Agreement by way of wager refers to a type of contract where two parties agree to pay each other a certain amount of money based on the outcome of an event whose result is uncertain. It is also known as a wagering agreement.

In simple terms, it is an agreement where both parties stand to gain or lose money depending on the outcome of a particular event. For instance, two people might agree to place bets on the outcome of a football match, where the winner takes all the money.

However, agreement by way of wager is not recognized by law in many countries, including India. In India, Section 30 of the Indian Contract Act of 1872 states that “Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made.”

The rationale behind this law is that wagering agreements promote gambling, which can lead to addiction and financial ruin. It is also believed that such agreements go against the principle of genuine consent, as the parties involved are not entering into the agreement for any legitimate business purpose.

However, there are some exceptions to this rule. For instance, agreements where the skill of the parties involved plays a significant role, such as a game of chess or a car race, are not considered wagering agreements. Similarly, agreements where the outcome is determined by factors beyond the control of the parties, such as a lottery or a horse race, are also exempt from this rule.

In conclusion, agreement by way of wager is a type of contract where two parties agree to pay each other a certain amount of money based on the outcome of an event whose result is uncertain. However, it is not recognized by law in many countries, including India, due to the belief that it promotes gambling and goes against the principle of genuine consent.