What is a Wagering Agreement?
A wagering agreement is an agreement between two parties wherein one party commits to pay a certain sum of money to another person on the occurrence or non-occurrence of a future uncertain event. Such agreements are void. This means that none of the parties can file a suit to recover the amount or anything won in such contracts. These agreements are based on chance.
What is a Wager?
The literal meaning of the word ‘wager’ is a bet which means something specified to be lost or won as an outcome of a doubtful issue. Therefore, wagering agreements are nothing but betting agreements.
So, alternatively, we call wagering agreements – ‘wager’ which is a game of chance wherein the fate of winning or losing relies upon a particular event which at the time of contract is not certain. Hence, it is a betting agreement. Here, the parties to the contract do not have any interest in the contract, except for the money which they gain or lose.
Suppose two people Steve and John come into an agreement that if Mumbai Indians win the next IPL match, Steve will pay Rs. 2,000 to John. But if Mumbai Indians lose the match John will pay the same amount to Steve.
Essential Elements of a Wagering Agreement
There are a number of conditions that must be met to be called a wagering agreement. These conditions or elements are:
- Dependence on Uncertain event: The performance of the agreement relies upon the occurrence or non-occurrence of the event. This event is not certain not only because it is a future event but also because it is not yet known to the parties concerned.
- Mutual chances of winning or losing: Both the parties to the contract stand on equal footing when it comes to winning or losing. This means that both parties have equal chances of winning or losing. suppose in an agreement one party can win but it cannot lose or he may lose but not win. Then these agreements are not wagering agreements.
- Parties have no interest in the event: None of the parties have any interest in the occurrence or non-occurrence of the event. Their primary concern is the sum of money that they will get. If any of the parties has some other interest, then it will not amount to a wagering agreement.
- No control of parties on the event: None of the parties have any control over the occurrence or non-occurrence of the event. But if any of the parties can control the occurrence or non-occurrence of the event, then it will not comes under wager.
- Promise to pay money or money’s worth: The consideration in terms of money should be involved in that agreement. This will be paid when the event does or does not happen.
Effects of Wagering Agreement
The consequences of the wagering agreement can be:
Effect on the main transaction
As we know these agreements are void. Thus, the winner in such contracts cannot recover the amount of money involved from another party to the agreement. Moreover, any new promise to pay the already won sum upon the wager also stands as void.
Further, if the party deposits the sum with the third party, to allow him to pay to the winning party, then also the winner cannot recover the same from the third party. However, the depositor of the money may take it back from the third party to whom the money is deposited, if the third party has not paid the same to the winner. This implies that the winner cannot recover it from a third party but the depositor of the money can do it.
But, when the money is already paid to the winner, then the recovery is not possible.
Effect on the collateral transaction
It is worth noting that wagering agreements are void, but they are not unlawful, except in the states of Gujarat and old Bombay. So, the transaction collateral to the original transaction is not void. So, the collateral transactions are valid and they can be enforced in a court of law.
Alisha and Bella bet each other Rs. 5,000 that a particular political party will win the general elections. Alisha borrowed Rs. 5,000 from her cousin Chetna, for that bet. Alisha failed to win the bet and pays Rs. 5,000 to Bella. In such a situation, the agreement between Alisha and Chetna is collateral to the main agreement and so it is not a void agreement. Hence, Alisha will be liable to pay the borrowed sum to Chetna.
Note: Because wagering agreements are unlawful in England. So, the transaction’s collateral to the wagering agreements is also void.
Transactions that are not Wager
- Prize competitions for games of skills such as picture puzzles, and athletic competitions. For example, Any agreement to enter into a wrestling event, wherein the winner will get the total sale proceeds of tickets is not a wagering contract.
- As per the Prize Competition Act, 1955. Prize competition in games of skills does not fall in the category of wagering agreements, subject to the prize money is not more than Rs. 1000
- Agreements for contributing to a plate or prize of value exceeding Rs. 500 as an award to the winner of a horse
- Contracts of Insurance.
Above all, wagering agreements are those agreements which are conditional on the occurrence or non-occurrence of the event.