Principle: 1. Wagering Agreements Are Void. 2. Collateral Agreements to Wagering Contracts Are Valid. - Legal Reasoning

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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 a 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?

Options

  • No, as it is a wagering contract.

  • Bank can recover money from Sabu so that payment of prize m oney can be made to Randeep.

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

  • Horse racing is illegal and therefore XYZ Bank cannot recover a nything from Sabu.

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Solution

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

Explanation:

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 upwards, to be rewarded to the winner or winners of any horse race. The reasonable conclusion is drawn that only collateral agreement to horse racing and therefore the bank can recover the money from Sabu.

Concept: Law of Torts (Entrance Exams)
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2015-2016 (May) Set 1

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