Payola is very common in the world. As much as you want to rant against it and how you want to complain agst bro X-TREME bro, there will be always some other kids who are hungrier than you to take up his offer.
Despite his status that he's with Gas Haus, we donch know what kinda deal he's signing with Gas Haus.
Anyhow, a contract is signed between 2 person and he doesn't need to register himself as a company or have a company license. Firstly, if your friend doesn't pay up, no worries about the cops though. It's a civil case, not a criminal case. The cops wouldn't be able to do anything to him.
But if X-Treme takes it to the subordinate courts under the small claims tribunal act with the contract, your friend will have to pay for X-treme's damages and potentially the legal fees incurred by X-treme to get that amount from your friend.
That's the reality of a contract lah. He signed it. Unless you've got some really good grounds to contest it, it still stands. No judge will take the reason: "We are students! How can he expect us to sell 40 tickets at $10 each!? We can't sell and we won't pay!"
JSUK lah...
Anyway, irregardless of what you and your friends are going to do...
I wish you all the best in your future endeavours!