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Unit 3: Capacity to Contract

(ii) A, who is a dealer in coconut oil only, agrees to sell to B “100 tonnes of oil”. The nature of Notes
A’s trade affords an indication of the meaning of the words, and that A has entered into a
contract for the sale of 100 tonnes of coconut oil.
(iii) A agrees to sell to B, “his white Maruti car for ` 1.35 lakhs or ` 1.25 lakhs”. There is nothing
to show which of the prices was to be given. The agreement is void.

(iv) A agrees to sell to B, “100 quintals of rice at a price fixed by C”. As the price is capable of
being made certain, there is no uncertainty to make the contract void.
3.5.5 Wagering Agreements (S. 30)

“A wagering agreement”, says Sir William Anson, “is a promise to give money or money’s worth

upon the determination of an uncertain event”. Cockburn C.J. defined it as “A contract by ‘A’
to pay money to ‘B’ on the happening of a given event in consideration of ‘B’s promise to pay
money to ‘A’ on the event not happening. Thus, a wagering agreement is an agreement under
which money or money’s worth is payable, by one person to another on the happening or non-
happening of a future, uncertain event. The essence of gaming and wagering is that one party
is to win and the other to lose upon a future event, which at the time of the contract is of an
uncertain nature – that is to say, if the event turns out one way A will lose but it turns out the
other way, he will win. An agreement by way of wager is void.

Example:
(i) A and B bet as to whether it would rain on a particular day or not – A promising to pay `
100 to B if it rained, and B promising an equal amount to A, if it did not. This agreement is
a wager.
(ii) A and B agree to deal with the differences in prices of a particular commodity. Such an
agreement is a wager.
Wagering agreement void and not illegal. In India, unless the wager amounts to a lottery, which
is a crime under s. 294-A of the Indian Penal Code, it is not illegal but simply void. Thus, except
in case of lotteries, the collateral transactions remains enforceable.

Example: A borrows ` 500 from B to pay to C, to whom B has lost a bet. The contract
between A and B is valid.
Lotteries. ‘Lottery’ is an arrangement for the distribution by chance among persons purchasing
tickets. The dominant motive of the participants need not be gambling. Where a wagering
transaction amounts to a lottery, it is illegal under s. 294-A of the Indian Penal Code. In Sir Dorabji
Tata v. Edward F Lance (1918) I.L.R. 42 Bom. 676, where the Government of India had sanctioned a
lottery, the Court held that the permission granted by the Government will not have the effect of
overriding s. 30 and making such a lottery legal. Its only effect was that the persons responsible
for running the lottery could not be punishable under the Indian Penal Code.
However, in H.Anraj v. Govt of Tamil Nadu, AIR 1986 SC 63, the Supreme court upheld lotteries
with the prior permission of the Government as legal thereby conferring upon the winner of a
lottery, a right to receive the prize and the sale of lotteries subject to payment of sales tax. A sale
of lottery ticket confers on the purchaser thereof two rights (a) a right to participate in the draw
and (b) a right to claim a prize contingent upon his being successful in the draw.
Exceptions (transactions held ‘not wagers’). The following transactions have been held not to be
wagers:
1. Transactions for the sale and purchase of stocks and shares, or for the sale and delivery of
goods, with a clear intention to give and take delivery of shares or goods, as the case may

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