Question
Under Section 30 of the Indian Contract Act, 1872, all
wagering agreements are void. Which of the following would be correctly characterized as a wagering agreement?ÂSolution
Section 30 declares void "agreements by way of wager." In Carlill v. Carbolic Smoke Ball Co., a wager was defined as "one by which two persons, professing to hold opposite views touching the issue of a future uncertain event, mutually agree that, dependent upon the determination of that event, one shall win from the other a sum of money, neither party having any interest in the contract other than the sum he will win or lose." Essential elements are: (i) two parties holding opposite views on an uncertain event; (ii) mutual chances of gain and loss for both parties; (iii) neither party having control over the event; (iv) neither party having any interest other than the stake. Critically, if either party may win but cannot lose, or vice versa, it is not a wager. In contrast, insurance is not a wager because the insured has a legitimate interest (protection of insurable interest), and genuine commercial transactions involving shares or forward contracts with intent to perform are not wagers.
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