome of any game or other unknown occurrence on which a wager is made. The term wagering agreement is not defined under the ICA, 1872. The nature of a wagering agreement has been defined in the landmark judgement of Carlill v. Carbolic Smoke Ball Co., where the Queen’s bench stated that Wagering agreement is one in which two people who profess to have opposing viewpoints on a certain uncertain event mutually agree that, depending on the outcome of the event, one will win from the other and the other will pay or hand over to him a sum of money or another stake; none of the parties has any other interest in the contract than the sum or stake he will win or lose. It is not a wagering deal if one of the parties can win but not fail, or if one of the parties can lose but not win. Thus, from the above elaboration, it can be inferred that all wagering agreements are contingent contracts, but all contingent agreements are not wagering agreements. Wagering agreement, thus, is a futuristic contract that is based upon the happening of a certain event in the future. 

There are three essentials of a wagering agreement: the existence of opposite views regarding an uncertain event, chances of gain or loss to the parties on the determination of the event one way or the other, and the existence of no other interest except winning or losing the bet. 

1. The existence of opposite views regarding an uncertain event

The parties should have opposite views regarding a future uncertain event, but that is not wholly correct as the opposite views could be in respect to a past or a present fact or even an event also. The only thing essential in this regard is the existence of uncertainty in the parties’ minds about the happening of a certain event in one way or the other. For instance, betting upon the results of a cricket match will create uncertainties in the minds of both parties about the outcome of the match and hence, it is a wagering agreement.

2. Chances of gain or loss to the parties on the determination of the event one way or the other

There should be a chance of gain or loss to the parties on the determination of the event one way or the other. If either of the parties may win but cannot lose or lose but cannot win, it will not be considered a wagering agreement. Even in case of any gate money recovered, it has been held in Babasaheb v. Rajaram that if the payment has to be made to the winner of a certain game, that is, one party only, then it is not a wagering contract because each party has the chance of winning something but no chance of losing anything. 

3. The existence of no other interest except winning or losing the bet

In a wagering contract, the existence of no other interest except winning or losing the bet or the stake is detrimental to the existence of a wagering contract. This essential distinguishes a wagering contract from conditional contracts like that of insurance. There are instances where an insurance policy can come under the category of wagering agreements. For instance, if an individual finances an insurance policy on the deceased’s life with having an insurable interest in his life, then a contract of such nature would come under the category of wagering contracts.

The Enforceability of a Wagering Contract

Under section 30 of the ICA, 1872, wagering contracts are explicitly declared void and, hence, void-ab-initio. Even section 65, which deal with the obligation of the person who has received advantage under the void agreement, or contract that becomes void, is not applicable as wagering contracts are void-ab-initio. But it has been nowhere mentioned that these types of contracts have been forbidden by law, and thus wagering agreements are legal in some states and banned in others. Section 30 further states that no action can be brought to recover something allegedly won on a wager or delegated to another party to abide by the outcome of any game or other unknown occurrence on which a wager is made. Even promissory notes executed for the debt payment can become unenforceable if such note was executed for the payment of debt caused through wagering transaction. But agreements collateral to wagering agreement is not void as it is nowhere mentioned that wagering agreements are illegal. Thus, in case of a partnership agreement to carry out wagering transactions, any partner can bring an action against the other partner for recovery of share of loss in case of any loss. As stated earlier, wagering agreements are legal in some states and banned in others. For instance, in Bombay, agreements collateral to wagering transactions are declared void by the Bombay Act III of 1856 as the ICA, 1872 do not repeal this act, the agreements collateral to Bombay’s wagering agreements, Maharashtra, become void. Thus, wagering contracts are not enforceable under the ICA, 1872, but agreements collateral to wagering agreements are enforceable depending upon the laws established in that state.

Conclusion 

As discussed above, an agreement enforceable by law constitutes a valid contract. In the case of a contract, each party is legally bound between both parties. But some agreements are expressly declared to be void under the ICA, 1872. Because of this, even if such agreements satisfy all the conditions of a valid contract, they are not enforceable. Under the Indian Contract Act, 1872, section 30 elaborates upon the validity of wagering agreements. It states that Wagering agreements are void, and no action can be brought to recover something allegedly won on a wager or delegated to another party to abide by the outcome of any game or other unknown occurrence on which a wager is made. Wagering agreement, thus, is a futuristic contract that is based upon the happening of a certain event in the future. There are three essentials of a wagering agreement: the existence of opposite views regarding an uncertain event, chances of gain or loss to the parties on the determination of the event one way or the other, and the existence of no other interest except winning or losing the bet. Under section 30 of the ICA, 1872, wagering contracts are explicitly declared void and, hence, void-ab-initio. Even section 65, which deal with the obligation of the person who has received advantage under the void agreement, or contract that becomes void, is not applicable as wagering contracts are void-ab-initio. But it has been nowhere mentioned that these types of contracts have been forbidden by law, and thus wagering agreements are legal in some states and banned in others. But agreements collateral to wagering agreement is not void as it is nowhere mentioned that wagering agreements are illegal. Thus, wagering contracts are not enforceable under the ICA, 1872, but agreements collateral to wagering agreements are enforceable depending upon the laws established in that state.

References:

1. The Indian Contract Act, 1872, No. 2(h) (Indian).
2. The Indian Contract Act, 1872, No. 2(e) (Indian).
3. Diganth Raj, What are the essentials of Contract? IPleaders, https://blog.ipleaders.in/what-are-the-essentials-of-contract/ (last accessed Apr. 22, 2021).
4. Meera Annie Koshy, What do you mean by revocation of proposals and acceptance under a contract? (2020) IPleaders, https://blog.ipleaders.in/mean-revocation-proposals-acceptance-contract/ (last accessed Apr. 28, 2021).
5. The Indian Contract Act, 1872, No. 2(h) (Indian).
6.  Dr. R.K. Bangia, The Indian Contract Act, (12^th Edition, 2005), Allahabad Law Agency, Haryana.
7. Mariya Paliwala, Void Agreement under the Indian Contract Act, 1872 (2020) IPleaders, https://blog.ipleaders.in/void-agreements/ (last accessed Apr. 28, 2021).
8. Akansha Rathore, Wagering Agreements LegalServicesIndia, http://www.legalservicesindia.com/article/283/Wagering-Agreements.html#:~:text=%E2%80%9C%20A%20wagering%20contract%20is%20one,or%20other%20stake%3B%20neither%20of (last accessed Apr. 28, 2021).
9.  The Indian Contract Act, 1872, No. 30 (Indian).
10.  Carlill v. Carbolic Smoke Ball Co., (1892) 2 QB 484.
11. Saksham Chhabra, What is a Wagering Contract? Can it be enforced? (2018) IPleaders, https://blog.ipleaders.in/wagering-contract/ (last accessed Apr. 28, 2021).
12. Bangia, supra note 6, at p. 210.
13.  Carlill v. Carbolic Smoke Ball Co., (1892) 2 QB 484, at p. 491.
14.  Babasaheb v. Rajaram, A.I.R. 1931 Bom. 264.
15. Bangia, supra note 6, at p. 210.