EXCHANGE(118-122) Flashcards
Essentials of an Exchange
(i) There must be a minimum of two parties and two properties, one each belonging to each of them;
(ii) There has to be a mutual transfer of these properties—i.e., A transferring his property to B, and B in turn transferring his property to A-
In exchange there is transfer of ownership of one thing for the ownership of some other thing.
Transfer of ownership for consideration of money is called sale whereas **without consideration, it is called gift. **
Therefore, where a property is changed for another property, it is called exchange.
Mutual Exchange
The term “mutually” signifies that the parties must be same, and two things are exchanged. For instance, A transfers his property to B and B transfers his own property in exchange to A.
If the transfer is only from the side of one of the parties, it is not an exchange.
A transfer by a husband to a wife in discharge of her claim to maintenance is not an exchange, as the wife does not transfer ownership in anything.
Object of Exchange Must be Lawful
The object of exchange must not be unlawful. Exchange is primarily a contract, and if
the object is illegal or aims at defeating the provisions of law, it would be invalid.
A deed of exchange was executed to compromise criminal proceedings between the parties. The agreement between them stated, that till the proceedings are compromised, the deed of exchange could not be taken from the Registrar’s office.
The court held that in view of section 23 of the Indian Contract Act, 1872, the exchange was invalid.
Sale and Exchange
The TP Act has kept both sale and exchange on the same footing as far as the liabilities of both the parties are concerned.
The methods and formalities for executing a sale and an exchange are also similar. Yet, the two are different in two fundamental aspects.
These two primary differences between an exchange and a sale are as follows:
(i) In a sale, generally only one property is exchanged for money but in an exchange, one property is exchanged for another property;
(ii) In a sale, the consideration is money, but in an exchange the consideration cannot be money.
The difference lies in the nature of consideration only.
In both, there is transfer of ownership, the only difference being that in sale, transfer of ownership is for money whereas in the case of exchange, transfer of ownership of property is for ownership of any other property.
A transfer of property by exchange can be made in the same manner as is applicable to sale.
Each party has similar rights and liabilities as that of a seller and a buyer.
Right of party deprived of thing received in exchange (119)
An exchange, like a sale, is primarily a contract between two parties; and unless the object of exchange is unlawful, the terms of the contract would be applicable to both of them. The rule enunciated in section 119 is also subject to a contract to the contrary.
According to this section, each party is entitled to the property that he was entitled to under the contract and provides a remedy to the aggrieved party in case, he does not get what he was supposed to get under this contract.
For instance, A and B enter into a contract to mutually exchange their properties X and Y, respectively. A delivers X to B, but B fails to deliver Y to A. A’s rights would be decided in accordance with the rules laid down under this section.
(i) He can claim compensation for the loss caused to him by such dispossession.
(ii) He can take back the property he had transferred only when-
(a) where the property is still in the possession of the other party, or
(b) in the possession of his legal representative; or
(c) a transferee from him without consideration.
However, this remedy is subject to the contrary intention appearing in the terms of exchange. The parties may have agreed to the contrary, in such a case, this covenant cannot be implied.
Rights and liabilities of parties (120)
Section 120 has not specifically mentioned the rights and liabilities of the parties to exchange.
Therefore, the rights and liabilities of the parties to the exchange are same as that of seller and buyer in case of a sale. In an exchange, one thing is given and another is taken or received.
So each party has rights and liabilities of both the seller as well as buyer. Where the exchanged properties are movables, the provisions of the Sale of Goods Act, 1930 may also apply.
Exchange of money (121)
Exchange is mutual transfer of ownership. Where money is transferred in consideration
of money, it is also an exchange.
Section 121 provides that on an exchange of money, each party thereby warrants the genuineness of the money given by him. The money transferred must be genuine. The money given must not be counterfeit or fake money.
The party who does not get genuine money in return would be entitled to recover genuine money paid by him.
Barter
Exchange of one movable property with another movable property is known as barter. Transfer of ownership in some movable property in consideration of transfer of ownership in another movable property is known as barter.
Mode of Transfer
Where both the properties are movable, exchange may be affected only by delivery of possession without registration.
Where the properties are immovable and of value is less than Rs 100, registration is optional but in case the value of immovable properties is more than Rs 100, registration of the document is compulsory.
