Page 48 - DMGT102_MERCANTILE_LAWS_I

Mercantile Laws-I

Notes be. However, where the intention is only to settle in price difference, the transaction is a
wager and hence void.
2. Prize competitions which are games of skill, e.g., picture puzzles, athletic competitions are
not wagers. Thus, an agreement to enter into a wrestling contest in which the winner was
to be rewarded by the entire sale proceeds of tickets, was held not to be wagering contract
(Babalalteb v. Rajaram (1931) Odham’s Press’ (1936)1K. 416 it was held that a crossword
puzzle in which prizes depend upon correspondence of the competitor’s solution with a
previously prepared solution kept with the editor of a newspaper is a lottery and therefore,
a wagering transaction. According to Prize Competition Act, 1955, prize competitions in
games of skill are not wagers provided the prize money does not exceed ` 1,000.
3. An agreement to contribute a plate or prize of the value of ` 500 or above to be awarded to
the winner of a horse race (s.30).
4. Contracts of insurance are not wagering agreements even though the payment of money
by the insurer may depend upon a future uncertain event. Contracts of insurance differ
from the wagering agreements in the following respects:
(a) It is only that person possessing an insurable interest who is permitted to insure life
or property and not any person, as in the case of a wager.
(b) In the case of fire and marine insurance, only the actual loss suffered by the party is

paid by the insurance company, and not the full amount for which the property is
insured. Even in the case of life insurance, the amount payable is fixed only because

of the difficulty in estimating the loss caused by the death of the assured in terms of

money, but the underlying idea is only indemnifi cation.

(c) Contracts of insurance are regarded as beneficial to the public and are, therefore,
encouraged. Wagering agreements, on the other hand, are considered to be against
public policy.

3.6 Summary

z Any one cannot enter into a contract; he must be competent to contract according to the
law. Every person is competent to contract if he (i) is of the age of majority, (ii) is of sound

mind, and (iii) is not disqualified from contracting by any law to which he is subject (s.11).

Thus, there may be a flaw in the capacity of parties to the contract. The flaw in capacity may
be due to minority, lunacy, idiocy, drunkenness, drug addiction or status. If a party to a
contract suffers from any of these flaws the contract may not be a valid one. If the contract

would have been allowed to be a valid one then it would result in one party being at a
disadvantage in the bargaining process.
z The goods are ‘necessaries’, for that particular minor having regard to his conditions in life
(or status or standard of living) and that purchase or hire of a car may be ‘necessary’ for a
particular minor. The minor needs the goods both at the time of sale and delivery. What
is necessary to see is the minor’s actual requirements at the time of sale and at the time of
delivery, where these are different.

z A minor’s agreement cannot he ratified by the minor on his attaining majority as the
agreement is void ab initio.

z If a minor has received any benefit under a void contract, he cannot be asked to refund the
same (see Mohisi Bibi’s case given above).
z A minor is always allowed to plead minority, and is not estopped to do so even where he
had procured a loan or entered into some other contract by falsely representing that he was
of full age.

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