Principle 1 Wagering agreement are void 2 Collateral agreement to wagering contracts are valid Facts...........

Indian Contract Act (ICA)1872 Valid and Void Contracts

Principle :1. Wagering agreement are void.

2. Collateral agreement 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 refused to pay the prize stating that horse racing is wagering agreement. Can XYZ Bank recover money from Sabu.

Yes it is only a collateral agreement to horse racing and there fore the bank can recover the money from Sabu.

Horse racing is illegal and therefore XYZ Bank cannot recover anything from Sabu.

No, as it is as wagering contract.

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

Explanation:

The payment of a sum of Rs. 40,000 which depends on the winning of a horse race, is an example of a wagering contract. However if a bank extends this sum as a loan to Sabu, who wants to further use this money as a reward to the winner of the horse race, amounts to a collateral agreement. As per the principle such an agreement can be enforced.