Contract Void Agreementst I


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Lectures by Dr. Tabrez Ahmad

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Contract Void Agreementst I

  1. 1. Law of Contract-I Void Agreements Dr. Tabrez Ahmad,1
  2. 2. Void Agreements  Agreement of which the consideration or the object is not lawful (Sec. 23 and 24)  Agreement without consideration (Sec. 25)  Agreement in restraint of marriage (Sec. 26)  Agreement in restraint of trade (Sec. 27)  Agreement in restraint of legal proceedings(Sec.28)  Agreement which is ambiguous and uncertain (Sec. 29)  Agreement by way of wager ( Sec. 30)  Agreement to do an impossible act ( Sec. 56) Dr. Tabrez Ahmad,2
  3. 3. Agreement in restraint of trade void Sec. 27 of the Indian Contract Act 1872  Exceptions – Sale of Goodwill – Partnership Act, sec. 11, 36, 54 – Trade combination – Restraints during employment – Solus or exclusive dealing agreements Gujarat Bottling Co. v Coca Cola Co.(1995) 5 SCC 545 Dr. Tabrez Ahmad,3
  4. 4. Void agreements Agreements in restraint of legal proceedings void Dr. Tabrez Ahmad,4
  5. 5. Agreements in restraint of legal proceedings void Sec. 28 of the Indian Contract Act 1872. An agreement is void to the extent it restricts absolutely a party from enforcing his contractual rights by usual proceedings in ordinary courts; or if it limits the time within which he may enforce his rights. It saves two types of contracts: (a) those with a stipulation that an arbitration award shall proceed a cause of action, and (b) a contract to refer existing disputes to arbitration. Dr. Tabrez Ahmad,5
  6. 6. Restraint of legal proceedings No man can exclude himself from the protection of courts by contract. The citizen has the right to have his legal position determined by the ordinary tribunals, except ,subject to contract (a) when there is an arbitration clause which is valid and binding under the law ; and (b) when parties to a contract agree as to the jurisdiction to which dispute in respect of the contract shall be discharged. The section affirms the Common Law. Its provisions appear to embody a general rule recognised in the English Courts which prohibits all agreements purporting to oust jurisdiction of the Courts. Dr. Tabrez Ahmad,6
  7. 7. Adsolute restriction The sec. 28 does not apply where the restriction is not absolute. Where one out of two competent jurisdictions are excluded by agreement, it does not amount to absolute of ouster jurisdiction, and such a clause does not violate sec. 28. ( ABC Laminart Pvt. Ltd. V AP Agencies, Salem AIR 1989 SC 1239.) Dr. Tabrez Ahmad,7
  8. 8. 26. Agreement in restraint of marriage void.  Every agreement in restraint of the marriage of any person, other than a minor, is void. COMMENTS  The wide and unguarded language of this section is taken from the draft Civil Code of New York (S. 8.36). It seems probable that a contract limited to not marrying a certain person or any one of a certain definite class of persons would be held good. Apparently such agreements must be held void in India. The Allahabad High Court expressed doubt on the question whether partial or indirect restraint on marriage was within the scope of S. 26. Dr. Tabrez Ahmad,8
  9. 9.  The Hindu law recognises polygamy, and as to Muhammadan law a man may have as many as four wives at a time subject to Family Laws restrictions. But neither law binds a man to marry more than one wife. It would seem, therefore, that a provision in a Kabinnamah by which a Muhammadan husband authorises his wife to divorce herself from him in the event of his marrying a second wife is not void, and if the wife divorces herself from the husband on his marrying a second wife, the divorce is valid, and she is entitled to maintenance from him for the period of iddat. Dr. Tabrez Ahmad,9
  10. 10.  There is a distinction between restraint on marriage generally and a restraint on remarriage; and a condition in a wakf that if the widow of a co-sharer remarried she should forfeit her right to the profits under the wakf was accordingly upheld. Dr. Tabrez Ahmad,10
  11. 11. 29. Agreements void for uncertainty.  Agreements, the meaning of which is not certain, or capable of being made certain, are void. Illustration  (a) A agrees to sell to B "a hundred tons of oil." There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty.  (b) A agrees to sell to B one hundred tons of oil of a specified description, known as an article of commerce. There is no uncertainty here to make the agreement void. Dr. Tabrez Ahmad,11
  12. 12.  (c) A, who is a dealer in coconut-oil only, agrees to sell to B "one hundred tons of oil." The nature of As trade affords an indication of the meaning of the words, and A has entered into a contract for the sale of one hundred tons of coconut-oil.  (d) A agrees to sell to B "all the grain in my granary at Bhubaneswar. "There is no uncertainty here to make the agreement void.  (e) A agrees to sell to B "one thousand maunds of rice at a price to be fixed by C." As the price is capable of being made certain, there is no uncertainty here to make the agreement void.  (f) A agrees to sell to B "my white horse for rupees five hundred or rupees one thousand." There is nothing to show which of the two prices was to be given. The agreement is void. Dr. Tabrez Ahmad,12
  13. 13. COMMENTS  Ambiguous contracts.---The text and (with one addition) the illustrations of this section follow the draft of the Indian Law Commissioners with only formal variation. The Illustrations are plain, and sufficient to explain the meaning of the section. S. 93 of the Evidence Act provides that when the language of a document is ambiguous or defective no evidence can be given to explain or amend the document. Sec also Ss. 94-97 of the same Act. Neither will the Court undertake to supply defects or remove ambiguities according to its own notions of what is reasonable; for this would be not to enforce a contract made by the parties, but to make a new contract for them. The only apparent exception to this principle is that when goods are sold without naming a price, the bargain is understood to be for a reasonable price. This was probably introduced in England on the assumption that there was an ascertainable market price, and then extended to all cases. Dr. Tabrez Ahmad,13
  14. 14.  Where the defendants, describing themselves as residents of a certain place, executed a bond and hypothecated as security for the amount "our property, with all the rights and interest", it was held that the hypothecation was too indefinite to be acted upon. The mere fact that the defendants describe themselves in the bond as residents of a certain place is not enough to indicate their property in that place as the property hypothecated. If they had described themselves as the owners of certain property it would then have been reasonable to refer the indefinite expression to the description. And where the defendant passed a document to the Agra Savings Bank whereby he promised to pay to the manager of the bank the sum of Rs. 10 on or before a certain date "and a similar sum monthly every succeeding month," it was held that the instrument could not be regarded as a promissory note, as it was impossible from its language to say for what period it was to subsist and what amount was to be paid under it. Dr. Tabrez Ahmad,14
  15. 15.  Similarly, where in an agreement for the sale of goods, the seller reserves the right to vary the price at will, there is no contract. A compromise stating: "The following five gentlemen shall decide all matters relating to our movable and immovable property" was held to be too ambiguous to be enforced. An agreement to grant a lease when no date of commencement is expressly or impliedly fixed cannot be enforced. But when the commencement of a lease is dependent upon a contingency, which has occurred, the agreement can be enforced. An agreement to pay a certain amount after deductions as would be agreed upon between the parties is void for uncertainty. It has also been held that an agreement to refer an arbitration to a person, who has been described in uncertain terms is void. But where the proprietor of an indigo factory mortgaged to B all the indigo cakes that might be manufactured by the factory from crops to be grown on lands of the factory from the date of the mortgage up to the date of payment of tile mortgage debt, it was held that the terms of the mortgage were not vague, and that the mortgage was not void in law. It has been suggested that an agreement is too uncertain to be enforced if no limit to the time of performance is expressed or can be inferred from the nature of the case. This does not appear acceptable as a general proposition Dr. Tabrez Ahmad,15
  16. 16.  Void agreement, connotation of---Agreements meaning whereof is not certain or capable of being made certain, held, would be void---Where both contracting parties are at consensus ad idem with regard to essential terms of contract, any uncertainty or vagueness which is incapable of being ascertained, would have effect of vitiating contract--- In letter of guarantee there was no vagueness or uncertainty, which could vitiate contract. Dr. Tabrez Ahmad,16
  17. 17.  Applicability---Agreement is void only when it is uncertain and unascertainable---Agreement capable of being ascertained---Not void. Under section 29 of the Contract Act, it is only when the meaning of an agreement is not certain or capable of being made certain that the agreement becomes void. When, therefore, the sellers told the buyers that each shipment shall be treated as if separate contracts were made for it and they shall be bound to accept it even if this shipment was only in respect of a part of the goods and the buyers agreed to this condition, the agreement is not void as it is capable of being ascertained. Dr. Tabrez Ahmad,17
  18. 18.  Vague contract---When not enforceable. Section 29 is based upon the principle that the contracting parties must be shown to be at ad idem with reference to the essential terms of the contract and, therefore, if there is any vagueness or uncertainty incapable of being made certain the contract fails for vagueness. For, in that case the parties cannot be said to agree to the same thing in the same sense. Therefore merely because the terms of the arbitration agreement are capable of different and various interpretations it cannot ipso facto be liable to be struck down as void. It can only be regarded as void for uncertainty if its meaning is not certain or capable of being made certain as provided by section 29. Dr. Tabrez Ahmad,18
  19. 19.  Vague contract---When not enforceable. Section 29 is based upon the principle that the contracting parties must be shown to be at ad idem with reference to the essential terms of the contract and, therefore, if there is any vagueness or uncertainty incapable of being made certain the contract fails for vagueness. For, in that case the parties cannot be said to agree to the same thing in the same sense. Therefore merely because the terms of the arbitration agreement are capable of different and various interpretations it cannot ipso facto be liable to be struck down as void. It can only be regarded as void for uncertainty if its meaning is not certain or capable of being made certain as provided by section 29. Dr. Tabrez Ahmad,19
  20. 20.  Terms of contract not ascertainable---Contract void and enforceable. Held: The document being incomplete, as its terms are not ascertainable with reasonable certainty, it comes within the mischief of section 29 and is void and by virtue of the provisions of S. 21 (a) of the Specific Relief Act cannot be enforced specifically. Dr. Tabrez Ahmad,20
  21. 21. 30. Agreement by way of wager void.  Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any Wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made. Exception in favour of certain prizes for horse-racing. This section shall not be deemed to render unlawful a subscription or contribution, or agreement to subscribe or contribute, made or entered into for or toward any plate, prize or sum of money, of the value or amount of five hundred rupees or upwards to be awarded to the winner or winners of any horse-race. Section 294-A of the Indian Penal Code not affected. Nothing in this section shall be deemed to legalise any transaction connected with horse racing, to which the provisions of section 294-A of the Indian Penal Code apply. Dr. Tabrez Ahmad,21
  22. 22. Wagering contract.---  This section represents the whole law of wagering entracts now in force.---There is no technical objection to the validity of a wagering contract. It is an agreement by mutual promises, each of them conditional on the happening or not happening of an unknown event. So far as that goes, promises of this form will support each other as well as any other reciprocal promises. It would have been better if the Courts in England had refused, on broad grounds of public policy, to admit actions on wagers; but this did not occur to the Judges until such actions had become common; and, until a remedy was provided by statute, they could only find reasons of special public policy in special cases, which they did with almost ludicrous ingenuity. Dr. Tabrez Ahmad,22
  23. 23.  In a case of life insurance, Fulton J. said: "What is the meaning of the phrase agreements by way of wager in S. 30 of the Contract Act? ...... Can it be that the words mean something different in India from what the corresponding words agreement by way of wagering mean in England? I do not see how such an argument can be maintained, or how the fact that 14 Geo. III. C. 48 is not in force in India affects the question. A certain class of agreements such as bets, by common consent, come within the expression agreements by way of wagers. Others, such as legitimate forms of life insurance, do not, though, looked at from one point of view, they appear to come within the definition of wagers. The distinction is doubtless rather subtle, and probably lies more in the intention of the parties than in the form of the contract. Dr. Tabrez Ahmad,23
  24. 24.  There is no wager unless both parties run the risk of loss and both parties have a chance of gain. Where two wrestlers therefore agreed to a contest with a stipulation that the wrestler who failed to appear should forfeit Rs. 500 and that the winner, if the contest took place, should receive a fixed sum out of the gate-money, in a suit to recover the Rs. 500 the defence of gaming and wagering failed Dr. Tabrez Ahmad,24
  25. 25. By way of wager"---  There is no distinction between the expression "gaming and wagering," and the expression "by way of wager," used in this section. The cases therefore bearing on the expression used are still useful in construing the expression "by way of wager," used in the present section. Wagering contracts may assume a variety of forms, and a type with which the Courts have, constantly dealt is that which provides for the payment of differences in stock transactions, with or without colourable provisions for the completion of purchases. Such provisions, if inserted, will not prevent the Court from examining the real nature of the agreement as a whole. "In order to constitute a wagering contract neither party should intend to perform the contract itself, but only to pay the differences". It is not sufficient if the intention to gamble exists on the part of only one of the contracting parties. Contracts are not wagering contracts unless it be the intention of both contracting parties at the time of entering into the contracts under no circumstances to call for or give delivery from or to each other. It is not necessary that such intention should be expressed. If the circumstances are such as to warrant the legal inference that they never intended any actual transfer of goods at all, but only to pay or receive money between one another according as the market price of the goods should vary from the contract price at the given time, that is not a commercial transaction, but a wager on the rise or fall of the market. Dr. Tabrez Ahmad,25
  26. 26.  On the other hand, the modus operandi may be such as to raise a presumption against the existence of a common intention to wager. This infrequently happens when agreements of a speculative character are entered into through the medium of brokers, and when, according to the practice of the market, the principals are not brought into contact with each other, nor do they know the name of the person with whom they are contracting, until after the bought and sold notes are executed. Under circumstances such as these, when a party launches his contract orders he does not know with whom the contracts would be made. And this presumption is considerably strengthened when the broker is authorised by the principal to contract with third persons in his (the brokers) own name; for the third person may in such case remain undisclosed even after the contract is made. But the presumption may be rebutted by evidence of a common intention to wager, though the contract has been brought about by a broker. Dr. Tabrez Ahmad,26
  27. 27.  The presumption against a wager was applied in a case where the transactions were in Government paper to the extent of about half a crore of rupees, and the plaintiff was both stockbroker and stockjobber, and the defendant was a stockjobber. The magnitude of the transactions in the case was set up by the defendant to support the contention that the transactions were by way of wager, and reliance was placed on the Privy Council decision. But the contention was overruled and the Court said: "In the Privy Council case the defendant was a rice miller or a producer by trade, and. the wager related to quantities of rice enormously out of proportion to his output and capital, deliverable at option from a number of specified mills. Here there is, I think, sufficient proof that the defendant was known in the market as the largest of jobbers, and the capital available for the purchases which he bargained for was at least presumably to be supplied by the constituents for whom a jobber is ordinarily supposed to be acting." Dr. Tabrez Ahmad,27
  28. 28. Teji mandi transaction.---  Teji mandi contracts were thus described; "It would appear that what happens in a contract of this nature is that one party pays a premium to the other party thus acquiring an option to buy and sell, as he decides, a certain quantity of gold at a certain rate on a certain date. Either on, or some date prior to, that date the put. chaser decides whether he will buy or sell. According to his decision, communicated to his broker, the broker enters into a contract with some third person in order to meet the situation. On the due date the parties can either take or give delivery of the stipulated quantity of gold or settle on the difference." In a Bombay case Beaman J. held that these transactions were by way of wager, and they were void under this section, and adhered to this view in a later case. But at present time the presumption is that a teji mandi is not a mere wagering transaction; and this, it is submitted, is the correct rule. Dr. Tabrez Ahmad,28
  29. 29. Agreements between Pakka Adatia and his constituents.---  It was at one time held in some Bombay cases that a Pakka adatia was merely the agent of his constituent, and that therefore no transaction between them could be a wagering transaction. However, it was held on the evidence of custom that as regards his constituent the pakka adatia was a principal and not a disinterested middleman bringing two principals together. Since that decision it has been held by the High Court of Bombay in two cases that a transaction between a pakka adatia and his constituent may be by way of wager like any other transaction between two contracting parties, and that the existence of the pakki adat relationship does not of itself negative the possibility of a contract being a wagering contract as between them. One of those cases was taken to the Privy Council, and though the decree of the High Court of Bombay was reversed, the Privy Council taking a different view of the facts, the principle laid down by the Bombay High Court was affirmed by the tribunal. The same view has been taken by the High Court of Allahabad, and the East Punjab High Court. Dr. Tabrez Ahmad,29
  30. 30.  Agreement collateral to wagering contracts.--- Thus for our observations are confined to suits between the principal parties to a contract. Different considerations apply where the suit is brought by a broker or an agent against his principal to recover his brokerage or commission in respect of transactions entered into by him as such, or for indemnity for losses incurred by him in such transactions, on behalf of his principal. Dr. Tabrez Ahmad,30
  31. 31.  There is no statute which declares agreements collateral to wagering contracts to be void. Nor is there anything in the present section to render such agreements void. It has accordingly been held that a broker or an agent may Successfully maintain a suit against his principal to recover his brokerage, commission, or the losses sustained by .him, even though contracts in respect of which the claim is made are contracts by way of wager. It does not follow because a wagering contract is void that contracts collateral to it cannot be enforced. The fact that a person has constituted another person his agent to enter into and Conduct wagering transactions in the name of the latter, but on behalf of the former (the principal) amounts to a request by the principal to the agent to pay the amount of the losses, if any, on those wageing transactions and if such payment is made, the agent is entitled to recover the amount from him. Dr. Tabrez Ahmad,31
  32. 32.  Conversely, an agent who has received money on account of a wagering contract is bound to restore the same to his principal. A deposit made by one gambler with another, as security for the observance of the terms of a wagering agreement, can be recovered, unless the amount has in fact been appropriated for the purpose for which it has been deposited. On the same principle a suit will lie to recover a sum of money paid by the plaintiff for the defendant and at his request, though such sum represents the defendants loss on a bet. Similarly money lent for gaming purposes, or to enable the defendant to pay off a gambling debt is recoverable. Such transactions are neither against the provisions of the present section nor of S. 23. Dr. Tabrez Ahmad,32
  33. 33.  But the transaction in respect of which the brokerage, commission, or losses are claimed must amount to a wagering agreement, and it is no answer to a suit by a broker in respect of such a claim against his principal that, so far as the defendant was concerned, be entered into the contracts as wagering transactions with the intention of paying the differences only, and that the plaintiff must have known of the inability of the defendant to complete the contracts by payment and delivery, having regard to his position and means. It must, further, be shown that the contracts which the plaintiff entered into with third persons on behalf of the defendant were wagering contracts as between the plaintiff and those third persons. Dr. Tabrez Ahmad,33
  34. 34.  An agreement to settle differences arising out of a nominal agreement for sale which was really a gamble is no less void than the original wagering transaction. The result therefore is that though an agreement by way of wager is void, a contract collateral to it or in respect of a wagering agreement is not void. Dr. Tabrez Ahmad,34
  35. 35.  Speculative transactions.---Speculative transactions must be distinguished from agreements by way of a wager. This distinction comes into prominence in a class of cases where the contracts are entered into through brokers. The modus operandi of the defendant in this class of cases is, when he enters into a contract of purchase, to sell again the same quantity deliverable at the same time in one or more contracts, either to the original vendor or to some one else, so as either to secure the profit, or to ascertain the loss, before the vaida day; and, when he enters into a contract of sale, to purchase the same quantity before the vaida day. This mode of dealing, when the sale and purchase are to and from the same person, has the effect, of course, of cancelling the contracts, leaving only differences to be paid. When they are to different persons, it puts the defendant in a position vicariously to perform his contracts. This is, no doubt, a highly speculative mode of transacting business; but the contracts arc not wagering contracts, unless it be the intention of both contracting parties at the time of entering into the contracts, neither to call for nor give delivery from or to each other. Dr. Tabrez Ahmad,35
  36. 36.  There is no law against speculation, as there is against gambling. It may well be that the defendant is a speculator who never intended to give delivery, and even that the plaintiffs did not expect him to deliver; but that does not convert a contract, otherwise innocent, into a wager. Speculation does not necessarily involve a contract by way of wager, and to constitute such a contract a common intention to wager is essential. It is in cases of the above description that there is a danger of confounding speculation, or that which is properly described as gambling, with agreements by way of wager; but the distinction in the legal result is vital. The Contract Act in section 30 provides that agreements by way of wager are void; but that a transaction may fall within this provision of the law there must be at least two parties, the agreement between them must be by way of wager, and both sides must be parties to that wager. Dr. Tabrez Ahmad,36
  37. 37.  Oral evidence of agreement being by way of wager.---Though an agreement in writing may ostensibly be for the purchase and sale of goods deliverable on a certain day, oral evidence is admissible to prove that the intention of the parties was only to pay the difference, the burden of proof, of course, being on the party who alleges that it was a wager. Such "intention" is a "fact" within the meaning of S. 3 of the Evidence Act (see cl. 1, illustration (d), and it may be proved by oral evidence under S. 92, proviso 1, of the same Act, as, if proved, it would invalidate the agreement under the provisions of the section now under consideration. The same principle has been reiterated in some cases. Thus in a Bombay case Jenkins C.J. said; "The law says that we must find, as best we can, the true intention of the parties; we must not take them at their written word, but we must probe among the surrounding circumstances to find out what they really meant.....We are not, and we must not be, bound by the mere formal rectitude of the documents if in fact there lurks behind them the common intention to wager, and parties cannot be allowed to obtain from the Courts any sanction for their wagers merely because they use a form which is not a true expression of their common purpose and intention. The surrounding circumstances and the position of the parities and the history of dealings of this class are legitimate, though not .exclusive, matters for our investigation into the true intention of the parties." Dr. Tabrez Ahmad,37
  38. 38.  ." In a still later case Davar J. said: "What the Court has to do is not simply to look at the transactions as they appear on the face of them, but to go behind and beyond them, and ascertain the true nature of the dealings between the parties by probing into surrounding circumstances and minutely examining the position of the parties and the general character of the business carried on by them." In this class of suits it would be almost idle to expect to get at the truth unless the Court takes the widest possible outlook consistent with the provisions of the Contract Act; otherwise the result would be that the statute could be violated with impunity by the simple and habitual device of cloaking wagers in the guise of contracts. There can be no question of a wager, if a substantial part of the goods has been delivered. Dr. Tabrez Ahmad,38
  39. 39.  To determine the general character of the plaintiffs business, the Court ought to inquire how other contracts that may have been entered into by the plaintiff with the same defendant, or even with third parties, and relating to the goods in question, were previously performed by the plaintiff, whether by payment of differences or by delivery of goods. Thus where it appeared that at the vaida for which the contracts in question had been made the plaintiff had neither given nor taken any delivery of any cotton, it was held that the evidence tendered by the plaintiff to show that at other vaidas he had given and taken delivery of cotton was admissible, and that the lower Court was wrong in excluding this evidence. Upon the same principle, evidence is admissible to show that in the case of a particular class of contracts, or of contracts relating to a particular commodity, the normal course of dealing is to pay difference only. Dr. Tabrez Ahmad,39
  40. 40.  Promissory note for debt due on a wagering contract.--- Agreements by way of wager being void, no suit will lie on a promissory note for a debt due on a wagering contract. Such a note must be regarded "as made without consideration"; for "a contract which is itself null and void cannot be treated as any consideration for a promissory note." Suit to recover deposit.---The prohibition contained in this section as regards the recovery of money deposited pending the event of a bet applies only to the case of winners. The winner of a wager or a bet cannot sue to recover the amount deposited by the loser with the stake-holder, but it is quite competent to the loser to recover back his deposit before the stake-holder has paid it over to the winner. In case, however, governed by the provisions of Bombay Act for Avoiding of Wagers (Amendment) Act, 1865, even a loser cannot recover back the deposit Dr. Tabrez Ahmad,40
  41. 41. Lotteries.---  S. 294.A of the Indian Penal Code makes it penal to keep any office or place for the purpose of drawing any lottery not authorised by Government or to publish any proposal to pay any sum, or to deliver any goods, or to do or forbear doing anything for the benefit of any person on any event or contingency relative or applicable to the drawing of any ticket, lot, number, or figure in any such lottery. Before the enactment of this section of the Code, lotteries not authorised by Government were prohibited by the Private Lotteries Act, 1844. The Act declares all such lotteries "common and public nuisances and against law." The Act was repealed by the Indian Penal Code Amendment Act, 1870, and in its place S. 294-A was inserted in the Code (see S. 10 of the amending Act). Where a particular association was authorised by the Government by a letter to hold a lottery, the effect was that no prosecution would lie under the criminal law. But a sale or purchase of a ticket in such a lottery would still be a wagering contract under this section as well as under the Bombay Act; for the Government could not by a letter overrule the Central Act of the Acts of the Provincial Legislature. Dr. Tabrez Ahmad,41
  42. 42.  What is a Lottery?---"Lotteries ordinarily understood are games of chance in which the event of either gain or loss of the absolute right to a prize or prizes by the person concerned is made wholly dependent upon the drawing or casting of lots, and the necessary effect of which is to beget a spirit of speculation and gaming that is often productive of serious evils." It was so stated in a Madras case where an agreement was entered into between twenty persons whereby it was provided that each should subscribe Rs. 200 by monthly installments of Rs. 10, and that each in his turn, as determined by lot, should take the whole of the subscriptions for one month. The defendant contributed Rs. 10 every month for a period of ten months, and in the tenth month he got his lot of Rs. 200. Thereupon a bond was taken from him by the plaintiff, who was the agent in the business, for the remaining Rs. 100 in order to ensure the furture regular payment of monthly installments for the further period often months. Dr. Tabrez Ahmad,42
  43. 43.  In a suit upon the bond it was contended that the transaction was illegal as being a lottery within the meaning of the Private Lotteries Act, 1844, and that the suit therefore could not be maintained. It was held that the transaction did not amount to a lottery. The Court said: "Here no such lottery appears to have taken place: It is not the case of a few out of a number of subscribers obtaining prizes by lot. By the arrangement all got a return of the amount of their contribution. It is simply a loan of the common fund to each subscriber in turn, and neither the right of the subscribers to the return of their contributions nor to a loan of the fund is made a matter of risk or speculation. No loss appears to be necessarily hazarded, nor any gain made a matter of chance." A "chit fund" plan under which all subscribers are repaid their capital by "a fixed date, though some determined by lot get more and sooner, is not a lottery. Dr. Tabrez Ahmad,43
  44. 44.  Default by Bank---Recovery of security by Bank--- Relationship between respondent Bank and appellant firm---One of agency---Respondent Bank under obligation to present three bills of lading of foreign Bank before a specified date alongwith Bill of Exchange---Bill of Lading and Bill of Exchange being most integrated parts of same transaction, failure to present full set of bills of lading being immediate cause of non-payment of Bill of Exchange, respondent Bank, held, marred security and not entitled to any decree on basis of bills of exchange Dr. Tabrez Ahmad,44
  45. 45. Wagering Contract---  Such contracts are void---No suit for recovery of money can be brought on such contract. A wagering contract is one by which two persons mutually agree that on determination of a future uncertain event one shall win from the other and the other shall pay a sum of money, there being no other real consideration for the making of such contract. In cases of such contract the intention of the parties .is to be determined as a question of fact. It is to be seen whether actual delivery of the goods is contemplated or only the differences are required to be paid. All contracts by way of gaming or wagering are void and no action can be brought by the winner on a wager, either against the loser or the stake-holder to recover what is alleged to be won. Dr. Tabrez Ahmad,45
  46. 46. Thanks we will continue….. Dr. Tabrez Ahmad,46
  47. 47. What is a wager?---  A wager has been defined as a contract by A to pay money to B, on the happening of a given event, in consideration of B paying [this should be "promising to pay"] to him money on the event not happening. But Sir William Ansons definition, "a promise to give money or moneys worth upon the determination or ascertainment of an uncertain event," is neater and more accurate. To constitute a wager "the parties must contemplate the determination of the uncertain event as the sole condition of their contract. One may thus distinguish a genuine wager from a conditional promise or a guarantee": Anson, Law of Contract, 17th ed. 221,222 (i). "But if one of the parties has the event in his own hands, the transaction lacks an essential ingredient of a wager". "It is of the essence of a wager that each side should stand to win or lose according to the uncertain or unascertained event in reference to which the chance or risk is taken." Dr. Tabrez Ahmad,47