Contracts play an extremely important role in the legal framework that governs business, commerce, and personal agreements. Among them, the two most commonly known types of contracts that are often discussed as part of contract law are contingent contracts and wagering agreements. Though they look substantially alike, they differ in almost every respect, which legally differentiates them. We are going to discuss differentiated circumstances that exist within contingent contracts and wagering agreements—including definitions, legality, and the key differences.

Are you interested in pursuing a career in Law? The Legal School in collaboration with IndusLaw has created a unique program for a Certification in Mergers & Acquisitions for fresh law graduates as well as professionals looking to advance in their careers! Enquire now for details!

What Is Contingent Contract?

A contingent contract is a contract whose performance depends upon the happening or not happening of any particular incident. Section 31 of the Indian Contract Act, of 1872, says, "A contingent contract is a contract to do or not to do something if any perplexing event collateral to the said contract does or does not happen."

That is to say, a contract contingent would be one whose performance is uncertain and subject to the happening or not happening of some future event. For instance, if person A promises to pay person B some sum of money if his ship has a chance to arrive, then that would be a contingent contract. Here the contract rests on collateral of the arrival of the ship. If the event happens, the contract is enacted; otherwise, it is declared void.

Characteristics of Contingent Contracts:

• The contract depends on an uncertain future event.

• The event must be collateral to the contract.

• The contract is enforceable only if the event occurs.

Also, read the difference between contract of indemnity and contract of guarantee.

What is a Wagering Agreement?

It is purely a gamble. A wagering agreement is a contract wherein two parties agree that, on the happening or non-happening of an uncertain event, one shall pay to the other a sum of money or consideration. A 'wager' strictly depends on winning or losing money and the parties have no interest in the event itself except as a source of winning or losing money.

As per Section 30 of the Indian Contract Act, wagering agreements are not enforceable by law. For example, if two persons wager that a particular cricket match will be won by one team and lost by the other, then that also is a wagering agreement. Accordingly, if the team wins, the money is paid by person B to person A; otherwise, person B wins.

Characteristics of Wagering Agreements:

• There will be two or more parties, and every party must have equal opportunities of winning and losing.

• The outcome of the promise is not certain.

• Under that agreement, no one can be assured that one will win or lose.

• No party has any stake in the happening of the event except the stake involved.

Check out the article and find corporate law courses to gain specialisation in this field of law.

Key Differences Between Contingent Contracts and Wagering Agreements

1. Nature of the Event

• Contingent Contract: A contingent contract is subject to an uncertain event that is collateral to the contract. The parties may or may not have control over the event, but the event must be external to the other main contract. 

• Wagering Agreement: A wagering agreement is based solely on some uncertain event whose outcome is governed by chance. No party in the wager has any control over the event, and the event is collateral to the agreement.

2. Legality and Enforceability

• Contingent Contract: Most of the difference is with regard to legal standing. A contingent contract is always valid and enforceable under the Indian Contract Act if the event happens. However, in case the event does not happen, then the contract becomes void.

• Wagering Agreement: Wagering agreements are clearly declared to be void under Section 30 of the Indian Contract Act. This means that even though a person may win the bet, the agreement is not executable anywhere in the courts of law.

3. Interest of the Parties

• Contingent Contract: The parties in a contingent contract have an interest in the event that will decide the outcome of the contract. The event may be one directly impacting the rights or obligations of the parties.

• Wagering Agreement: In wagering agreements, neither of the parties has any real interest in the happening of the event except for the money they can win or lose.

4. Consideration

• Contingent Contract: In a contingent contract, the consideration is founded on fulfilling some obligations dependent upon the happening of a future event. Once the event occurs, both parties are bound to perform, though this consideration is not purely speculative. 

• Wagering Agreement: In the case of a wagering agreement, consideration or money rests purely upon chance. There is no performance of any obligation here except the stake in a bet.

5. Void vs. Voidable

• Contingent Contract: Contingent contracts are not void in themselves. The contracts become void only if the event does not happen. 

• Wagering Agreement: Wagering agreements are inherently void ab initio. Irrespective of the outcome of the wager, the law cannot make the agreement operational, which means that even if one party wins the bet, he cannot bring legal action to recover his money.

AspectContingent ContractWagering AgreementDefinitionA contract where performance depends on the occurrence of a specific uncertain event.An agreement where two parties bet on an uncertain event's outcome.Legal StatusEnforceable by law under Section 31 of the Indian Contract Act.Declared void and unenforceable under Section 30 of the Indian Contract Act.Nature of EventDependent on a collateral future event, which may or may not happen.Purely based on chance or speculation about an uncertain event.Interest in EventParties have a genuine, vested interest in the event's occurrence.Parties have no actual interest in the event, only in winning or losing money.EnforceabilityEnforceable if the specified event occurs.Not enforceable, regardless of the event’s outcome.LegalityLegal and valid.Void and not legal.OutcomeBased on the occurrence of the event, the contract may become void if the event doesn’t happen.The outcome is purely speculative; no legal obligation to perform based on the result.ConsiderationConsideration is genuine and not solely dependent on chance.Consideration is based entirely on the outcome of the wager.ExampleA contract to pay a sum if a ship arrives safely.Betting on the outcome of a horse race.

Find out about the certificate of incorporation.

Conclusion

From the above discussion, it can be concluded that the paramount difference between a contingent contract and a wagering agreement is based on their enforceability, legality, and interest of the parties concerned. Whereas the treaties on contingent contracts are valid and enforceable in so far as that event takes place, the betting contracts are also considered to be void ab initio because they deal with chances and probable future events. To know this, one must be clear of the intrinsic distinctions that exist between the two forms of contracts. More importantly, this must be understood by anyone involved in putting forward or entering into a contract to know beforehand the legal consequences and nature of the agreement entered.

Difference Between Contingent Contracts and Wagering Agreements FAQs

1. What is a contingent contract?

For example, a contingent contract is an agreement where, upon the happening or not happening of any uncertain event collateral to the contract, the right to claim performance is created. It is valid and enforceable under the Indian Contract Act provided such an event befalls.

2. What is a wagering agreement?

A wagering agreement refers to a bet wherein both parties agree to pay money or consideration for the happening of an uncertain event. Under India's jurisdiction, wagering agreements are considered void and unenforceable as granted in Section 30 of the Indian Contract Act.

3. What are the main differences between contingent contracts and wagering agreements?

The main difference between the two lies in their enforceability. Contingent contracts are enforceable by law if the event actually occurs. Wagering agreements, on the other hand, are void and not enforceable in a court of law from the very outset, regardless of the results.

4. Are insurance contracts contingent contracts or wagering agreements?

An insurance contract is a type of contingent contract in which the performance depends on the happening of an event, such as fire, accident, or death. It is enforceable by law.

5. Is a courtable wagering agreement?

No, wagering agreements are declared null and void by statute under Indian law (Section 30 of the Indian Contract Act). Though one party may win the wager, that party cannot file a suit for winning the wager.

6. Why is a contingent contract actionable while a wagering agreement is not?

Contingent contracts are enforced because they represent a real interest and collateral events, and parties have control or interest in the event. On the other hand, wagering agreements are speculative and based on chance and have no real interest except for the event of a bet.