An agreement by way of wager is void, with certain exceptions. ‘Wager means a bet. A bet can be laid on anything under the sun. The most common case is of horse racing. Two people lay a bet on horse X, the odds, being 8 to 2. This means that there are 8 chances for the horse coming first in the race against two of his not coming first. If Rs. 10 have been placed by A and B on the horse in question, A may have to pay Rs. 10 to B in the event of the horse not coming first, in return of B having to pay Rs. 2 to A in the event of the horse coming first. A wager, therefore is a “game of chance, in which the event, of either gain or loss, is wholly dependent on an uncertain event.”
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From a legal point of view a wager may be described as “ a promise to give money or moneys worth upon the determination or ascertainment of an uncertain event”(Anson). It is in fact a type of contingent contract the determination of an uncertain event being the sole condition of the fixing of liability under the contract. In this sense a wagering contract resembles a conditional promise, a contract of guarantee or a policy of insurance , each of which are contracts of contingent nature, the happening or not happening of the contingency being the sole test of the liability . A contract of guarantee , or a policy of insurance however are valid and binding in law, whereas the agreement by way of wager is declared void by the sec.
The difference between the two lies in the fact that while in the case of the former type of contract , the parties concerned have and interest of their own to protect and have for that very reason, entered into the contract is question, the parties in the second case have no other interest therein except the winning or losing the wager or bet laid between them. And insurance policy taken out by A on his life is valid, because he is interested in protecting his dependents from the consequence of his premature death. In case of betting, on a horse neither of the two parties has anything to loose or gain by the particular horse coming first nor last. They lay the bet on the horse exclusively because they can thereby make some easy money.
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This is precisely the reason why wagering contract are prohibited by law, because they tend to encourage sloth and indolence on the part of public whereas there policy of the law is the same as that preached by the Bible, viz. “that thou shalt earn thy daily bread in the sweat of thy brow.” Obvious instance of wagering contracts are betting on horse racing, purchasing lottery tickets, transaction known as “Ank Farack”, i.e. betting on what the particular difference in the forward rates of New York cotton would been at a stipulated time. These are pure gambling transactions and therefore void in law as wagers.