.

WAGER AND CONTINGENT CONTRACTS -A VIEW

INDEX

1) INTRODUCTION
2) WAGER CONTRACTS
a. Definition & meaning
b. Essentials of Wagering Contract:
3) EFFECTS OF WAGERING AGREEMENT
4) LAWS RELATED TO WAGER
5) AGREEMENTS COLLATERAL TO WAGERING AGREEMENTS
6) CONTINGENT CONTRACT
7) DEFINITION OF CONTINGENT CONTRACT
8) ESSENTIAL OF CONTINGENT CONTRACT

9) RULES REGARDING CONTINGENT CONTRACTS

INTRODUCTION

WAGER AND CONTINGENT CONTRACTS -A VIEW

Section 30 of the Indian Contract Act deals with the wagering
agreements but this section has not defined wager. Wager is a promise to
give money or moneys worth upon the determination or ascertainment of an
uncertain event. On the other hand section 31 of the Indian Contract Act
defines contingent contract as one to do or not to do something, if some
event, collateral to such contract, does not happen. A overview of the said
contracts shall be as follows.
WAGERING AGREEMENTS
Definition & meaning
Literally the word wager means a bet something stated to be lost or
won on the result of a doubtful issue, and, therefore, wagering agreements
are nothing but ordinary betting agreements.
Section 30 of the Indian Contract Act talks about wagering
agreements, which reads as agreements by way of wager are void. The
section does not define wager. Section 30 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 the result of any game or other uncertain event on which
any wager is made.

WAGER AND CONTINGENT CONTRACTS -A VIEW

Exception in favour of certain prizes for horse racing
This section shall not be deemed to render unlawful a subscription or
any contribution, or agreement to subscribe or contribute, made or entered into
for or toward any plate, prize or sum of money, of the value or amount of five
hundred rupees or upwards, to be awarded to the winner or winners of any
horse race.
Section 294A of The Indian Penal Code not affected
Nothing in this section shall be deemed to legalize any transaction
connected with horse Racing, to which the provisions of S.294A of The
Indian Penal Code (45 of 1860) apply.
The expression wager has not been defined in the Indian Contract
Act. A classic definition is however available in the case of Carlill v Carbolic
Smoke Ball Co.
A wagering contract is one by which two persons, professing to hold
opposite views touching the issue of a future uncertain event, mutually agree
that, dependant on the determination of that event, one shall win from the
other, and that other shall pay or hand over to him, a sum of money or other
stake; neither of the parties having any other interest in that contract than the
sum or stake he will so win or lose, there being no other consideration for
making of such contract by either of the parties. If either of the parties may
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WAGER AND CONTINGENT CONTRACTS -A VIEW

win but cannot lose, or may lose but cannot win, it is not a wagering
contract.

The above definition excludes event which have occurred. Hence Sir
William Ansons definition, a promise to give money or moneys worth upon
the determination and ascertainment of an uncertain event, is nearer and
more accurate.
Essentials of Wagering Contract:
1. Mutual chances of gain and loss
There must be two parties, or two sides, and mutual chances of gain
and loss, i.e., one party is to win and the other to lose upon the
determination of the event. It is not a wager where one party may win but
cannot lose, or if may lose but cannot win, or if he can neither win nor lose,
if one of the parties has the event in his own hands, the transaction lacks
an essential ingredient of wager. It is of the essence of the wager that each
side should stand to win or lose according to the uncertain or unascertained
event in reference to which the chance or risk is taken.
2. Two parties
There must be two persons, either of whom is capable of winning or losing.
3. Uncertain Event
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WAGER AND CONTINGENT CONTRACTS -A VIEW

Uncertainty in the minds of the parties about the determination of the
event in one way or other is necessary. A wager generally contemplates a
future event; but it may even relate to an event which has already happened
in the past, but the parties are not aware of its result or the time of its
happening.
The first thing essential to wager is that the performance of the
bargain must depend upon the determination of an uncertain event. A wager
generally contemplates future events; but it may even relate to an event
which has already happened in the past, but it may even relate to an event
which has already happened in the past, but the parties are not aware of its
result or the time of its happening.
4. No interest other than stake
Neither party should have any interest in the happening of the event
other than the sum or stake he will win or lose. To constitute a wager, the
parties must contemplate the determination of the uncertain event as the
sole condition of their contract. The stake must be the only interest which
the parties have in the contract.
5. Neither party to have control over the event

WAGER AND CONTINGENT CONTRACTS -A VIEW

Lastly, neither party should have control over the happening of the event
one way or the other. If one of the parties has the event in his own hands,
the transaction lacks an essential ingredient of a wager.
EFFECTS OF WAGERING AGREEMENT
A wagering agreement is void ab initio, and S. 65 has no application to
it. Money paid directly by a third party to a winner of a bet cannot be
recovered from the loser. Even if a loser makes a new promise to pay for his
losses in consideration of his not being posted, the promise cannot be
enforced; but if he gives a cheque in discharge of his liability, the cheque
may not be tainted with illegality because of the winners promise not to
have the name posted. The cheques will not be enforceable by the original
payee, but may be enforced by a third party holder of the cheque, even if he
knew of the facts leading up to giving of the cheque.
It has been laid down by the Supreme Court, in Gherulal Parekh v.Mahadeo
Das that though a wager is void and unenforceable it is not forbidden by law.
Hence a wagering agreement is not unlawful under section 23 of the
Contract Act and therefore the transactions collateral to the main
transaction is enforceable.
LAWS RELATED TO WAGER

WAGER AND CONTINGENT CONTRACTS -A VIEW

This section represents the whole law of wagering now in force in
India, supplemented by the Bombay state by the act for avoiding wagers
(amendments) act 1865, which amended the act for avoiding wagers 1848.
Before the act of 1848 the law relating to wagers in force in British India was
the common law in England. By that law an action might be maintained on
a wager, if it was not against the interest or feelings of third persons, did not
lead to indecent evidence, and was not contrary to public policy.
The nature of gambling is inherently vicious and pernicious. Gambling
activities which have been condemned in India since ancient times appear to
have been equally discouraged and looked upon with disfavour in England,
Scotland, the United States of America and Australia. The Hindu law
relating to gambling has not been introduced in the law of contract in India.
Gambling is not trade and commerce, but res extra commercium and
therefore not protected under art 19(1) or art 301.
Section 30 of the Indian Contract Act 1872 is influenced by the
English Gaming Act 1845. Heavily influenced by the English decisions, the
judges have adopted the essential features of that of the gaming act.
However, there is a major difference between the English and the Indian
laws relating to wagers: under the English Gaming Act, 1845, agreements
Collateral to the wagering agreement are also rendered to be void,38
whereas in India, collateral agreements are not necessarily void except in
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WAGER AND CONTINGENT CONTRACTS -A VIEW

Bombay, because The object of such a collateral contract may not
necessarily be unlawful. Further the Apex Court held that, By law an act
might be maintained on a wager if it was not against the interest or feelings
of a third person, did not lead to indecent evidence and was not contrary to
public policy.
As previously mentioned, a number of Indian companies when
incurring losses in foreign exchange dealings, construct an argument that
derivative transactions are in the nature of wagering agreements, and are
hence not enforceable in Indian Courts under Section , and hence do not
give rise to any liability or financial obligations in respect of repayment of
loan to the bank. As a result of this, many conservative Indian banks such
as the State Bank of India refrained from entering into any sort of derivative
transactions with their clients for a fairly long time.
In Gherulal Parakh v. Mahadeodas Maiya, a question arose as to
whether a partnership formed for the purpose of entering into forward
contracts for the purchase and sale of wheat so as to speculate in rise and
fall of price of wheat in future, was a wager and whether it was hit by
Section 30 of the Contract Act. But the Supreme Court held that such a
partnership was not illegal, although the business for which the partnership
was formed, was held to involve wagering. It was held therein as follows:

WAGER AND CONTINGENT CONTRACTS -A VIEW

After the enactment of the Gaming Act, 1845, a wager is made void
but not illegal in the sense of being forbidden by law, and thereafter a
primary agreement of wager is void but a collateral agreement is enforceable.
There was a conflict on the question whether the second part of Section 18
of the Gaming Act, 1845, would cover a case for the recovery of money or
valuable thing alleged to be won upon any wager under a substituted
contract between the same parties: the House of Lords in Hill's case had
finally resolved the conflict by holding that such a claim was not sustainable
whether it was made under the original contract of wager between the
parties or under a substituted agreement between them.
So under the Gaming Act, 1892, in view of its wide and comprehensive
phraseology, even collateral contracts, including partnership agreements,
are not enforceable;
As Section 30 of the Indian Contract Act is based upon the provisions
of Section 18 of the Gaming Act, 1845, and though a wager is void and
unenforceable, it is not forbidden by law and therefore the object of a
collateral agreement is not unlawful under Section 23 of the Contract Act;
and partnership being an agreement within the meaning of Section 23 of the
Indian Contract Act, it is not unlawful, though its object is to carry on
wagering transactions.
Wagers Distinguished From Contract Of Insurance
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WAGER AND CONTINGENT CONTRACTS -A VIEW

A transaction of insurance resembles a wager. Every contract of
insurance is a wager if the insurer has no insurable interest in the event
upon which insurance money is payable. The insurance interest lies
normally in that the event is one which is prime facia adverse to the interest
of the insurer. If a insures cargo which he has loaded on a vessel , his
contract is not a wager because his property is at risk during the voyage;
but if has no cargo on board, the contract is a wager; because if the vessel is
not lost, he loses the amount of premium.
Section 6 of the Marine Insurance Act 1963, provides that every
contract of marine insurance by way of wager is void; and that a contract of
marine insurance is deemed to be a wagering contract where the assured
has not an insurable interest. The (English) marine insurance act 1906, also
provides that a contract or Marine Insurance is deemed to be a gaming or
wagering contract if the insured has no interest in the adventure.
A truck owned by a was transferred benami to b who got it insured in
his own name. The truck was involved in an accident and it seriously
injured a young army officer who claimed heavy damages from the owner,
driver and the benamidar and the insurance company. It raised the plea
that an ostensible owner (a benamidar) had no insurable interest and that it
was a wager for that reason. But these pleas were negatived by the high
court.
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WAGER AND CONTINGENT CONTRACTS -A VIEW

Contract Of Gaming
A gaming contract consist of the mutual promises which the players of
the game necessarily make, express or by implication, in paying for a stake
as to its transfer upon the result of the game. Such contract may be a wager
if the parties are two.
In K.R. Lakshmanan (Dr) v State of Tamil Nadu , the Supreme Court
had an occasion to decide whether horse racing amounts to gaming as
defined under the Madras City Police Act 1888, and the madras gaming act.
It stated:
Gambling in a nutshell is a payment of a price for a chance to win a
prize. Games may be of chance or of skill and chance combined. A game of
chance is determined entirely or in part by lot or mere luck. A game of skillalthough the element of chance necessarily cannot be entirely eliminated- is
one in which success depends principally upon the superior knowledge,
training, attention, experience and adroitness of the player.
Speculative Transactions
A speculative contract is not necessarily a wagering contract, and
must be distinguished from agreements by way of wager. This distinction
comes into prominence in a class of cases where the contracts are entered
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WAGER AND CONTINGENT CONTRACTS -A VIEW

into through brokers. The modus operandi of the defendant in this class of
cases is, when he enters into a contract of sale, to purchase the same
quantity before the vaida day; and when he enters into a contract of sale, to
purchase the same quantity before the vaida day. This mode of dealing,
when the sale and purchase are to and from the same person, has the
effect, of course, of cancelling the contracts, leaving only differences to be
paid. When they are different persons, it puts the defendant in the position
vicariously to perform his contracts.
This is, no doubt, a highly speculative mode of transacting business;
but the contracts are not wagering contracts, unless it be the intention of
both contracting parties at the time of entering into the contracts, neither to
call for nor give delivery from or to each other. There is no law against
speculation as there is against gambling. A fortiori, dealings between
stockbrokers, whose regular course of business is periodical settlement of
differences, are not presumed to be wagering agreements. It may well be
that the defendant is a speculator who never intended to give delivery, and
even that the plaintiffs did not expect him to deliver; but that does not
convert a contract, otherwise innocent, into a wager. Speculation does not
necessarily involve a contract by way of wager, and to constitute such a
contract a common intention to wager is essential. It is in cases of above
description that there is a danger of confounding speculation, or that which

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WAGER AND CONTINGENT CONTRACTS -A VIEW

is properly described as gambling, with agreements by way of wager; but the
distinction in the legal result is vital. Every forward contract is to some
extent speculative, but is not a wager or gamble on that account. The
distinction

between

the

two

is

narrow

one.

AGREEMENTS COLLATERAL TO WAGERING AGREEMENTS

Contract collateral to a wagering agreement is not necessarily
unenforceable. Section 30 of the Contract Act is based upon the provisions
of S. 18 of the (English) Gaming Act 1845, and though a wager is void and
unenforceable, it is not forbidden by law. Therefore the object of a collateral
agreement is not unlawful under s 23 of the contract act. But it is otherwise
under the (English) Gaming acts of 1845 and 1892, the acts being wider and
more comprehensive in phraseology, because they expressly render void even
collateral transactions. As a result, though an agreement by way of wager is
void, contract collateral to it or in respect of a wagering agreement is not
void except in Bombay state. There is nothing illegal in the strict sense in
making bets. They are merely void and there would be no illegality in paying
them or giving a cheque, but payment cannot be compelled. But an
arbitration clause in a wagering contract is a part of the contract and not
collateral to it and cannot therefore be enforced.

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WAGER AND CONTINGENT CONTRACTS -A VIEW

A collateral agreement is not unlawful under s 23 of the contract act.
Apart from Bombay enactment, there is no statute declaring void
agreements collateral to wagering contract. Nor is there anything in the
present section to render such agreements void. The policy of law in India
has been to sustain the legality of wagers and not to hit at collateral
contracts. It has accordingly been held that a broker or an agent may
successfully maintain a suit against his principal to recover his brokerage,
commission, or the losses sustained by him, even though contracts in
respect of which the claim is made are contracts by way of wager.
The Supreme Court has held that if agreement collateral to another or
of aid in facilitating the carrying out of the object of the other agreement,
which though void, is not in itself prohibited within the meaning of s 23 of
the contract act, may be enforced as collateral agreement. If on the other
hand it is part of a mechanism to defeat what the law has actually
prohibited, courts will not countenance a claim based upon the agreement
because it will be tainted with an illegality of the object sought to be
achieved, which is hit by s 23 of the contract act. An agreement cannot be
said to be forbidden or unlawful merely because it results in a void contract.
a void agreement when coupled with other facts may become part of a
transaction which creates legal rights but this is not so if the object is
prohibited or mala in se.

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WAGER AND CONTINGENT CONTRACTS -A VIEW

THE ACT FOR AVOIDING WAGERS (AMENDMENT) ACT 1865 (BOMBAY
ACT 3 OF 1865)
The law is however, different in the state of Bombay. In that state,
contracts collateral to or in respect of wagering transactions are prevented
from supporting a suit by the special provisions of the act for avoiding
wagers (amendment) act 1865 (Bombay act 3 of 1865). It was observed:

That act was passed to.to close the doors of the courts of justice in the
presidency to suits upon contracts collateral to wagering transactions where
such collateral contracts have been entered into or have arisen since the act
came

into

force,

purpose

which

it

has

effectually

answered.

Derivatives
The position of derivatives under the common law
Two

English

decisions

have

caused

concern

among

market

participants that certain derivatives transactions may fall foul of the gaming
and wagering laws. In Universal Stock Exchange v. Strachan the court held
that wagering contracts included contracts for differences. Halsbury defines
contracts for differences as;
Agreements between those who are only ostensible buyers and sellers
of stock and shares where the common interest of the parties is to pay or

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WAGER AND CONTINGENT CONTRACTS -A VIEW

receive the differences between their prices on one day and their prices on
another day.
In the second decision, City Index Limited v. Leslie, the court declared
that

contracts

akin

to

cash-settled

derivatives

were

contracts

for

differences. The combined effect of both decisions is that cash-settled

derivatives are wagering contracts and therefore unenforceable, unless
exempted by legislation.
The common law position in Australia has been modified by statute.
Section 1141 of the Australian corporations law protects the following
categories of derivative contracts from the gaming and wagering laws:
1.

Those made on the futures market of the futures exchange, or a

recognised futures market,

2.

Those

3.

Those permitted by the business rules of a futures association, a

futures
4.

made

exchange,

on

or

an

exempt

recognised

futures

futures

market,

exchange.

The risk that a contract may not be enforceable on the grounds of

illegality is one that needs to be addressed. Generally, there is little risk of

exchange traded derivatives falling foul of the gaming and Wagering laws in
either the UK or other common law jurisdictions.

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WAGER AND CONTINGENT CONTRACTS -A VIEW

Regardless of the interest of the counterparties, there is no
justification for treating derivative contracts as wagering or gaming
contracts. They are no different from other commercial contracts entered
into by parties on the daily basis. It is true they are more risky than other
commercial contracts and some parties are attracted to derivatives by the
prospects of windfall gains. But these factors do not make them wagering or
gaming contracts any more than contracts to undertake some highly
speculative business. Apart from the need to remove the existing
uncertainties, regulators should also address the broader question of
whether it is appropriate for gaming and wagering legislation to be
applicable in the realm of financial transactions.
However, Indian contract law is indeed woefully deficient with regard
to provisions That clarifies the legality of derivative contracts. The
problematic question whether Derivative contracts are in the nature of
wagering agreements is not answered by the Act till date and no Amendment
to that effect has been passed either. Under Indian Exchange control laws,
an Indian corporate, being a person resident in India, can Enter into a
foreign currency derivative contract only to hedge an exposure to foreign
exchange risk and not for speculating and yielding profits.
In the case of Rajshree Sugars &Chemicals Limited v Axis Bank
Limited. Since March 2008, Axis Bank and Rajshree Sugars have been
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WAGER AND CONTINGENT CONTRACTS -A VIEW

fighting a legal battle over the foreign exchange derivatives contract, sold by
the Bank to the company, thereby resulting in huge losses for the company
estimated to be around Rs. 46-50 crores. The company had refused to make
any loan repayment to the bank contending that the contract was a
wagering deal, and hence untenable on such grounds. The court answered
this issue in the negative. Based on the elucidations of various landmark
judgments on wagers, the court evolved a threefold test to determine
whether the contract is a wager - First, there must be two persons Holding
opposite views touching a future uncertain event; second, one of those
parties is to win and the other is to lose upon the determination of the
event; third, both the parties have no actual interest in the occurrence or
non-occurrence of the event, but have an interest only on the stake. The
case in question fulfilled the first criteria, but the second was not satisfied
because in the light of the facts of the case, the plaintiff did not always
stand to lose. Citing Indian case law, the judges make an interesting
observation, that though every wagering contract is speculative in nature,
every speculation need not necessarily be a wager. Further, a common
intention to wager is essential, and an element of mutuality has to be
present in the sense that the gain of one party would be the loss of the other
on the happening of the uncertain event which is the subject matter of
wager.

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WAGER AND CONTINGENT CONTRACTS -A VIEW

In the light of abovementioned points and also adhering to the
Supreme Court judgment in Gherulal Parakh v. Mahadeodas Maiya, the
Judges in this case concluded that the sequence of events in the present
case reflected that the nature of the transaction was not in the form of a
wager. Even though the plaintiff was susceptible to incurring huge losses yet
that by itself could not deem the contract to be a wager.
CONTINGENT CONTRACT
A contingent contract is a contract where performance depends upon some
event which may or may not happen. The performance of a contingent
contract becomes due only upon the happening of non happening of some
future uncertain event which may or may not happen.
Example : X contracts to pay Y Rs. 10,000 if Ys house is burnt. This is a
contingent contract as its performance is dependent upon an uncertain
event i.e. burning of Ys house which may or may not happen.
DEFINITION OF CONTINGENT CONTRACT
According to Section 31 of the Indian Contract Act 1872,
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.
ESSENTIAL OF CONTINGENT CONTRACT

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WAGER AND CONTINGENT CONTRACTS -A VIEW

The following are the essentials of the contingent contract,
1. There should be a contract to do or not to do something.
2. The happening of the event should be uncertain.
3. The performance of the contract must depend upon the happening or
non-happening of some event.
4. The event on which the performance is to depend must be collateral or
incidental to the contract.
5. The event must not be the mere will of the promisor.
Essentials with examples

1. The performance must depend upon the happening or non (-) happening
of an event.

2. The event must be uncertain, i.e., it may or may not happen. If the event
is sure to happen, the contract is not contingent but an absolute one.

3. The event must be collateral, i.e., incidental to the contract. An event

which is "neither a performance directly promised as part of the contract,
nor the whole of the consideration for a promise" is known as collateral
event.

Example:
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WAGER AND CONTINGENT CONTRACTS -A VIEW

There was a contract between A and B for the sale of the American
parachute cloth. The delivery was to be made on receipt of goods in the ship.
However, the ship arrived without the above goods. B sued A for a breach. A
contended that the contract was contingent on the arrival of cloth. Held, the
contract was not contingent but an absolute one and the obligation of A was
independent and not dependent upon the arrival of goods by the ship.
[Ranchhodas v. Nathumal Hirachand & Co.].

From the above characteristics it would appear that wagering

agreements, insurance contracts, contracts of indemnity and guarantee are
contingent contracts.

Contingency dependent upon an event or an act of a party :

The performance of a contingent contract depends upon the happening or

non-happening of a collateral event. The word event is very wide. It includes
an act of a party. The party may be a party to the contract or even a third
party. Performance of promise should not depend upon the discretion of the
party to the contract otherwise it will be invalid. Strictly speaking sale on
approval is not a contingent contract.

However, where the sale is subject to approval of a technical expert it can be

called contingent contract. For example, A buys certain goods subject to his
engineer's approval. It is a contingent contract. Again, a promise to pay
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WAGER AND CONTINGENT CONTRACTS -A VIEW

whatever the promisor thinks reasonable is void. However, a promise to pay
whatever a third party thinks reasonable is valid.

RULES REGARDING CONTINGENT CONTRACTS

Indian Contract Act has laid down various rules regarding contingent
contracts which are as follows:

1. Contracts contingent on the happening of a future uncertain event:

Contingent contracts dependent upon the happening of an uncertain

future event cannot be enforced until the event has happened. If the event
becomes impossible such contracts become void (Sec. 32) . Contingent
contract to do or not to do anything, if an uncertain future event happens,
cannot be enforced by law unless and until that event has happened.
Conversely, contingent contract dependent on the happening of a certain
event, can be enforced only on the happening of that event, can be enforced
only on the happening of that event. It the event becomes impossible, such
contracts becomes void as provided under section 32.

Examples:

(1) A promises to pay B Rs. 1,000 if he marries C. Rs. 1,000 are payable only
if B marries C

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WAGER AND CONTINGENT CONTRACTS -A VIEW

(2) A promises to pay B Rs. 1,000 if he marries C. C died before the
marriage. The contract becomes void.

2. Contracts contingent on the non-happening of a future uncertain

event:

Contingent contract to do or not to do anything if an uncertain future

event does not happen, can be enforced when the happening of that event
becomes impossible, and not before. (Sec. 33)

Example:

A promise to pay Rs. One lakh to B if B's ship does not return. The ship is
sunk. The contract can be enforced after the ship is sunk and not before.

3. Contracts contingent on future conduct of a living person:

Where a contract is contingent upon the way a person will act at an

unspecified time, the event shall be considered to become impossible when
such person does anything which renders it impossible that he should so
act within any definite time, or otherwise than under further contingencies.
(Sec. 34)

Example:

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WAGER AND CONTINGENT CONTRACTS -A VIEW

A agrees to pay B Rs. 10,000 if B marries C. C marries D. If bigamy is
not allowed, then the marriage of B with C must be considered impossible
although it is possible that D may die and that C may afterwards marry B.

4. (i) Contracts contingent on the happening of an event within a fixed

time:

Contract contingent on the happening of an event within a fixed time

becomes void if such event does not happen or the event becomes impossible
before the time fixed.

Example:

A promises 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 the year, and
becomes void if the ship is burnt within the year.

(ii) Contracts contingent on the non-happening of an event within a

fixed time:

Contracts contingent on the non-happening of an event within a fixed time

may be enforced by law if such event does not happen, or it becomes
impossible before the expiry of fixed time. (Sec. 35).

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WAGER AND CONTINGENT CONTRACTS -A VIEW

Example:

A promises to pay B a sum of money if a certain ship does not return within
a year. The contract may be enforced if the ship does not return within the
year, or is burnt within the year.

5. Contract contingent on an impossible event void:

Contingent agreements to do or not to do anything if an< impossible event

happens are void, whether the impossibility of the event is known or not to
the parties to the agreement at the time when it is made. (Sec. 36).

Examples:

(1) A agrees to pay B Rs. 1,000 if two straight parallel lines should cut each
other.

(2) A agrees to pay B Rs. 1,000 if B will marry A's daughter C. C was dead at
the time of the agreement. The agreement is void.

CONTINGENT CONTRACTS AND WAGERING AGREEMENTS

The difference between contingent contracts and wagering agreements
has been something that has troubled me in the past, and I was rather
satisfied to finally allay my doubts sometime ago. The distinction is a fine
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WAGER AND CONTINGENT CONTRACTS -A VIEW

one, and principally involves the following Sections of the Indian Contract
Act, 1872:
Section 30: Agreements by way of wager void.
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 the result of any game or other uncertain event on which
any wager is made
Section 31: Contingent Contract defined
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.
From a plain reading of the above provisions, it is clear that there are
similarities between the two in fact, one would conclude that every
wagering agreement would necessarily have to be a contingent contract,
since a wager by definition is the placing of a premium on the occurrence of
an event that is uncertain. The very nature of a contingent contract too is
the lack of certainty as to whether the event will happen, and if a contract is
made conditional on an event that will happen for sure, it cannot be
designated as a contingent contract as such event merely becomes a
condition precedent to performance of the contract.

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WAGER AND CONTINGENT CONTRACTS -A VIEW

The

distinction

between

contingent

contracts

and

wagering

agreements lies principally in the fact that contingent contracts (subject to

other relevant provisions of law like S. 30) are valid, legal, contracts whereas
all wagering agreements are void agreements. Therefore, as a starting point
one must indicate that all wagering agreements are contingent contracts,
but that the converse is not true. Contingent contracts are a larger set,
whereas wagering agreements are just one species (an admittedly illegal
species) of contingent contracts.
A fundamental difference between the two is the interest of the
parties in the uncertain events occurrence or non-occurrence. In a wagering
agreements, the occurrence of the event is merely incidental and it is the
reward contingent on the event that the parties are really concerned about
as

such.

In

contingent

contracts,

however,

the

event

and

its occurrence carries a significance over and above the financial transaction
contingent on the event. Thus, the interest of the parties in the occurrence
of the event is one distinguishing factor between the two types of
agreements.
The

next

significant

difference

is

that

in

wagering

agreements, promises are necessarily reciprocal, in the sense that there will
always be a winner and a loser, and either party has something to gain one
way or another. In contingent contracts, the promise can simply be
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WAGER AND CONTINGENT CONTRACTS -A VIEW

unilateral, such as for a person to compensate you if your house is burnt
down (Illustration to Section 31). Another difference is that in wagering
agreements, the entire agreement hinges on the future uncertain event. The
occurrence of the event is the be-all and end-all of the contract as it were. In
contingent contracts, there can be various other conditions and aspects to
the contract and the entire agreement need not depend on that event alone.
The event is, in other words, collateral to the agreement as such.
Therefore, there are several significant differences between the two
kinds of agreements and while at first blush it might appear that the
difference is almost illusory, the above discussion should indicate the
fundamental differences between the two kinds of agreements.
CONCLUSION
As section 30 of the Indian Contract Act 1872 reads about agreements
by way of wager, void. Further The Contract Act does not define what
constitutes a wager or a wagering agreement. It only mentions that such
agreements will be void and unenforceable and no action can lie to either
recover anything that is due under a wager or for performance of a contract
that is in the nature of a wager. A wager is in the nature of a contingent
contract but is prevented from being enforceable by Section 30.

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WAGER AND CONTINGENT CONTRACTS -A VIEW

Hence Section 30 should be amended to define the word wager. Since
a lot of inconvenience and ambiguity have been faced by the judiciary while
dealing with the issue of wagers, specifically as to what all constitute wagers
and what all comes under the ambit of wagers. As different jurists and in
different judgments the ambit of wagers is defined in different ways. In other
words the scope of section 30 needs to be widened.
The enforceability of a contingent contract is very clear i.e. it comes
into force only when the required contingent event has happened. Till the
happening of such event, it would not come into force. And as seen from the
above cases, the arbitration agreement cannot operate independently if the
contract is unenforceable.
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