The general rule is that if A accepts a bill drawn upon him by B, or gives him a promissory note, for an illegal consideration, the instrument no doubt is entirely void as between A and B, so that the latter cannot sue the former upon it; still if B transfers the instrument by endorsement or otherwise to C, who takes without notice that it was originally given for an illegal consideration, and gives value for it, C may sue all the prior parties and recover upon it. The chief difference that such illegality makes to C is, that a presumption is raised that C is the agent for the original holder, i.e., that the indorsement to him is presumed to be merely a means of evading the law and enforcing the originally illegal contract.[57] |Burden of proof is on transferee.| Consequently the rule is that the burden of proof lies on the transferee of showing that he took the instrument bonâ fide, i.e., without notice of the illegality, and that he gave value for it. Moreover, the illegality would affect the interests of a transferee if at the time of the transfer the bill were overdue. Before the late Bill of Exchange Act, it was commonly said that an indorsee of an |Overdue bill.| overdue bill took it subject to all the equities attaching to the bill. Thus, if a bill were obtained from the acceptor by fraud or undue influence, or given for an illegal consideration, those were equities between the original parties which would prevent the instruments being enforced as between them; but would not affect a bonâ fide transferee for value. The fact, however, of a bill being overdue would be sufficient notice of the infirmity to prevent his being a bonâ fide holder. |45 & 46 Vict., c. 61.| The new Bill of Exchange Act[58] leaves the law practically unchanged, excepting in phraseology. |“Holder in due course.”| For “bonâ fide holder” is substituted the expression “holder in due course.”
By section 29, the holder in due course is defined to be (1) a person who takes a bill not overdue and without notice of dishonour, if any; (2) and takes it in good faith and for value, and at the time the bill was negotiated to him he had no notice of any defect of title of the person who negotiated it.
The expression “defect of title,” which occurs in this section, is substituted for the older and more cumbrous one of “equity attaching,” &c. By section 29, the title of a person who negotiates the bill is “defective” when he obtains the bill or acceptance thereof by fraud duress (“force or fear” in Scotland), or other unlawful means, or for an illegal consideration (which includes a gaming debt).
By section 30, the holder is presumed to be a holder in due course until the contrary is proved; but in that event the burden of proving that value has been given for the bill and in good faith, is shifted on to the holder. See Tatham v. Hasler.[59]
By section 36, an overdue bill is negotiated subject to all defects of title affecting it.
The result of these enactments, stated in the language of the law at the present day, seems to be shortly as follows:—
(1.) A bill or note accepted or made for a gaming debt (such as is dealt with by the Statute of Anne) is subject to a defect in title.
(2.) If such instrument be overdue, any transfer is made subject to such defect.
(3.) The holder must in all cases, to entitle himself to sue when once the illegality has been proved, show that he took the bill or note bonâ fide and for value.
As will be seen by reference to any work on Bills of Exchange, mere absence of consideration does not constitute a defect of title: consequently the indorsee for value of an overdue accommodation bill can recover on the bill from the acceptor.
In Fitch v. Jones[60] the question was raised as to whether a consideration not illegal but merely void by Act of Parliament constituted an “equity.” It was an action on a promissory note by the indorsee against the maker. Defendant pleaded that the note was given by him to one C in payment of a debt on the amount of hop duty in 1854, the bet being made since the passing of 8 & 9 Vict., c. 109. It was not an illegal consideration within 5 & 6 William IV., as the bet was not on a game or pastime. A question was raised at the trial as to whether the plaintiff had given value for the note when endorsed to him. The judge directed the jury that the onus was on the defendant of proving that no value was given. On this ruling the substantial question in the case was raised before the Court, viz., whether the voidness of the consideration had the same effect as illegality, in throwing the burden on to the indorsee (i.e., the plaintiff) of showing that he took the note for value and without notice. The Court held that the consideration was merely void by 8 & 9 Vict., c. 109, and not illegal; and that this had not the effect of raising the presumption that the plaintiff took the note without value.
In Lilley v. Rankin[61] the same ruling was applied to cheques given in payment in respect of gambling transactions in stocks.
Questions have sometimes arisen upon what amounts to notice of the illegality, which, as has been seen, a holder of a bill is sometimes called upon to disprove. On this subject reference should be made to works on Bills of Exchange. It seems that there need be no express or precise notice, but that any circumstance of suspicion which ought to have put the holder upon enquiry is sufficient. |What notice is sufficient.| Thus, in Soulby v. Portarlington,[62] defendant was acceptor of a bill for £1,000, payable to one Aldridge, who was keeper of a gaming house, for money lost at play. It was endorsed to one Brooke, who discounted it with Soulby & Co., wine merchants, the plaintiffs in the action, with whom Brooke, a retail wine dealer, had dealings. The plaintiffs advanced £700 on the bill, agreeing to deliver £300 in wine. Soulby commenced an action in Ireland on the note. The defendant instituted a suit in the Court of Chancery in England to restrain the plaintiffs from proceeding with the action, on the ground that it was given for a gambling debt. Held that the facts were such as to put the plaintiffs on enquiry as to what the origin of the bill was, especially as it was not denied by the plaintiffs in their affidavits that they knew that Aldridge was the keeper of a gambling house. That the Court had clearly jurisdiction to restrain the plaintiffs (who were resident in England) from proceeding with their action in Ireland, and also to order the bill to be delivered up to be cancelled.
The case of Hawker v. Hallewell[63] is a good illustration of cases where the transferee will not be held to have taken with notice, and also of cases where the transferor by his conduct estops himself from alleging the illegality of the original consideration. |Assignee of bond.| In Hawker v. Hallewell[63] the plaintiff gave a bond in 1841 to one Jenkins to secure repayment of a betting debt; at least, this was assumed for the purposes of argument, though the evidence did pot prove it. Jenkins assigned the bond and a policy of assurance to a bank. Plaintiff, in June, 1848, made a proposal to the bank that the bond and policy should be given up, and that the existing debt, together with a further advance, should be secured by mortgage on some reversionary property of the plaintiff. The plaintiff alleged that he had given notice to the bank that the bond was given for a gaming debt. The plaintiff, in 1853, assigned all his property to trustees for the benefit of his creditors, and now filed a bill to administer the trusts. The Chief Clerk disallowed the claim of the bank. The plaintiff contended that the bond was void under 9 Anne, c. 14, which had not been repealed by 5 & 6 William IV., so far as regards bonds. 8 & 9 Vict., c. 109, which repealed so much of the Statute of Anne as was not repealed by 5 & 6 William IV., was not retrospective. The Vice-Chancellor decided on the facts that the bank had taken the bond without notice of the original consideration. He also held that, although the operative part of the Statute of William IV. only applied to negotiable securities, yet the recitals included bonds and securities of every kind; so that an obligee was within the equity of the statute, and that, on the principle of Equity follows the Law, a bonâ fide assignee of a bond for valuable consideration would be treated in the same way as a bonâ fide holder of a bill of exchange. But there was a further ground on which his honour decided in favour of the |Estoppel of obligor.| bank—that the plaintiff by his proposal in 1848 had held out to the bank that the bond was a valid security and that on the principle of Pickard v. Seears[64] he could not be heard to set up its invalidity. This latter point seems to be the same as that on which Edwards v. Dick[65] was decided, viz., the ordinary principle of estoppel—that if one person by his acts or representations induces another person to believe in the existence of a certain state of facts, and acting on such belief to enter into a contract with him, he cannot be heard to say that those facts do not exist.
Of course, the burden of proving the illegality of the consideration lies on the person who sets it up, on the principle that he who alleges the affirmative must prove it. This was clearly recognised by the Court in Fitch v. Jones.[66] By the Rules of Court, 1883, facts showing illegality either by Statute or Common Law must be specially pleaded. It seems, too, at any rate under the old system of pleading, that it was not sufficient for defendant to plead a fact showing illegality, but he must also aver that plaintiff gave no value for the bill, although the illegality once established would raise a presumption to that effect.[67]
It seems that in order to throw the burden of proof on to the shoulders of an indorsee, it was not sufficient that the illegality should be admitted on the pleadings; it must be proved in evidence. Thus in Edmunds v. Grove[68] in an action by the indorsee against the maker of a note. Plea, that the note was made for a gaming debt, and indorsed to plaintiff without consideration and with notice. To this plaintiff replied denying the notice and absence of consideration without denying the illegality. Held, that although the pleadings by not putting in issue the illegality admitted it, still that had not the effect of throwing the burden of proof on to the plaintiff that he took without notice and for good consideration. Presumptions or inferences of fact could only be drawn by the jury from facts proved before them. The issues only, and not the pleadings, were before the jury. But now by the Bill of Exchange Act, s. 30 (2) it is sufficient that the illegality should be admitted or proved.
It is always advisable, particularly where a plea of illegality is set up, to state fully the circumstances under which the contract or security is affected with illegality. Thus in Bolton v. Coghlan[69] plaintiff sued as indorsee of a note made by defendant. The latter pleaded that it was made for money lost at play.
The evidence showed that defendant lost money at play to one Aldridge, and accepted a bill for the amount drawn by Aldridge. Aldridge indorsed to Knight. It was then agreed between defendant and Aldridge that defendant should in substitution for the bill give Knight his note of hand for the amount Knight indorsed to plaintiff.
Held that as the plea implied that the note was originally given for a gaming debt, whereas it was really only a substituted agreement, the defendant should not be allowed to take plaintiff by surprise and go into evidence of the subsequent agreement.
But under the Rules of Court the judge at the trial has power to allow amendments in the pleadings upon terms as to costs or otherwise.[70]
The statute only affects the liability of the acceptor of a bill or maker of a note given for a gaming debt. It does not prevent the indorsee suing the indorser where the indorsement was, as between them, for a legal consideration: the statute leaves the law, as settled in Edwards v. Dick,[71] untouched.
(2.) Another consequence of the consideration being declared illegal is, that although the absence of consideration does not affect a deed, an illegal consideration avoids it. It seems, too, from Hawker v. Hallewell,[72] that a bond is within the equity of the Statute of William IV. For the general authorities on the subject of Bonds and Deeds given for an illegal consideration, the reader should refer to Smith’s Leading cases under Collins v. Blantern.
(3.) Again, if part of the consideration for which an instrument is given be illegal, the whole is vitiated.
But here a distinction must be drawn between contracts that are divisible and those that are indivisible.
Hay v. Ayling[73] is an example of an indivisible contract. In 1848 the defendant owed one A £100 on a bet on a horse-race. A was also indebted to the plaintiff. A by arrangement drew a bill on the defendant for the amount which the defendant accepted and was indorsed by A to plaintiff. The bill was dishonoured and the plaintiff at defendant’s request gave him further time and took from him a renewed acceptance, knowing at that time that the original acceptance was given for a gaming debt. Held (1) That the fact of there being an additional consideration for the bill sued upon (i.e. the giving of time) would not be an answer to the plea of illegality, as illegality in any part of the consideration is sufficient to avoid the contract. (2) That the plaintiff having notice of the illegality could not recover as a bonâ fide holder. (3) That the bills were avoided not by 8 & 9 Vict., c. 109, s. 18 (which statute, as we shall see hereafter, only avoids wagering contracts without making them illegal), but by 5 & 6 William IV., c. 41. It must at the same time be admitted that this view of the matter was not adopted in Bubb v. Yelverton.[74] |Bubb v. Yelverton.| This was a summons in an administration suit to determine the legality of a claim on a bond given by the Marquis of Hastings. Having got into racing difficulties, and being unable to pay his debts, his creditors threatened to bring the matter before the Jockey Club and have the Marquis posted at Tattersall’s as a defaulter. To avoid this the Marquis arranged to secure the payment of certain sums to his creditors by bonds with sureties. Lord Romilly decided in favour of the claims, on the ground that the consideration for the bonds was not so much the existence of a betting debt, but the forbearance of the creditors to bring the matter before the Jockey Club. It is, however, submitted that the bonds were void as having been given partially for an illegal consideration, viz., a series of gaming debts. |Contract divisible.| On the other hand, as an instance of a divisible contract, |Clayton v. Dilley.| in Clayton v. Dilley[75] the defendant authorised plaintiff to bet for him at the Epsom races. Plaintiff made two bets of £100 each, which were illegal under the Statute of Anne, and another of £5, which was admitted to be legal; all of them were lost, and paid by the plaintiff, who sued to recover from defendant. The Court held that he could recover the £5, but not the 200. It is obvious the commissions to make the different bets were separable.
So in Lyne v. Siesfield[76] a broker sued his client for money paid to his use, to which defendant pleaded that the money was paid in respect of differences on certain contracts by way of gaming relating to the public funds and railway shares. Held, that as the plea was bad in parts, and had been united in one, the whole was bad.
III. It seems that a person who has given a bond, bill, or note to secure payment of a gambling debt, can bring an action in the Chancery Division to have the security delivered up to be cancelled, and also under the whole practice could obtain an injunction against suing at law to recover upon it.[77] But since the Judicature Act,[78] no proceeding in the High Court can be restrained by injunction, though probably this does not affect an injunction against suing in any other court. In some of the cases referred to, the action restrained was brought in an Irish Court; in such a case probably an injunction would lie even since the Judicature Act. In the case of the acceptor of a bill or maker of a note being compelled to pay the amount to a bonâ fide holder, |Section 2 of Act.| section 2 of the Act provides that he can recover from the drawer or payee for money “paid for and on account of the person to whom the bill was originally given upon such illegal consideration.”
In Gilpin v. Clutterbuck[79] the plaintiff had been compelled to pay an indorsee of a bill which he had accepted in payment of a gaming debt; and it was held that he was entitled by the statute to sue the original payee in an action of “assumpsit,” and was not bound to sue in “debt under the statute.”
The bill bore interest on the face of it. Held that plaintiff was entitled to recover the interest from the defendant as well as the principal sum. Secus if the bill does not on the face of it provide for the payment of interest.
In Lynn v. Bell[80] the plaintiff, in payment of certain bets on horse-races, gave to the defendant three cheques on the plaintiff’s bankers, payable to bearer; two of these were indorsed by the defendant and by his indorsees to third parties, and a third was indorsed by the defendant alone in payment of a betting debt; all were eventually paid by the plaintiff’s bankers. Plaintiff sued the defendant to recover under this section the amount of the three cheques. It was urged for the defendant (1) That the cashing of the cheques by the plaintiff’s bankers was not a payment of a bill or note within the statute. (2) That he was entitled to set off the amount of a cheque drawn by one A in his favour, and indorsed by him to the plaintiff in payment of a betting debt, and for which the plaintiff had received cash at A’s bankers. Held (1) as stated above, that the term “bill” in the statute includes “cheque.” (2) That the payment by the plaintiff’s bankers of the amount of the cheques drawn by the plaintiff to the holders was in effect a payment by the plaintiff himself. “He pays when his banker pays on his account.” A cheque is a direction to pay so much money of the drawer, “actually or assumedly in the possession of the drawee.” It would be different if, in payment of a betting debt, the plaintiff had drawn a bill of exchange which was subsequently paid by the acceptor, as “it is not necessary nor usual that there should be money of the drawers in the hands of the drawee of a bill of exchange.” The language of this part of the judgment would seem to leave it an open question, if the drawer of the cheque had at the time no assets at the bank; or in the case of a bill of exchange being given instead of a cheque, if the acceptor recovered the amount from the drawer, whether this would not amount to a “payment” by the drawer within the section. (3) As to the set-off, the same reasoning was applied. The amount of the cheque was not paid by the defendant or his bankers, but by A’s bankers, consequently it could not have been recovered in an action by the defendant under this section, and could not be made the subject of a set-off. |What instruments are within the statute.| As to the instruments that are within the statute in the above case of Hawker v. Hallewell[81] the Vice-Chancellor seemed clearly of opinion that bonds were within the equity of the statute. In the above case of Lynn v. Bell[82] it was held that “bills” in the statute included “cheques.” In the judgment are to be found some instructive observations as to the similarities and differences between cheques and ordinary bills of exchange. In Parsons v. Alexander[83] the plaintiff sued on a cheque and also on an I O U, both given for a gaming debt; as the cheque was unstamped the plaintiff relied on the I O U. But as an I O U is not an instrument or security for a debt, but only evidence of it, it was treated as void under 8 & 9 Vict., c. 108, and not as illegal under 5 & 6 William IV., c. 41. See, too, Quarrier v. Coulston[84].
Such was the state of the law at the commencement of the present reign, until it was attempted to deal with wagers by a broad and general enactment, which, however, left the provisions of the Act of William IV. untouched.
The Statute 8 & 9 Vict., c. 109, s. 18 provides “that all contracts or agreements, whether by parol or in writing, by way of gaming or wagering shall be null and void, and no suit shall be brought or maintained[85] in any court of law or equity to recover any sum of money or valuable thing alleged to be won upon any wager or which should have been deposited in the hands of any person to abide the event on which any wager should have been made. Provided that this enactment shall not be deemed to apply to any subscription, contribution, or agreement to subscribe or contribute for or towards any plate, prize, or sum of money to be awarded to the winner or winners of any lawful game, sport or pastime.”
Section 15 of the Act repeals the Statute of Charles II., and so much of the Statute of Anne as was not altered by 5 & 6 William IV., c. 41, and so much of 18 George II., c. 34, as related to the Statute of Anne or as rendered any person liable to be indicted and punished for winning or losing at any one time at play or by betting, the sum of £10 or £20 within 24 hours.
It will be observed that this statute includes under one sweeping enactment all contracts by way of wagering, and therefore has a much wider application than the previous Statutes of Charles II., Anne and William IV., which, as has been before pointed out, apply only to wagers on games and pastimes. Further, the statute introduces a change in the attitude of the law towards transactions of this description in that they are in no sense declared illegal; and all the penal provisions of the earlier statutes are expressly repealed. It merely makes them void and incapable of legal enforcement, or, in the language of Lush, J., in the case of Haigh v. Town Council of Sheffield,[86] a wager is made “a thing of a neutral character; not to be encouraged, but not to be absolutely forbidden; it leaves an ordinary betting debt a mere debt of honour, depriving it of legal obligation, but not making it illegal.” The wording of the statute seems moreover to be framed so as to cover the case which arose in Pugh v. Jenkins,[87] where the parties made a bet on a race which had already been run, but the event was unknown to either, and it was held that the earlier statutes applied only to wagers before or at the time the gaming was going on.
It may be convenient in the present place to consider what is the precise operation of this statute on contracts within 5 & 6 William IV. That statute declared that securities for the payment of bets on games and pastimes (including horse-racing), as well as all contracts for the payment of the same, shall be deemed to be for an illegal consideration; at any rate, that is the effect given to the statute by Applegarth v. Colley. |? Combined effect of 5 & 6 Wm. IV. and 8 & 9 Vict.| It might well be questioned whether 8 & 9 Vict. c. 109, s. 18, leaves that statute unaffected (in which case all such contracts would still be illegal), or whether the wording of the Act is not sufficiently wide to embrace such contracts and make them merely void like other wagers, that is, in the language of Sir Montague Smith in Trimble v. Hill,[88] to “abolish the distinction between legal and illegal wagers.” Of course the latter construction leaves the seeming anomaly of a contract being merely void when standing by itself, but illegal when forming the consideration for a bill of exchange or other security. It is, however, submitted that this is the true view of the matter. There is good reason for declaring such a consideration for a bill of exchange illegal, because there are certain well-known rules of law relating to bills of exchange given for illegal consideration, rules based on convenience, and designed for the protection of innocent holders; and it was, no doubt, thought advisable to put bills given for betting debts on the same footing. It is a strong argument in favour of this view that in nearly all the cases of actions in respect of betting transactions (where the bet was on a horse-race or other game) it seems to have been almost assumed that such gaming is only void under 8 & 9 Vict., c. 109: at the same time with the single exception of ex parte Pyke[89] the point does not seem to have been raised; but in that case it was argued that the effect of the Statute 5 & 6 William IV. was, as interpreted by Applegarth v. Colley,[90] to make bets on games, &c., illegal. The point, however, was not decided, as the Court held that the facts did not bring the case within the statute. There is at any rate no question that wager-contracts are avoided only, and not rendered illegal by virtue of 8 & 9 Vict., c. 109. |Wagers void, not illegal by 8 & 9 Vict.| It is not necessary to refer to every case which recognises that fact. The following are perhaps the cases which best illustrate the difference in the effects of illegal and void contracts.—Inchbald v. Cotterill,[91] where a broker sued for work and labour done and money paid at defendant’s request, in and about the purchases and sales of shares in a Railway Company. Held, that even supposing the “money paid” could not be recovered, there was no answer to the count for work done: and as there was nothing illegal about paying money on gaming transactions (as there was under Barnard’s Act), the rest of the consideration was not tainted. In Thacker v. Hardy[92] and Read v. Anderson,[93] the agent was assumed entitled to indemnity from his principal in respect of gaming transactions entered into on his behalf, which he clearly would not be entitled to recover in respect of illegal contracts. So in Fitch v. Jones,[94] where a bill was given for a betting debt not illegal within 5 & 6 William IV., it was held that a merely void consideration did not throw the onus on to the indorsee’s shoulders of proving that he was a bonâ fide holder for value.
It may be advisable here to notice that the Indian Contract Act contains provisions of a very similar character. By Art. 30, “all agreements by way of wager are void; and no suit shall be brought to recover anything alleged to be won on any wager or entrusted to any person to abide the result of any game or other uncertain event.
“This section shall not be deemed to render unlawful a subscription or contribution or agreement for any subscription or contribution for any plate, prize, or sums of money of the value of 500 rupees or upwards, to be awarded to the winner of any horse-race.”
It is evident that nearly all the cases decided on the English Statute will apply to these provisions of the Indian Act.
The questions which have arisen as to the construction and effect of the Statute 8 & 9 Vict., c. 109, s. 18, may perhaps be grouped under the three following main headings.
I.—What are contracts by way of gaming within the statute.
II.—The effect of the declaration that “no action shall be brought,” &c.
III.—The proviso in favour of a subscription or contribution to a prize.
I.—Under this heading the following topics are of importance.
(1) There must be a consensus ad idem by both sides to the agreement, and that consensus must relate to an agreement, which of itself constitutes a wager. It is not sufficient that one of the parties should have it in his mind to speculate or gamble, terms which are used metaphorically and are inclined to be misleading: it is essential that the other party should be privy to and assist in the intent to wager. It is of great importance to bear this in mind in dealings on the Stock Exchange, where a purchaser may simply buy for the purpose of selling again, receiving the difference in price in case of a rise. The vendor is probably entirely ignorant of the purchaser’s ultimate intentions. If this is so the contract cannot be in the nature of a wager, as is dearly laid down in Marten v. Gibbons[95] and Thacker v. Hardy.[96]
(2.) It is essential to a wager-contract that “one party should win and another should lose upon a future uncertain event.... Some transactions, however, on which the parties may win or lose upon a future uncertain event, are not within 8 & 9 Vict., c. 109; for instance, the sale of next year’s apple crop, in which the parties may be losers or winners, but the essential element of a wager-contract is wanting.”[97]
It is probable that the Lord Justice did not mean this to be an exhaustive definition of a wager, as it seems to omit one important requisite, viz., mutuality. |Mutuality necessary.| If a man promises to give his wife a new ball dress if the gold mine pays a 10 per cent. dividend for the current half-year, this would scarcely be a wager, as the wife would not stand to lose anything. That this is the ordinary understanding on the subject is clear from the fact that by the “Rules of Betting” it is no bet unless there is a possibility for each to lose as well as to win. Under the old law, when wagers were enforceable, one party could not have sued the other unless the other would have been able to sue him. In Blaxton v. Pye[98] the plaintiff laid odds of 14 to 8 against a horse to the defendant. By the then law no greater sum than £10 could be recovered on a wager, so that the defendant could not have sued the plaintiff if the horse had won. The horse lost, but held that the plaintiff could not recover the £8 on the ground of want of mutuality.[99]
(3.) It is, however, clear that not every contract which contains the element of mutual promises to pay is a wager. A builder agrees with an owner of land to build a house by a certain date, he to be paid £1,000 on completion; in default, he to pay £100 by way of penalty. This would not seem to be a wager. On the other hand, if A promises to pay B £100 if the house be finished by the time fixed, and B promises to pay £100 if it is not, both A and B being independent of the building contract, this would appear to be a wager. It is submitted that the true test is that in a wager the sole elements of the contract must be made up of the reciprocal promises to pay on the happening of given alternative contingencies.[100] A promises to pay B on the happening of contingency x, B promises to pay A on the happening of contingency y; y, of course, may be negative, such as the non-happening of x. The difference between the two is illustrated by an ordinary bet on a horse race. A backs a horse with B; B is popularly said to “lay against” the horse, i.e., to back the negative contingency of the horse not winning. As a matter of fact, “the layer” backs “the field.”[101] Each event or contingency must, of course, be uncertain, or, at all events, unknown to the parties, that is, it represents a chance, and where the chances are agreed to be uneven the inequality is represented by odds. It must not, however, be supposed that a wager necessarily embodies the backing of conflicting opinions; the parties back their respective chances or contingencies, not their opinions on them, e.g., a man backs a horse for a race at a long price: if the horse goes to a much shorter price, he will very likely hedge by backing the field against him, though feeling certain that he will win. (See Appendix C.)
It is not necessary that the event should be independent of the control of the parties, e.g., two persons agree to run a match for £5 a side.
This criticism certainly seems to suggest the distinction between the two cases above given of agreements with respect to the completion of the building. The first case contains more than mutual promises to pay on contingencies—it is a contract of personal service, an agreement to do something at the request of another. The second case contains no such element; the sole factors of the contract are the mutual promises to pay each other on the happening of their respective events. It is easy to apply this test to such ordinary wagers as bets on horse races, and to the less common cases of wagers on the rise or fall of stocks on difference bargains. (See more fully as to this the chapters on Stock Exchange Transactions.)
(4.) In conjunction with the last proposition a rule may, perhaps, be stated as follows, that it is not the form, but the substance of the contract that is important. Thus, in Hill v. Fox[102] the loser of several bets borrowed £2,000 from one of his creditors, and paid him the bets out of the money. The lender sued to recover the money lent. The Court held that if at the time of the advance there was an “agreement or stipulation” that the bets should be repaid out of the £2,000, then the transaction was merely a colourable evasion for obtaining a security for a betting debt; but that if the borrower were at liberty to do as he pleased with the money, even though the lender hoped that he would be repaid out of the money, then it would be a bonâ fide loan, which could be recovered. So in Rourke v. Short,[103] the plaintiff was about to sell some rags to the defendant, when a dispute arose about the price of a former lot of rags, the plaintiff asserting them to have been of one price, and the defendant said they were sold for more. |Wagers under guise of sales.| They agreed to refer the dispute to M, a wine and spirit merchant, and that whichever party was wrong should pay M for a gallon of brandy, and that if the plaintiff was right the price of the present lot should be 6s. per cwt., but if the defendant was right the price was to be 3s. M decided that the plaintiff was right. Plaintiff tendered the rags to the defendant, but he refused to accept them at 6s., but offered 5s. The plaintiff sued to recover the higher price, and defendant pleaded that it was a wager within the statute. The Court held that the plea was good, as the contract was, both in form and substance, nothing but a wager; it was not like a case of determining the price by the mere ascertainment of the former price. It was not the value of the goods that was to be determined, but the correctness of the parties’ opinions. In the course of argument, Grizewood v. Blaine[104] was quoted. In that case it was held that a contract nominally for the sale of shares, but in reality an agreement for the payment of differences was a wager. But in the present case Lord Campbell observed that the contract was in form a wager, and that it lay on the plaintiff to show that it was in substance something else.
With this case should be compared Crofton v. Colgan.[105] There the agreement was that the defendant should take the plaintiff’s mare in exchange for his own; and that defendant should give plaintiff half the winnings of her first two races, or in case she should be sold before then, defendant should pay plaintiff one-third of what she should be sold for. Held that this was not a wager, but only a means of assessing the price of the mare in certain events.