CONDITIONAL TRANSFERS (25-34) Flashcards
[s 25.1] Conditional Transfer (Section 25
Property may be transferred by one person to another absolutely or conditionally. In absolute transfers, interest in the property is immediately vested in the transferee because nothing is to be performed by his side.
Whereas in a conditional transfer, as the very name suggests, certain conditions are attached which are to be fulfilled for the transfer and vesting of interest in the transferee.
These conditions may be of three types:
(i) Conditions Precedent
(ii) Conditions Subsequent
(iii) Conditions Collateral
[s 25.1.1] Condition Precedent
A condition which is prior to the transfer is known as condition precedent. Where the terms of a transfer of property impose a condition to be fulfilled before a person taken interest in the property, the condition is a condition precedent. For example, where A makes a gift of his house to B provided B marries C.
This is a condition precedent because unless and until B marries C (condition fulfils) the property will not be transferred to him.
[s 25.1.2] Condition Subsequent
The condition which is to be fulfilled after the transfer of property has already taken place is known as condition subsequent. Where a transfer of property is subject to a condition subsequent the interest which has already been vested in the transferee is affected by fulfilment or non-fulfilment of that condition.
For example, A transfers his land to B on the condition that within 2 years of the date of transfer B will go to a foreign country for higher studies. Here if B does not go for higher studies to a foreign country within 2 years of date of transfer his interest in the land will cease.
[s 25.1.3] Collateral Condition
The condition which is to be fulfilled simultaneously with the transfer is known as collateral condition. Such a condition is to be performed side by side the operation of the transfer.
For example, A leases his house to B so long as B resides in the house of A, this condition is collateral. The lease will remain vested in B as long as he will be residing in that house.
According to section 25, an interest created on a transfer of property and dependent
upon a condition fails under the following conditions:
(i) if the fulfilment of the condition is impossible, or
(ii) is forbidden by law, or
(iii) is of such a nature that, if permitted, it would defeat the provisions of any law, or
(iv) is fraudulent, or
(v) involves or implies injury to the person or property of another, or
(vi) Court regards it immoral or opposed to public policy.
[s 26.1] Condition Precedent (Section 26)
Condition precedent means the condition which is to be performed before the transfer takes place. The general rule regarding this is that where a transfer is made on a condition precedent, the transfer fails unless the condition is first fulfilled. The section
says that even if the condition is substantially complied with the condition will be deemed to have been fulfilled.
The characteristics of a condition precedent may be summarized as follows:—
(i) A condition precedent is one which must happen before the estate can vest.
(ii) Where the condition is precedent, the estate does not vest in the transferee until the condition is performed.
(iii) A condition precedent is fulfilled if it is substantially complied with.
(iv) Where the condition precedent becomes impossible of performance, or is immoral or opposed to public policy, or fraudulent, the transfer will be void.
[s 27.1] Rule of Acceleration (Section 27)
Section 27 of the Transfer of Property Act, 1882, outlines the rules for conditional transfers. It states that if a property is transferred to one person with a condition, and that condition fails, a subsequent transfer can occur to another person. The validity of the subsequent transfer depends on the initial condition being lawful; if not, the subsequent transfer fails as well. For example, if A transfers property to B on the condition that B transfers another item to C, and B fails to do so, the property can then be transferred to D
[s 28.1] Conditional Limitation (Section 28)
This section deals with ulterior transfers which are conditional on the happening or non-happening of a specified event. The section says that in case of a transfer of property an interest may be created in favour of a person with condition that—
(i) a specified uncertain event shall happen, or
(ii) a specified uncertain event shall not happen,
For example, if A transfers Rs 1,00,000 to B with a condition that he will join the army within 3 years from the date of transfer and if he fails to do so within the specified period, the money shall go to C. Now, if B does not join the army within three years from
the date of transfer or he fails to do so at all, the money will go to C.
A transfer which is absolute in the first instance may be subjected to a condition that it shall be divested on the happening of a contingency, such a condition is called a condition subsequent. The difference between a condition subsequent and ulterior transfer is that in the case of happening of a contingency the interest created does not cease but it passes to another person.
It is not necessary that the interest created should be an absolute interest in the property. A contingent interest or life interest may be created subject to a condition that on the happening of a specified uncertain event, it shall pass to another person. It is
necessary that the condition imposed must be a part of the transfer and must be imposed at the time of making the transfer.
A conditional limitation is a condition of defeasance, which terminates the interest of one person and invests that in another person. If an estate is given to a person (named donee) in terms which confers an
absolute estate, and then a further interest is given merely after or on termination of that person’s interest and not in defeasance of it, the further interest will be void for repugnancy
The ulterior transfers or conditional limitations are subject to the rule contained in some sections.
(i) Section 10—A transfers his land to B without the power of alienation, in case of B’s death without issue, to C without power of alienation. The restriction was held to be void in both the cases.
(ii) Section 12—A transfers his land to B and in case B becomes insolvent to C. B becomes insolvent. The condition is void. The property will not vest in C but in
Official Receiver or Official Assignee appointed under the insolvency laws.
(iii) Section 21—A transfers his land to B and in case of B’s death without issue, to C. C has contingent interest in the property which will be vested if B dies without
issue.
(iv) Section 22—A transfers his land to B and on the death of B to such of the children of C as shall attain the age of 18 years. Here all the children who are
alive at the death of B have an interest, which will vest when they will attain the age of 18.
(v) Section 23—A transfers his land to B for life and then to C, if C goes to England. C does not go to England until a year after B’s death. The interest of C fails.
(vi) Section 24—A transfers his land to B and in case B dies without issue to the sons of C or the survivor of them. The sons of C who survive B take the land.
(vii) Section 25—A transfers his land to B for life on the condition that he murders C and if B will die without issue the land will be transferred to D. Here the
interests of both B and D fail.
[s 29.1] Condition Subsequent
This section says that an ulterior disposition of the kind contemplated by section 28 cannot take effect unless the condition is strictly fulfilled. The general rule of law is that conditions subsequent which are intended to defeat vested interests are to be construed strictly.
The law does not favour the divesting of an estate which has vested as much as it favours vesting of the estate. Therefore, the condition divesting the
estate must be strictly fulfilled. In comparison to condition subsequent, the condition precedent under section 26 is deemed to have been fulfilled even if it is substantially complied with.
If the interest has become vested, it cannot be taken away except with clear words without any ambiguity. Where a Hindu widow was authorized to adopt a son with a direction that if the first adopted son died before the age of 20 years, she was to adopt
a second child to take the place of first adopted son, it was held that in order to apply this condition, the clause must contain express words or words with necessary implication of a gift over to a definite person or persons.
The implication of a gift over to the second adopted son was not sufficient to prevent the widow of the first
adopted son from inheriting her husband’s share.
If there is any ambiguity in the condition subsequent, it will be read in the sense most favourable to the vested interest. Thus, a gift to A for life and then to his children with a gift over in the event of A’s death without leaving children was construed as a gift over
in the event of A’s death without having had a child.
[s 30.1] Subsequent Interest Invalid
This section deals with the effect of an invalid ulterior disposition on the prior one. It says that if ulterior disposition is invalid, the prior disposition is not affected by invalidity of the subsequent disposition.
In comparison to this, section 16 provides that
if a prior interest is invalid, the subsequent interest depending upon the prior interest also fails. However, here if subsequent interest is not valid the prior interest will not be rendered invalid.
s 31.1] Condition Subsequent (Section 31)
This section says that subject to the provisions of section 12, an interest may be created on a transfer of property with a superadded condition that interest shall cease to exist—
(i) in case a specified uncertain event shall happen, or
(ii) in case a specified uncertain event shall not happen.
Section 12 to which the provisions of this section are subjected deals with the conditions making interest determinable on insolvency or attempted alienation.
The condition referred to in this section is a condition subsequent which terminates an interest and reverts it in the grantor. It is not a conditional limitation which creates an interest in a third person.
The condition subsequent which operates to terminate the interest must be a valid condition. If it is a void condition, the interest will not revert in the grantor.
The event on the happening or non-happening of which the interest is terminated must be a definite and specific event. For example, where a lease deed
provided that the lease shall stand cancelled if the lessee takes upon “any other business or manufacture of any other kind” without the written consent of the landlord, it was held that the condition was vague and the transferee was not bound by it.
[s 32.1] Invalid Condition Subsequent (Section 32)
There are many grounds in which conditions subsequent may be invalid.
(i) Where a condition subsequent is vague and uncertain, and incapable of giving a definite meaning, the condition becomes void.
(ii) Where the condition subsequent is incapable of performance i.e., it cannot be performed, the condition subsequent is held to be a void condition.
(iii) Where a condition subsequent is opposed to public policy, it is an invalid condition.
(iv) Where a condition subsequent is immoral, it will be a void condition.
[s 33.1] Time for Performance (Section 33)
This section deals with a condition where no fixed time is given for the performance of a condition subsequent. This section says that when no time is fixed for performance of a condition subsequent but the person, who has to perform the condition and who is to take interest created, does some act by which the condition becomes impossible to perform or its performance is permanently postponed, the condition subsequent is broken.
[s 34.2] Difference between Condition Precedent and Condition Subsequent
- Condition precedent precedes the vesting, i.e., the condition comes before the creation of the interest.
Condition subsequent follows the vesting, i.e., interest is created before the condition can operate. - In condition precedent, vesting is postponed till the condition is performed.
In condition subsequent, vesting completes before fulfilment of the condition. - In condition precedent, interest which has been vested once can never be divested by reason of non-fulfilment of the condition.
In condition subsequent, interest, even though vested, is liable to be divested due to non-fulfilment of the condition. - Condition precedent affects the acquisition of an estate.
Condition subsequent affects the retention of the estate. - In condition precedent, if the condition is impossible to perform, immoral or opposed to public policy, the transfer will be void.
In condition subsequent, the transfer becomes absolute and such a condition is ignored. - In condition precedent, the condition must be valid in law only then the interest can be vested.
