Question

Principle :
1. Wagering agreements are void.
2. Collateral agreements to wagering contracts are valid.
Facts : XYZ Bank lends Rs$40,000$ to Sabu in order to enable him to award as prize to Randeep who is the winner of horse race. Later Sabu refuses to pay the prize stating that horse racing is wagering agreement. Can XYZ Bank recover money from Sabu?

• A. No, as it is a wagering contract.
• B. Bank can recover money from Sabu so that payment of prize money can be made to Randeep.
• C. Yes, as it is only a collateral agreement to horse racing and therefore the bank can recover the money from Sabu.
• D. Horse racing is illegal and therefore XYZ Bank cannot recover anything from Sabu.

Answer 1

The correct option is C Yes, as it is only a collateral agreement to horse racing and therefore the bank can recover the money from Sabu.

There is an exception under section 30 of the Indian Contract Act in which it is mentioned that in favour of certain prizes for Horse Racing shall not be deemed to render unlawful a subscription or contribution, or agreement to subscribe or contribute, made or entered into for or to word any plate, prize or sum of money, of the value or amount of five hundred rupees or upwords, to be rewarded to the winner or winners of any horse race. The reasonable conclusion drawn that only collateral agreement to horse racing and therefore the bank can recover the money from Sabu. Hence option (c) is correct.