When a promissory note is expected for payment of a debt arising out of a wagering contract or transaction, it is affected by Section 30 of the Indian Contract Act and cannot be enforced. However, the Supreme Court has held that although a wager is void and unenforceable, it is not forbidden by law.

Therefore, the object of a collateral agreement is not unlawful under Section 23 of the Indian Contract Act. Consequently, a partnership, being an agreement within the meaning of Section 23, is not unlawful even if its purpose is to carry on a wagering transaction (as established in the case of Gherulal Parekh vs. Mahadeo Das, SIR 1959 SC 781).

An agreement to engage in speculation on the rise and fall of the price of goods is not necessarily a wagering contract. To constitute a wagering contract, there must be proof that the performance of the contract should not be demanded, but only the difference in price should be paid.

Additionally, there should be a common intention between the parties to the wager that they should not demand delivery of the goods but should take only the differences in price upon the happening of an event.

Furthermore, the Supreme Court has held that where an agent has paid losses arising from wagering transactions to third parties on 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) can be enforced. This right to indemnity is collateral to the forbidden transaction.