Definition of Wager: A wager is an agreement by mutual promises, each of them conditional on the happening or not happening of an unknown event.
   
Example-
a)    A contract by A to pay money to B on the happening of a given event, in consideration of B paying to him money on the event not happening, is a contract by way of wager.

b)    A share market transaction, in which there is no intention to give or take delivery of the shares and where the parties intend to deal only with the differences in prices, is a wagering transaction. 

Case-
a)    Lotteries- A lottery is a game of chance. Therefore an agreement to buy a ticket for a lottery is wagering agreement. The government may authorize a lottery. The only effect of such authorization is to attempt the persons conducting the lottery from criminal prosecution but it remains a wagering transaction. Dorabji v. Lance (1918) 42 bom 676.

b)    Cross – word puzzles - In an English case it has been held that a cross-word puzzle, in which pieces depend upon sameness of the competitors solution with a previously prepared solution kept with the editor of a newspaper, is a lottery and therefore a wagering transaction. Coles v. Odham’s Press,(1936) 1 K.B. 416  .

Characteristics of wagering agreements:

1. 
   The consideration for the promise under a wagering agreement is to pay or get money.

2.    The money is payable on the happening or the non-happening of an event.

3.    The agreement depends on a future or uncertain event.

4.    The essence of gaming and wagering is that one party is to win and other loses.

5.    In wagering agreement no party has control over the event.

6.    Commercial transactions are valid, but to pay price differences in a wagering agreement is void.
  
Exceptions-
It has been held that the following transactions are not wagers:

a)    Shares:  Share market transaction in which there is clear intention to give and take delivery shares.

b)    Games of skill: Prizes and competitions which are games of skill, e.g., picture puzzles; athletic competitions etc. An agreement to enter into a wrestling contest, in which the winner was to be rewarded by the whole of the sale-proceeds of tickets and the failing to appear on that day would have to forfeit Rs.500 was held not to be a wagering agreement. Babasaheb v. Rajaram (1931) 33 Bom L.R.260.

c)    A statutory exception: an agreement to contribute to the payment of prize of the value Rs.500 or upward to the winners of a horse race is valid. This is statutory exception laid down in section 30 of the Contract Act.

d)    Contract of insurance: A contract of insurance is not a wagering agreement.

e)    Badla:  Badla transaction are exactly similar to the transaction of ‘conversion’ or ‘carrying over’ in the terminology of the stock exchanges with regard to dealing in securities. Mere agreement to engage in speculation on the rise and fall in prices goods is not necessarily a wagering contract. But in a case this contract was held void under section 23 of Contract Act because it prohibited forward contracts by a statute on this subject. Protapchand Nopaji v. Kotrke Venkata Shetty & Sons etc. AIR (1975) Supreme Court 1223.