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Wagering agreements - Contract Act

Wagering Agreement

Agreements entered into between parties under the condition that money is payable by the first party to the second party on the happening of a future uncertain event, and the second party to the first party when the event does not happen, are called Wagering Agreements . There should be mutual chance of profit and loss in a wagering agreement. Generally wagering agreements are void.

Wagering Agreement – let us understand.

Wager means a bet. It is a game of chance where the probability of winning or losing is uncertain. The chance of either winning or losing is wholly dependent on an uncertain event.

Parties involved in a wagering contract mutually agree upon the nature of the agreement that either one will win. They themselves enter into this type of arrangement after fully knowing that their chances of winning and losing are equal. Each party stands equally to win or lose the bet. The chance of gain or the risk of loss is not one sided. If either of the parties may win but not lose, or may lose but cannot win, it is a wagering contract.

One of the main feature of wagering agreement is that neither of the parties have any other interest in the contract than the money they have invested. Parties are trying to encash the opportunities which can go either side.

Example 1:

X and Y agree with each other that if it rains on Tuesday, X will pay Rs. 1000 to Y and if it does not rain on Tuesday, Y will pay X Rs. 1000. Such an agreement is a wagering agreement and hence is void.

Example 2:

There is an agreement between A and B which provides that if the train reaches at the station at right time, A will pay 10000 to B and if the train is late then B will pay 10000 to B. This is a wager agreement.

Features that make an agreement a wagering agreement

1. Uncertain Event

One of the important essentials of a wagering agreement is that it must depend upon an uncertain event. Event may be past, present or future, but the parties must be unaware of its future or the time of its results or the time of its happening.


IPL is happening and there is a match between Mumbai Indians and Delhi Chargers are happening. Mr Prakash and Mr Mohan enter in to an agreement that if Mumbai Indians win, Prakash will pay Mr Mohan Rs. 10000 and if Delhi wins, Mr Mohan will pay Mr Prakash Rs 10000. This is an example of wagering agreement.

2. Equal Chance of Gain or Loss

Another element of wagering agreement is that each party to the agreement should stand to win or lose as per the result of the uncertain event.


IPL is happening and there is a match between Mumbai Indians and Delhi Chargers are happening. Mr Prakash and Mr Mohan enter in to an agreement that if Mumbai Indians win, Prakash will pay Mr Mohan Rs. 10000 and if Delhi wins, Mr Mohan will pay Mr Prakash Rs 10000. This is an example of wagering agreement.

In this case. each party has the chances to win or lose. Here the gain of one party will be the loss of the other and vice versa.

3. No Other Interest in the Event

Neither party should have any interest in happening or non-happening of the event other than the sum he will win or lose. If either party has some other interest other than the sum he will win or lose, it will not be a wager.


A simple health insurance agreement can be an example for this. If Mr A takes a health insurance on his family and subsequently claims any amount. Here Mr A has interest on his family, which he insured. Also non happening of the event, will not gain any thing for Mr A, so it is not a wagering agreement.

4. No Control Over the Event

The parties to the contract should not have any control over the happening of the event one way or the other. If one party has the events in his hands, the transaction will not be a wager.


A and B enter into an agreement that if A walks one KM , B will pay Rs. 500 to A and A will pay Rs. 500 to B if he does not walk one KM. Here A has the event under his control. Hence not a wager.

5. Promise to Pay Money or Money’s Worth

The wagering agreement must contain a promise to pay money or money’s worth.

What are not Wagers? – Exceptions

The following transactions are not wagers:

1. Contract of Insurance are not wagers

Insurance contracts are contracts of indemnity. They are entered into, to safeguard the interest of one party to the contract. In this contract, the insured has insurable interest in the property or life Hence, it is not a wager.

Distinction between Wagering Agreement and Contract of Insurance

An insurance contract differs from a wager in the following respects:

1. In a wagering agreement, there is no interest, whereas contract of insurance has insurable interest

2. Wagering is a void agreement, whereas contract of insurance is a valid .

3. In a wagering agreement, neither party has any interest in the happening or non-happening of an event. But in an insurance agreement, both the parties are interested in the subject-matter.

4. Wagering agreements are conditional contracts, whereas insurance agreements are contracts of indemnity except life insurance contracts which are contingent contracts.

5. The object of a wagering contract is to speculate for money or money’s worth, whereas an insurance contract is to protect an


6. A wagering agreement is just a gamble, whereas a contract of insurance is based on scientific and actuarial calculation of risks.

2. Skill Competitions are not wagers

Skill plays a substantial part for the successful solution of certain competitions. For e.g., crosswords competitions, picture, puzzles etc. Here, the prizes are awarded as per the merits of the solution. Such competitions are not wagers. However, if prizes depend upon a chance, that is a lottery and therefore a wager.


A Sudoku puzzle was given in a newspaper and it was stated in the newspaper that whose solution of the puzzle would correspond with the solution kept with the editor, he would be given the first prize. This is a game of chance and therefore a lottery. And thus, is a wager.

3. Horse Race Competition is not wager

State Governments may authorize the horse race competition, if it is permitted by the local laws. In such cases, any subscription or contribution of the value of Rs.500 or upwards made towards any prize or sum of money which is to be awarded to the winner of any horse race, shall not be unlawful. In other words, agreements to subscribe or contribute towards such prize or sum of money is also valid and enforceable.


A entered into an agreement with the Race Course Authority who was permitted to conduct the race course competition, to contribute Rs. 600 towards the money which was to be paid to the winner of the horse race to be held on a particular day. This is not a wager.

4. Share Market Transactions are not wagers

Transactions for the purchase and sale of shares and stocks, with an intention to take and give delivery of shares, is not a wager. However, if the intention is only to settle the price difference, the transaction is a wager and hence void.

5. Sports Competitions are not wagers

Effects of Wagering Agreements

In India, wagering agreements have been expressly declared to be void. So it cannot be enforced in any Court of law.

Sec. 30 of the Act states that

agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager or entrusted to any person to abide by the results of any game or other uncertain event on which any wager is made.

As a matter of fact, though a wagering agreement is void and unenforceable, but it is not forbidden by law. That is, the wagering agreements are void but not illegal. However, in the States of Gujarat and Maharashtra, the wagering agreements have been declared to be illegal.

As far as collateral transactions are concerned, as the wagering agreements are void but not illegal, they are not void. Therefore, they are enforceable. For e.g., where a person lends money to another person to enable him to pay of a gambling debt, the lender can recover the money so paid.

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