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Understanding the Legality and Implications of Wagering Contracts in Law

When a promissory note is executed for payment of debt arising out of a wagering transaction,it is hit by section 30 of the Indian Contract Act can't be enforced. ( Badri Das vs Meghraj ,AIR 1967 CAL 25) . The Supreme Court has, however, held that a wager is void and unenforceable, it is not forbidden by law and, therefore the object of a collateral agreement, is not unlawful u/s 23 of the Indian Contract Act.

Thus, a partnership being an agreement within the meaning of section 23 of the Contract Actus not unlawful though it's object is to carry on wagering transaction. Mere agreement to engage in speculations on the rise and fall of price of good s is not necessarily a wagering contract.

To constitute a wagering Contract there must be proof that the contract was entered in to upon the terms that the performance of the Contract should not be demanded, but only the difference in prices should be paid. There should be common intention between the parties to the wager that they should not demand delivery of goods, but should take only difference in prices on the happening of an event.

It has, however, been held by the Supreme Court that where an agent has paid losses arising from wagering transaction s to third parties in behalf of the Principal in pursuance of the authority conferred upon him, his right to indemnity which is an incident of the contract of agency and which is collateral to the forbidden transaction can be enforced by Suit - AIR 1954 SC 500

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