BLS LLB 5 Years Sem 5 Contract I 2022-23 Question Paper with Solutions

Section 2(b) of the Indian Contract Act, 1872: "When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise."

The essentials are that the acceptance must be absolute and unqualified (Section 7(1)), expressed in some usual and reasonable manner unless the proposal prescribes a manner (Section 7(2)), and communicated to the proposer (Sections 3 and 4). It must be given by the person to whom the proposal was made, while the proposal subsists, and with knowledge of it.

Section 8 adds that the performance of the conditions of a proposal is itself an acceptance, which is how a general offer is accepted.

Section 31 of the Indian Contract Act, 1872: "A contingent contract is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen."

Illustration: A contracts to pay B Rs. 10,000 if B's house is burnt. This is a contingent contract.

Essentials: performance depends on a future event; the event must be uncertain; and it must be collateral to the contract, that is incidental to it, and neither the performance promised by either party nor the consideration for the contract.

Contracts of insurance, indemnity and guarantee are the standard examples.

Effect. Section 19A: the contract is voidable at the option of the party whose consent was so caused, and the court may set it aside absolutely or upon such terms as it thinks just.

• (g) the company, where its promoters made a contract before incorporation for its purposes, the contract is warranted by the terms of incorporation, and the company has accepted it and communicated the acceptance;
• (h) the new limited liability partnership after an amalgamation.

The general rule is in the Explanation to Section 17: "Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech."

So silence amounts to fraud in two cases:

1. Where there is a duty to speak. This arises in contracts uberrimae fidei, that is of the utmost good faith, such as insurance, family settlements, marriage and guarantee (see also Section 143); in fiduciary relationships; where a statement is a half truth; where circumstances change after a true statement was made (With v. O'Flanagan, 1936); and on a sale of immovable property, where Section 55(1)(a) of the Transfer of Property Act, 1882, obliges the seller to disclose material defects in the property or title known to him and not discoverable by the buyer with ordinary care.

Rectification is the correction by the court of a written instrument which, through fraud or mutual mistake, does not express the real intention of the parties. It is governed by Section 26 of the Specific Relief Act, 1963.

Section 26(1) allows the relief to be sought in three ways: by a suit for rectification; by a plaintiff claiming it in his pleading in any suit in which a right under the instrument is in issue; or by a defendant asking for it in addition to any other defence. The articles of association of a company are excluded.

Section 26(2): the court may, in its discretion, direct rectification so as to express the real intention, so far as it can be done without prejudice to rights acquired by third persons in good faith and for value.

Section 26(3): a contract may first be rectified and then specifically enforced, if so prayed.

Section 26(4): the relief must be specifically claimed, and the court shall allow an amendment to include the claim.

The doctrine of privity of contract means that only a person who is a party to a contract can sue or be sued upon it. A stranger acquires no rights under it and incurs no liabilities, even if the contract was made for his benefit.

Dunlop Pneumatic Tyre Co. Ltd. v. Selfridge and Co. Ltd. (1915): Lord Haldane said that only a person who is a party to a contract can sue on it. In India, M.C. Chacko v. State Bank of Travancore (1970 SC).

It must be distinguished from privity of consideration, which is not required in India, since Section 2(d) allows consideration to move from "the promisee or any other person": Chinnaya v. Ramayya (1882 Mad).

Exceptions: a beneficiary under a trust or charge on immovable property (Khwaja Muhammad Khan v. Husaini Begum, 1910 PC); a marriage settlement or family arrangement; acknowledgement or estoppel; agency; and covenants running with land (Tulk v. Moxhay, 1848).

For full marks, cover: Article 298 for the capacity and Article 299 for the form, the three mandatory requirements of Article 299(1), the consequence of non compliance with Chatturbhuj and Bhikraj Jaipuria, the relief under Section 70 with B.K. Mondal, Article 299(2) on personal immunity, and the public law duty to act fairly.

The Government may enter into contracts, and when it does it is bound by the Indian Contract Act, 1872, like any other party. But the Constitution imposes a special form, and non compliance is fatal.

Capacity: Article 298

Article 298 of the Constitution of India: the executive power of the Union and of each State extends to carrying on any trade or business, to the acquisition, holding and disposal of property, and to the making of contracts for any purpose.

• Chatturbhuj Vithaldas Jasani v. Moreshwar Parashram (1954 SC): the Supreme Court held that Article 299 is mandatory in form, though it also recognised that a contract not conforming to it may still be ratified and its benefits retained in certain circumstances.
• Bhikraj Jaipuria v. Union of India (1962 SC): contracts for the supply of foodgrains made by a railway officer who was not authorised in the manner required were held void, and the Union was not bound.
• K.P. Chowdhry v. State of Madhya Pradesh (1967 SC): there can be no implied contract with the Government; compliance with Article 299 is essential, and the doctrine of implied contract or ratification cannot be used to get round it.

The relief that remains: Section 70

Where the Government has taken the benefit of goods or services under an agreement void for want of form, the supplier is not without a remedy.

The public law dimension

Even where the Government contracts in its commercial capacity, it is not a private party. Its actions are subject to Article 14, so it must act fairly, reasonably and without arbitrariness, particularly in the award of contracts and tenders. Standard form terms imposed by the State are open to challenge as unconscionable: Central Inland Water Transport Corporation v. Brojo Nath Ganguly (1986 SC); LIC of India v. Consumer Education and Research Centre (1995 SC). Suits by and against the Government are governed by Article 300 and by Section 80 of the Code of Civil Procedure, 1908, which requires two months' prior notice.

Explanation. A trustee of property is a "person interested to deny" a title adverse to the title of someone who is not in existence, and for whom, if in existence, he would be a trustee."

The conditions are therefore:

1. the plaintiff must be entitled to a legal character or to a right as to property;
2. the defendant must be denying, or interested in denying, that character or right;
3. the plaintiff must not be able to seek further relief and omit to do so; and
4. the court must think it right to exercise its discretion.

"Legal character" means a person's status, for example that he is a legitimate son, an adopted son, a citizen, a member of a caste or community, the holder of an office, married or unmarried, a major or a minor.

Section 35. Effect of declaration

"A declaration made under this Chapter is binding only on the parties to the suit, persons claiming through them respectively, and, where any of the parties are trustees, on the persons for whom, if in existence at the date of the declaration, such parties would be trustees."

For full marks, cover: Section 28 in both its clauses, the three exceptions in full, the distinction between absolute and partial restrictions, the 1997 and 2013 amendments, and the relation to Section 23.

Section 28 of the Indian Contract Act, 1872. Agreements in restraint of legal proceedings void.

"Every agreement:

(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or

(b) which extinguishes the rights of any party thereto, or discharges any party thereto from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights,

is void to that extent."

Exception 3. Saving of a guarantee agreement of a bank or a financial institution. Nor shall the section render illegal a contract in writing by which any bank or financial institution stipulates a term in a guarantee or any other agreement or a memorandum of understanding which in effect extinguishes the rights or discharges any party thereto from any liability under or in respect of such guarantee or agreement on the expiry of a specified period which is not less than one year from the date of occurrence or non occurrence of the specified event for extinguishment or discharge of such party from the liability.

What is and is not caught

Void:

• a clause providing that neither party shall approach any court;
• a clause shortening the period of limitation, for example requiring suit within six months;
• a clause extinguishing the right or the liability after a fixed period, which is what clause (b) was inserted to catch.

Not void:

• an arbitration clause, under Exceptions 1 and 2;

Relation to Section 23

Independently of Section 28, an agreement to oust the jurisdiction of all courts is opposed to public policy and therefore void under Section 23, since the administration of justice is a matter of public and not merely private concern. Parties cannot by agreement confer jurisdiction on a court that does not have it, nor take away the jurisdiction a court has by law.

Section 61. Application where neither party appropriates. Where neither party appropriates, the payment is applied to the discharge of the debts in order of time, whether or not barred by limitation; and if the debts are of equal standing, the payment is applied proportionately.

Clayton's Case, properly Devaynes v. Noble (1816), lays down the rule for a single running or current account, such as a bank account. Where there is one blended account, payments in are appropriated to the debts in the order in which the debts were incurred, so that the first item on the debit side is discharged by the first item on the credit side. This is "first in, first out".

Illustration. A owes his banker Rs. 10,000 drawn on 1 January, Rs. 15,000 drawn on 1 February and Rs. 20,000 drawn on 1 March, all on one running account. A pays in Rs. 12,000 on 1 April without appropriating it. Under Clayton's rule the Rs. 10,000 of 1 January is wiped out entirely and Rs. 2,000 goes towards the February advance.

Limits. The rule applies only where there is one entire running account; it does not apply where the accounts are kept separate, and it may be displaced by agreement or by a contrary intention, because it is a rule of presumed intention and not of law.

The luggage of Mr 'X' was lost during the voyage. (a) Explain reasonable notice of terms as per standard form of contract.

(b) Will the company be liable in the present situation?

For full marks, cover: the rule of reasonable notice with the four English cases, then apply Henderson v. Stevenson, which is this exact fact pattern, and conclude that the company is liable.

This problem is Henderson v. Stevenson (1875) with a cruise in place of a steamer. Naming it is worth a mark on its own.

1. The notice must be given before or at the time of contracting, not afterwards. Olley v. Marlborough Court (1949): a notice in a hotel bedroom disclaiming liability for stolen property was ineffective, because the contract had been concluded at the reception desk.
2. A term hidden on the back, with nothing on the face to point to it, is not reasonable notice. Henderson v. Stevenson (1875).
3. The document must be one a reasonable person would expect to contain contractual terms. Chapelton v. Barry Urban District Council (1940): a deck chair ticket was a mere receipt.
4. The more onerous the term, the greater the notice required. Thornton v. Shoe Lane Parking (1971), where Lord Denning said such a clause would need to be printed in red ink with a red hand pointing to it.
5. Ambiguity is construed against the party who drafted the clause, contra proferentem.
6. An unfair and unreasonable term may be struck down altogether where the parties are of unequal bargaining power: Central Inland Water Transport Corporation v. Brojo Nath Ganguly (1986 SC).

• The company therefore did not do what was reasonably sufficient to give notice of the condition, and fails the third limb of Parker.
• The clause accordingly never became part of the contract, and there is nothing to exclude the company's liability.

Step 3. Consequence.

• The company is liable for the loss of the luggage as a bailee. Having received the luggage for carriage, it owes the duties of a bailee under Sections 151 and 152 of the Indian Contract Act, to take as much care of the goods as a person of ordinary prudence would take of his own goods of the same bulk, quality and value, and it is liable for loss caused by its negligence.
• X may recover damages under Section 73, being the loss which naturally arose in the usual course of things from the breach.
• X may also complain to a consumer commission under the Consumer Protection Act, 2019, for deficiency in service, which in practice is the faster route.

Step 4. Two arguments the company might raise, and why they fail.

For full marks, cover: the definition and the 2018 Amendment, then that a painting is an article for which damages are inadequate, Section 10 and Section 8 of the Specific Relief Act, and the bars that do not apply.

(a) What specific performance means

Specific performance is an equitable remedy by which the court directs a party to a contract to perform it according to its terms, instead of leaving the aggrieved party to a claim for damages. It is governed by Chapter II of the Specific Relief Act, 1963.

Its justification is that damages are not always an adequate substitute. Money will buy another consignment of wheat; it will not buy the particular plot of land or the particular painting.

Step 2. Under the present Section 10, enforcement is the rule.

Since 2018, Q does not have to establish that damages are inadequate as a threshold. The court shall enforce the contract unless one of the three named provisions bars it.

Step 3. None of the bars applies.

• Section 14(a): Q has not obtained substituted performance, which in any case he could not, since no equivalent painting can be procured.
• Section 14(b): selling a painting is a single act, not a continuous duty requiring supervision.
• Section 14(c): the contract does not depend on the personal qualifications of P. He is a seller, not an artist commissioned to paint.
• Section 14(d): a contract of sale is not determinable in its nature.
• Section 16: Q must prove he has performed, or has always been ready and willing to perform, the essential terms on his part, that is that he is ready with the price, and must aver it in his plaint.
• Section 11(2) is irrelevant, no trust being involved.

Conclusion: Q should sue for specific performance under Section 10, and in the alternative for delivery of the painting under Section 8, pleading readiness and willingness throughout and claiming compensation in the alternative under Section 21.

Section 6(1) of the Specific Relief Act, 1963: "If any person is dispossessed without his consent of immovable property otherwise than in due course of law, he or any person claiming through him may, by suit, recover possession thereof, notwithstanding any other title that may be set up in such suit."

The words "notwithstanding any other title" are the whole point. In a Section 6 suit the only questions are whether the plaintiff was in possession and whether he was dispossessed otherwise than in due course of law. D's ownership would be irrelevant and could not even be tried.

Step 2. So forcible eviction would reverse the parties' positions. S, having been physically thrown out, could sue D under Section 6 within six months, and would succeed on proof of possession alone. D would be ordered to restore possession, and would then have to bring a fresh suit on title under Section 5 to get it back lawfully. He would have lost time, costs and the moral advantage.

Step 3. Forcible entry may also attract criminal liability, for criminal trespass, house trespass and criminal intimidation, and D may be met with proceedings under Section 145 of the Code of Criminal Procedure, 1973, now Section 164 of the Bharatiya Nagarik Suraksha Sanhita, 2023, which empowers a magistrate to preserve possession where a dispute is likely to cause a breach of the peace.

• No appeal or review lies from the decree (Section 6(3)).
• This is the faster route, and D should take it if he acts promptly.

Route 2. Section 5, the ordinary suit on title. "A person entitled to the possession of specific immovable property may recover it in the manner provided by the Code of Civil Procedure, 1908."

• D sues as owner, proving his title and S's want of any right to remain.
• Limitation: twelve years from the date the possession became adverse, under Article 65 of the Limitation Act, 1963.
• The decree settles title and is appealable.
• Section 6(4) expressly preserves this route, so D may use it even if the six months have run out.

Ancillary relief in either suit:

• a temporary injunction under Order XXXIX, Rules 1 and 2, of the Code of Civil Procedure, restraining S from parting with possession, inducting anyone else, or damaging the flat during the suit;

(b) What do you mean by discharge of Contract? State various modes of Discharge of Contract.

For full marks, cover: that the answer turns on whether the store had already accepted, Sections 5 and 6 if it had not, Section 62 if it had, and then the six modes of discharge.

The point on which everything turns

The facts do not say whether the General Store had accepted the order for 5 kilograms before A telephoned again. That single fact decides the case, so a complete answer takes both alternatives.

(a) What happens to the earlier order of 5 kilograms

Alternative A. If the store had not yet accepted the order.

Either way the store's consent is essential. If the store agreed, "the original contract need not be performed" (Section 62), and the 5 kilogram contract is discharged. If the store refused, that contract stands, and A's refusal to take delivery would be a breach, for which the store could claim compensation under Section 73, measured by the difference between the contract price and the market price.

In practice Alternative A is the likelier reading, since the call was made "shortly after" the order and before any delivery, and shop orders of this kind are ordinarily accepted by dispatch.

The second communication is, on either view, a fresh proposal, binding only when the store signifies its assent under Section 2(b) or accepts by performing the conditions of the proposal under Section 8, that is by dispatching 7 kilograms. It is not a counter offer in the Hyde v. Wrench sense, because it comes from the same party who made the original proposal; a counter offer is a reply by the offeree that varies the terms.

(b) Discharge of contract, and its modes

Discharge of a contract means the termination of the contractual relation, so that the parties are freed from the obligations they undertook. There are six modes.

5. By operation of law. Death where personal skill is essential; insolvency; merger; material alteration of a written contract by one party without the other's consent.

6. By breach (Sections 39, 73 to 75). Actual and anticipatory breach. Section 39 entitles the promisee to put an end to the contract where the other has refused to perform or disabled himself from performing in entirety. Hochster v. De La Tour (1853) permits an immediate suit.

Remedies for breach: rescission with compensation under Section 75; damages under Sections 73 and 74; quantum meruit; and specific performance or injunction under the Specific Relief Act, 1963.

For full marks, cover: Sections 5 and 6 in full, the comparison table, the case law on settled possession and self help, and the injunctions that protect possession.

The Specific Relief Act, 1963, deals with the recovery of possession of immovable property in Sections 5 and 6, in Chapter I of Part II. The scheme offers two routes, one founded on title and one on possession.

Section 5. Recovery of specific immovable property

"A person entitled to the possession of specific immovable property may recover it in the manner provided by the Code of Civil Procedure, 1908."

Features:

• The suit is founded on title. The plaintiff must prove that he is entitled to possession, ordinarily as owner, and he recovers on the strength of his own title, not on the weakness of the defendant's.
• It is an ordinary suit governed by the Code of Civil Procedure, and the decree is appealable.

• The suit is possessory, not proprietary. The only issues are whether the plaintiff was in possession and whether he was dispossessed otherwise than in due course of law.
• Title is no defence at all, however good the defendant's title.
• The proceeding is summary, which is the reason for the six month limitation and the bar on appeal and review. The only recourse against the decree is a writ petition or revision, on limited grounds.
• The possession protected is settled possession, not the momentary possession of a trespasser who has just entered.
• Section 6(4) preserves the title suit, so the two are complementary and not alternatives.

The two compared

• Lallu Yeshwant Singh v. Rao Jagdish Singh (1968 SC): a landlord who forcibly evicted a tenant whose tenancy had been terminated was held liable to restore possession. The Supreme Court affirmed that a person in settled possession cannot be dispossessed even by the true owner except by due process of law, and that the rule applies to the Government as much as to a private landlord.
• Krishna Ram Mahale v. Shobha Venkat Rao (1989 SC): it is well settled that where a person is in settled possession of property, even on the assumption that he had no right to remain, he cannot be dispossessed by the owner except by recourse to law.
• Rame Gowda v. M. Varadappa Naidu (2004 SC): the Court explained the concept of settled possession, holding that a person in settled possession may protect it even against the rightful owner, while a trespasser in the process of entering may be resisted; the possession must be effective, undisturbed and to the knowledge of the owner, or with his acquiescence.
• Poona Ram v. Moti Ram (2019 SC) restated the position: a person in settled possession is protected, but a plaintiff who is not in settled possession cannot invoke the principle against a rightful owner.

For full marks, cover: the meaning of breach, actual and anticipatory with Section 39 and Hochster v. De La Tour, then each of the five remedies with its sections and cases, giving the most space to damages under Sections 73 and 74.

What breach of contract means

A breach of contract occurs when a party, without lawful excuse, fails or refuses to perform what he has promised, performs defectively, or disables himself from performing.

The duty to perform is imposed by Section 37: the parties must either perform, or offer to perform, their respective promises, unless performance is dispensed with or excused. A failure that is excused, for example by frustration under Section 56 or by the promisee's refusal of a valid tender under Section 38, is not a breach.

Kinds of breach

1. Actual breach, occurring when performance is due, or during performance.

The remedies

1. Rescission of the contract (Sections 39 and 75). The aggrieved party may put an end to the contract and is absolved from performing his own side. Section 75: "A person who rightfully rescinds a contract is entitled to compensation for any damage which he has sustained through the non fulfilment of the contract." He may also sue under Section 27 of the Specific Relief Act, 1963, to have the rescission adjudged.

2. Damages (Sections 73 and 74).

Section 73: compensation for loss which naturally arose in the usual course of things from the breach, or which the parties knew when they made the contract to be likely to result from it; and no compensation for remote and indirect loss. This codifies Hadley v. Baxendale (1854) and its two rules.

Kinds of damages:

• Ordinary or general damages, arising naturally. In a sale of goods, the difference between the contract price and the market price at the date of breach.

Duty to mitigate. The Explanation to Section 73 requires the court to take into account the means which existed of remedying the inconvenience. The injured party must take reasonable steps to minimise his loss, cannot recover for a loss he could have avoided, and may recover the reasonable expenses of mitigation.

3. Suit upon quantum meruit. Quantum meruit means "as much as is earned", a claim for reasonable remuneration for work actually done, brought outside the contract. It lies where the contract is discovered to be void or becomes void (Section 65), where the other party prevents completion or breaches the contract, under a divisible contract, and where an express contract is abandoned by consent. Section 70 supports it where a person lawfully does something for another, not intending to do so gratuitously, and the other enjoys the benefit. Craven-Ellis v. Canons Ltd. (1936).

For full marks, cover: Section 2(d) and Currie v. Misa, the essentials with their cases, the rule in Section 25 and the maxim, then every exception with its conditions and case, and close with adequacy and privity.

Definition

Section 2(d) of the Indian Contract Act, 1872: "When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise."

Currie v. Misa (1875): "some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other." Sir Frederick Pollock's shorter formulation is that consideration is "the price for which the promise of the other is bought".

Essentials, with their cases

The rule

Section 25 opens: "An agreement made without consideration is void", subject to the exceptions in that section. The maxim is ex nudo pacto non oritur actio, out of a bare promise no action arises. Section 10 carries the same requirement, listing "a lawful consideration" among the essentials of a contract.

The exceptions

In Section 25 itself:

1. Natural love and affection. Section 25(1). Valid if the agreement is in writing, registered, made on account of natural love and affection, and between parties standing in a near relation to each other. All four conditions are necessary.

• Rajlukhy Dabee v. Bhootnath Mookerjee: a registered agreement by a husband to pay maintenance to his wife, from whom he lived separately after quarrels, was unenforceable, because the document showed no natural love and affection.

7. Remission. Section 63: a promisee may dispense with or remit performance, extend the time, or accept any satisfaction he thinks fit. No consideration is required, a deliberate departure from Foakes v. Beer.

8. Gratuitous bailment. Section 148.

Recognised by the courts:

9. Charitable subscriptions, where the promisee has, on the faith of the promise, undertaken a liability. Kedar Nath v. Gorie Mohamed (1886 Cal), where municipal commissioners had engaged a contractor on the faith of the subscriptions; contrast Abdul Aziz v. Masum Ali (1914 All), where nothing had been done.

Under other statutes:

10. A negotiable instrument is presumed to have been made for consideration under Section 118 of the Negotiable Instruments Act, 1881.

Two riders

Adequacy. Explanation 2 to Section 25: an agreement is not void merely because the consideration is inadequate, but the inadequacy may be taken into account in deciding whether the promisor's consent was freely given.

For full marks, cover: the definition and essentials, Section 30 in both limbs with both exceptions, the effect on collateral transactions with Gherulal Parakh and the Maharashtra position, the stakeholder rule, and the distinctions from a contingent contract, insurance and a speculative transaction.

Definition and essentials

A wager is a promise to pay money or money's worth on the determination of an uncertain event, where each party stands to win or lose according to how it turns out, and neither party has any interest in the event other than the sum he will win or lose.

The classical definition is Hawkins J.'s in Carlill v. Carbolic Smoke Ball Co. (1892): a contract by which two persons, professing to hold opposite views touching the issue of a future uncertain event, mutually agree that, dependent on the determination of that event, one shall win from the other a sum of money, neither of the contracting parties having any other interest in that contract than the sum or stake he will so win or lose, there being no other real consideration for the making of such contract by either of the parties.

Exception 1. Horse racing. The section does not render unlawful "a subscription or contribution, or agreement to subscribe or contribute, made or entered into for or toward any plate, prize or sum of money, of the value or amount of five hundred rupees or upwards, to be awarded to the winner or winners of any horse race".

Exception 2. Lotteries. Nothing in the section "shall be deemed to legalise any transaction connected with horse racing to which the provisions of section 294A of the Indian Penal Code apply", and the section does not affect any law relating to lotteries.

Effect

1. The agreement is void, and no suit lies to recover anything won.
2. The stakeholder rule. The second limb bars a suit to recover anything entrusted to a stakeholder to abide the result. But a depositor may recover his own stake from the stakeholder if he demands it back before it has been paid over to the winner, because as between depositor and stakeholder there is no wager at all, only a revocable authority. Timing decides it.

Every wagering agreement is contingent in form, but not every contingent contract is a wager. The difference lies entirely in interest.

Distinguished from insurance

A contract of insurance is not a wager, although both depend on an uncertain event.

• The insured has an insurable interest in the subject matter; a wagerer has none.
• Insurance is a contract of indemnity, restoring an actual loss; a wager creates a profit where no loss existed.
• Insurance rests on calculated risk and the law of averages; a wager is pure chance.