A contingent contract is a contract that is based upon the happening or non-happening of a future uncertain event whereas a wagering agreement is the payment made against the results of an uncertain event. In this paper, an attempt has been made to demarcate between contingent contract and wagering agreement. One leads to a contract which is enforceable at law whereas the other does not, for want of a contract, since agreements not amounting to a contract are not enforceable.

Wagering agreements

A wagering agreement is related to a contract where two or more parties agree on betting on the outcome of a future event. Commonly, in such agreements, parties stake money or valuable things on the happening or not happening of an uncertain event, and the winner takes all the stakes involved. Many legal systems view wagering agreements as illegal and unenforceable, seeing them as going against public policy. One of the biggest problems with such agreements is that gambling, generally associated with some rather negative social and economic effects like addiction and financial problems, is promoted through the advisers.

Exceptions occur at times, especially in jurisdictions where some forms of gambling or regulated casino gambling is permitted. Here, wagering agreements would be applicable subject to certain legal provisions. It should be noted that the legality of wagering agreements varies considerably across jurisdictions; thus, it essentially needs an advice of law to determine the validity of any agreement.

Basic elements of wagering agreement:

1. Parties: at least two parties must be integrally involved.

2. Consideration: the agreement to be void should involve an express commitment to pay money or things having a monetary value.

3. Uncertain event: the event on which the wager is placed must be uncertain.

4. Common intention: the parties should have a common intention regarding the wager.

5. No control over event: the happening of the event should be beyond the control of parties.

6. No interest except stake: no party should have a personal interest in the event other than its stake.

7. Equal opportunity of winning and losing: a wagering agreement requires the presence of an opportunity for either party to win or lose. An agreement in which one party can only win without having a chance of losing or can only lose without having an opportunity of winning, is not a wagering agreement.

Laws relating to wagering

This section sums up the existing law of betting as applicable to india, supplemented by the bombay state act for avoiding wagers (amendments) act of 1865, amending the act for avoiding wagers of 1848. The pre-1848 act law relating to wagers in british india was a reproduction of the common law of england. Under this statute, an action could be maintained upon a wager provided it did not injuriously affect third persons, did not require indecent evidence, and did not offend against public policy.

The very nature of gambling is held to be pernicious and injurious. Gambling transactions, condemned from remotest times as immoral in this country, have been equally condemned and frowned upon in england, scotland, the united states of america, and australia. Principles of hindu law relating to gambling have not been adopted by indian contract law. Gambling, being a non-commerce activity- res extra commercium, is not protected under article 19(1) or even article 301 of the constitution, that deal with freedom of trade and commerce.

Exceptions to the rule of wagering agreement

However, the following are some exceptions to the general rule vide section 30 of the indian contract act, 1872, that wagering agreements are void:

1. Commercial transactions:

Every bona fide transaction of business, whether of sale of goods or of delivery of shares, which involves an actual intention to carry on business, would not constitute a wagering agreement. On the other hand, where the intention is merely to take advantage of market fluctuations and there is no bona fide business purpose, it would be a wagering agreement.

2. Game of skill:

Contests of skill, wherein the outcome depends on exercise of skill and not chance, like crossword puzzle, picture puzzle and athletic contests do not constitute wagering contracts. For in these cases the prize is awarded on merits of solution or performance.

3. Contracts of insurance:

An agreement amounting to a contract of insurance between the insured and the insurance company, where the insurer undertakes to indemnify the insured against losses arising from uncertain events upon receipt of premiums from the latter, is not a wagering agreement. The insurance contracts are contingent upon uncertain events, whether they relate to life, fire, marine, or other risks.

4. Horse racing:

Agreements for subscriptions or contribution to prizes or sums of money to be awarded to the winners of horse races are not within the voidness of wagering agreements under section 294a of the ipc. It may be noted that such exceptions would not operate in respect of horse racing which is covered by section 294a, ipc, so far as offences relating to gambling are concerned.

Contingent contracts

Contingent contracts are those in which performance, either of one or both of the parties, is made contingent upon the happening or not happening of a specified future event. The event would be uncertain at the time the contract is made and outside the control of the contracting parties. For instance, a sell contract over a property may be contingent on the buyer acquiring financing from a lending institution. This contract is not performable if the buyer cannot get financing.

Contingent contracts come into play in a variety of fields, from insurance and real estate to construction. In the case of insurance, policies are based on contingent events such as natural disasters, while construction contracts are based on milestones for regulatory approvals. All such contracts are generally valid, subject to the fact that the contingency should be lawful, outside the control of parties, and not against public policy. If the contingency does not occur, then the contract may be discharged, relieving the parties from their obligations.

Elements of contingent contracts

1. Dependency upon an event: the performance under the contract is dependent upon the happening or non-happening of a specific event or condition.

2. Collateral event: the event is collateral, or incidental, to the main contract obligations and does not form a part of the contract terms per se.

3. Uncertainty of event: the event must be uncertain at the time the contract is entered into. In case it has already happened, it will not be a contingent contract.

4. Non-willful contingency: the contingency shall not depend upon the will of one of the parties to the contract.

These constituents tautologically explain the contingent contract and the circumstances upon which they are legally valid and enforceable.

Enforcement of contingent contracts

Section 32- enforcement of agreements contingent on an event happening:

A contract contingent to do, or not to do, anything upon the happening or not happening of any future uncertain event cannot be enforced until that happening or not happening be known to have taken place and where the language of the contract is such that or its natural consequence of which is that it can only be enforced if the event happens has become impossible, the contract is void.

Section 33 - enforcement of contracts contingent on an event not happening:

A contingent contract to do or not to do something based on the non-occurrence of an uncertain future event can be enforced when it becomes certain that the event will not happen. Until then, the contract remains enforceable.

Section 34: impossibility of future conduct of a living person:

If a contingent contract depends on the future conduct of a living person at an unspecified time, it becomes impossible to enforce when that person performs an act making it impossible to act in the specified manner within any definite time.

Section 35 - contingent contracts dependent on the happening of an event within a fixed time:

A. Contingent contract—occurrence of uncertain event expected within fixed time—event not happening and fixed time expiring, contract void.

B. Contingent contract—contract depending on specified event not happening within fixed time—certain before fixed time expires that happening of event is impossible—contract may be enforced.

Section 36 - agreement contingent on impossible events void:

Agreements contingent on the happening of an impossible event are void, whether the impossibility was known or not to the parties at the time of making such agreement.

These sections, therefore, sniff the loophole as to when the contingent contracts are actionable and when they become void on account of impossibility or uncertainty of events.

Contingent contract and wagering contract, under the indian contract act 1872, are two separate kinds of contracts with a marked difference in the definitions, actionability, and the resultant effect of law.

1. Definition:

Contingent contract: it is defined in sec. 31 of the act. A contingent contract is a contract, the performance of which is dependent upon the happening or non-happening of some future uncertain event. The happening of that event must be beyond the control of parties and incident to the contract. A contract to pay the money when a house is burnt is a contract contingent on the happening of an uncertain event, viz., burning of the house.

- wagering contract: as per section 30, a wagering contract is a type of agreement whereby two parties bet by depositing money or other things contingent on the happening of some event in the future which is unknown. Such contracts are void in indian law because the inherent nature of the same would be not to serve the purpose of transferring property but solely for the prize to be gained on account of the happening of the event.

2. Enforceability:

Contingent contract: such a contract becomes actionable when the event contemplated therein happens. Under sections 32 to 36 of this act, contingent contracts would become void in case of impossibility or illegality of the event. They permit the effectiveness of legal framework dealing with uncertain future events and risks linked with those in business areas like insurance, real estate, construction.

- wagering contract: such contracts have been held to be void and voidable under section 30; remarkably, it is considered to be against the public policy since it tends to encourage gambling and speculative activities. The indian law denotes any legal remedy to recover anything won under such contracts.

3. Legal implications:

- contingent contract: valid contracts acknowledging parties to have a legitimate interest in the outcome of some future events, contingent contracts also serve practical purposes in mitigating risks and uncertainties in business and personal transactions.

- wagering contract: abhorred by indian law because they tend to cause social evil, wagering contracts have been declared invalid with the purpose of avoiding gambling practices against which financial and social consequences would remain pitted.

Case laws

Carlill v. Carbolic smoke ball co.

In this case, it was held that a wagering contract is a contract between two persons who have a different opinion regarding the issue of the event, which is to occur in the future and is uncertain. They agree that according to the event, one of them shall receive a sum of money or other stake from another, wherein neither of the parties has any interest in the contract other than winning or losing per se. If an agreement is such that one party can only win and not lose, or can only lose and he cannot win, such an agreement comes within the definition, but not otherwise.

Gherulal parakh v. Mahadeodas

The supreme court, while explaining this case clarified that it, though a wagering contract is void and its performance cannot be sued upon, it is not forbidden by law. Hence, nothing in the wagering agreement runs counter to section 23 of the indian contract act, and dealings accessory to the principal wagering agreement are not void in law.

In the case, there was an agreement for sale of land which provided that money taken as earnest money would be refunded if the land is acquired by issuance of a notification. The parties were unaware that such notification for acquisition was already issued. When such declaration was made under section 6 of the land acquisition act, the contract became impossible to perform and accordingly became void.

Frost v. Knight

In the case, defendant promised to marry the plaintiff after his father's death. Before the death of his father, he married another woman. The court held that circumstances had become such that performance of the contract to marry the plaintiff had become impossible on the part of the defendant. Thus, the plaintiff was entitled to sue the defendant for breach of contract.

Conclusion

The gambling contracts are those contracts wherein two or more parties bet on the outcome of an uncertain event. Such contracts are considered to be void and against public policy in many countries. On the other side, contingent contract denotes contracts wherein performance by either one or both the contracting parties depends upon the happening or non-happening of a specified uncertain event at the time when such contract was entered into. Contingent contracts are very common, including in insurance, real estate, and construction. They are generally legally binding so long as the contingency is outside the control of the parties, lawful, and does not offend public policy. It is always advisable to have a lawyer review any type of contractual agreement before entering into it to ensure it is legally valid and legally binding.