Article.

"That’s the Ticket!" The puzzling problem in the palm of your hand.

29/06/2020

At a glance

Millions of lottery tickets are purchased every day. It is the simplest of transactions, and quite often accompanied by something as banal as a newspaper or a bar of chocolate. But as with many things in the world of gambling, lottery tickets, what they are, and what they represent, are more complicated than they might first appear. Carl Rohsler and Kasia Reda from our Gambling team discuss some of the legal complexities of the apparently simple lottery ticket.

For most people, a lottery ticket is just a “thing” – an item which they buy along with other groceries. Some might say, if pushed, that a ticket was a contractual document, by which the agreement to participate in a lottery is present – forming the proof of a contract between ticket purchaser and lottery provider. In consideration for payment for a lottery ticket, the purchaser receives the chance to win a prize.

Tickets have certainly played their part in the canon of English case law on contracts. They crop up in the field of transport, car parks and with their own complexities, as entry passes for sporting and cultural events. Tickets have surfaced numerous times in the reassessment of the doctrine of incorporation of contractual terms. In the ‘leading’ ticket case, Thornton v Shoe Lane Parking Ltd, the decision turned on the fact that a term on a car park ticket (which stated that the contract of parking was subject to the terms and conditions which were displayed inside the car park) had not been incorporated into the contract as the parking agreement had already been concluded when the ticket came out of the ticket machine. In another case, the courts held that terms and conditions for the hire of deckchairs, which were printed on the back of the ticket, were not enforceable as the ticket was simply a receipt for the money paid for the hire of the chair.

In the case of a lottery ticket most of the contractual terms are actually recorded elsewhere (usually in online terms incorporated by reference) but there are also some crucial details recorded on the ticket which are unique to the transaction,  namely the numbers selected, a reference code, and that the price of the ticket has been paid.

The view of “ticket as contractual jigsaw piece” is a safe starting point – and we know now, at least, that gambling contracts such as bets and participating in a lottery are legally binding contracts, because s.335 of the Gambling Act 2005 tells us so explicitly. However, that does itself raise another interesting point in relation to lottery tickets purchased for lotteries in jurisdictions in which those contracts are not in fact legally binding contracts at all. What is a lottery ticket if the contract which it evidences is unenforceable? Answer: a piece of paper.

If a lottery ticket evidences a contract, then who may enforce it? Presumably only the parties, and the parties should be clear enough – the lottery operator and the purchaser of the ticket. Indeed, the National Lottery terms and conditions seems to make that point explicit by excluding the effect of the Contracts (Rights of Third Parties) Act 1999.

However, matters then become a little blurred:  if you buy a lottery ticket in a retail outlet, your name as a contracting party is not recorded anywhere.  Possession of the ticket is the only proof of entry into the draw. Even if a winning ticket is claimed, it may not be the purchaser making the claim. According at least to the official rules provided by the National Lottery, if someone finds a winning ticket, has informed the relevant authorities that they found the ticket and have tried to return it to the original purchaser, they will normally have an entitlement to claim the prize using the winning ticket if the original purchaser does not come forward. So, when scrutinised, a ticket is no longer merely evidence of a contract, it has now also become a potential unilateral contract between the lottery provider and whoever is lucky enough to be holding the winning ticket. Indeed, the lottery ticket has become something akin to a “bearer bond” rather than a contract, in that the right to claim the prize is owned by the ticket holder rather than any registered owner. In some ways this is no different to the “token” nature of other tickets: if I buy my friend two tickets to the theatre as a birthday present, then the benefit of the contract to enter the theatre and see the show essentially belongs to the possessor of the ticket at the time of entry. But what if I buy my ten year old son a winning ticket in the lottery. Does he have a right to collect the prize even if he does not have the right to purchase the ticket in the first place?

Why is this relevant? What is so important about defining whether a lottery ticket is a contract document, or constitutes a more general legal right? The answer ends up actually being quite important for lottery syndicates and also for those involved in the secondary lottery market.

This has developed extensively over the last 10 years. Operators usually offer either fixed odds bets on the result of a lottery, or a ‘lottery messenger service’ (LMS).

Lottery betting operators offer fixed odds bets on the outcome of a third party lottery and then hedge that risk either by an insurance product or by buying tickets in the lottery concerned in order to balance the risk of a big win. In the latter case, the betting operator is actually the beneficiary of the contract with the lottery organiser. Lottery companies may not particularly want to encourage these lottery betting operators which, although they buy large quantities of tickets, are also seen as somewhat “parasitic” on the lottery itself. So many lottery terms and conditions seek to prohibit sale (and seek to refuse prizes) to those who purchase tickets “for commercial purposes”.

An LMS service is somewhat more complicated, since the operator is buying a ticket “on behalf of” the end purchaser. By way of background, many lottery providers allow only citizens of, or those physically present in, the country in which the lottery is hosted to take part. So those who wish to buy tickets in lotteries are notionally prevented from doing so unless they are such residents. LMS providers are designed to satisfy that need in the market.

So the question arises: is the LMS provider (i) purchasing a ticket for the end player and holding that ticket as an agent, or is the operator the trustee of the ticket as a piece of property? Or (ii) is the situation more akin to a contractual relationship, in which the operator has a contractual right to collect the winnings from the lottery provider and in turn an obligation to pay those winnings as a contractual debt to the end player?

It might appear that the difference is a matter of form only – but in cases where the lottery operator refuses to pay out to the LMS provider, or where the LMS provider goes into liquidation while holding winning tickets, such questions might become of very serious practical importance.

Another area in which these difficulties arise is in relation to lottery syndicates. There are basically two forms of syndicate – the commercial services provided by operators where tickets are purchased and winnings pooled between a large number of players, with the organiser taking a commercial cut, and those more “amateur” arrangements where a group of co-workers decide to club together to buy tickets and share their winnings. In the former case, one is again confronted by the dilemma of whether the arrangement is based upon the ticket and any winnings being an item held effectively on trust for the players, or whether the players merely ask the organiser to purchase a ticket, collect the winnings and owe any such winnings as a contractual debt to the participants in the scheme.

For more informal syndicates, where one individual buys tickets on behalf of friends or colleagues,  is the organiser acting as an agent for the other members, and buying them shares in the ticket, or does the syndicate organiser own the ticket and have a contractual obligation to pay out winnings to the other members? Given the fluidity of the legal position, and the general vagueness of the contracts in this field, it is surprising that there are not more conflicts as between syndicate members.  Perhaps the lack of conflict arises from the lack of large winners.

One thing is certain, a survey of the terms and conditions of various syndicate operators, does not provide a very clear picture – and of course it may be advantageous for all that the position remains somewhat opaque. But the next time you buy a scratch card, ask yourself whether what you are holding is merely evidence of a contract, or alternatively an equivalent of what the Governor of the Bank of England hands out: a ticket which guarantees the bearer the right to claim a certain value.

(Note: This article was written by Carl Rohsler and Kasia Reda in our Gambling team)

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Carl Rohsler

Carl Rohsler Partner, Head of Commercial, IP and Technology

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