Business Law Notes on Wagering Agreements

In everyday language, a wager means bet. An agreement wherein two parties in which one of the parties agrees to pay money if some unknown event  occurs, with the understanding that if the event does not happen, the other party must pay the same amount back, is called an agreement of Wager. In simple terms, a wagering agreement is an agreement in which money or the value of money is paid based on the occurrence or non-occurrence of any potential, unpredictable event. Still, each form will exhibit the typical characteristics of a bet.

What is a wagering agreement?

Agreement between two parties where the money payable by the one party to the other party on the happening of uncertain events and the other party to first-party, when the event doesn’t take place. These agreements are known as the wagering agreement. Generally, wagering agreements as per law are void. 

Example of wagering agreement:  

1. If there is an agreement between P and Y that if Team Blue beats Team Yellow, Y will give an amount of Rs.1,000 to P. In case Team Yellow wins, Y will receive Rs. 500 by P. Such an agreement is considered a wagering agreement in the eyes of law and thus void. 
2. Shilpa secures her automobile against damage by purchasing a car insurance policy and paying the associated insurance payment. We can conclude that Shilpa is interested in the car and that she will lose nothing in the event of a future unpredictable occurrence, such as an accident. As a result, it is not a wager.

 Even though the term wager is not defined in The Indian Contracts Act, the case of Carlill v Carbolic Smoke Ball Co. illustrates the fundamental concept of the wager. 

A wagering contract is one in which two people or parties who profess to hold opposing or contradictory viewpoints or perspectives about a potential unknown or strange case or event agree that there is no other consideration for any party to allow such a contract based on the outcome of the event that one must win or lose.

ESSENTIAL CONDITIONS OF WAGER

The following are the conditions of the wagering agreement:

1. It must depend on an uncertain act.

The subject matter of the agreement must rely on an uncertain event. It was held that, while a wager is usually about a future occurrence, it can also be about an event that occurred in the past, but the parties need to be unaware of the outcome or the time when it occurred.

1. Mutual possibility of profit or loss

Both the parties have a chance of winning or losing depending on the unpredictable event is an important component of a wagering agreement. An agreement cannot be considered a wagering agreement if it lacks the desire to win or lose. It is crucial that both parties must stand to gain or lose based on the outcome of an unknown event.

1. Neither of the parties has control over the event.

If one of the parties can affect the outcome, the agreement will lack an essential component of a wager.

1. Promise to remunerate

There must be a promise to remunerate the other party is an essential element of a wagering agreement. 

EXCEPTIONS 

1. INSURANCE CONTRACTS

An insurance contract is an indemnity contract used to protect one party’s interest against damage and has an insurable interest. On the other hand, a wagering contract is a conditional contract that has no stake in whether an event occurs or not.

Wagering contracts are void by definition, and the purpose of a wagering contract is to earn money or money’s worth.

1. Skill competitions

Skill competitions are not considered wagering agreements because they involve a significant skill level to win and are not based on the probability of an uncertain outcome. Crossword puzzles, sports competitions, and other such activities are examples. If the competition is based on luck or chance like the lottery or casino, it will be a wager and void. 

1. Share market transactions

The sale and purchase of stocks and shares are not considered a wager. It is a valid transaction between the parties and not a wager. 

CONCLUSION

The Indian Contract Act of 1872 does not define the wager; the judicial system has been dealing with what genuinely constitutes a bet and what has been outside the meaning of wagering requirements. Section 30 just indicates that all betting contracts are null and void, which leaves much room for interpretation. The definition of the word wager should thus be altered, and the scope of this section needs to be broadened.

A wagering agreement is centered on the reward. As a result, both parties must have a reasonable possibility of winning, and both sides must be given equal chances to succeed or fail.