Property Law

By Prof. Dr. K.S.N. SARMA

B. Sc, M.A, LL.D

Visiting Faculty of Law

Icfai Foundation for Higher Education.Study Material for MBA Students

– Subject: Legal Environment of Business

January, 2015.

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Enactments Covering Property Matters

The Transfer of Property Act, 1882Sale of Goods Act, 1930Negotiable Instruments Act, 1881Indian Trusts Act, 1882Indian Easements Act, 1882Indian Succession Act, 1925Hindu Succession Act, 1956Companies Act 2013, and Statutes covering - Intellectual Property Rights.

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What Constitutes Property?

• 1. Corpus + Animus = Property

• 2. Possession + Ownership = Property

• 3. A person who has Possession + Enjoyment + Right to dispose of a thing as one likes is - the Owner of that thing or Property.

• 4. Possession is 9 out of 10 parts - of ownership.

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• Ownership is said to exist over a determinate thing

When it is

- Indefinite in point of user;

- Unrestricted in point of disposition;

and - Unlimited in point of duration.

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• The term property is used in common parlance to signify - the thing over which the right of ownership is exercised.

• The right is available against the whole world (jus in rem);

• The Property over which right in rem is available is – the General Property

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Extension of Right to Immovable Property

• Below - to the centre of the earth

• Above - up to the sky [Subject, however, to

- certain rules, regulations and restrictions - imposed by the state

in view of – public utility and public interest as well as – to facilitate International air-traffic ]

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Ideologies in support of property and ownership

• Capitalism is - in support of private ownership.

• Communism is

- in support of state ownership.

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Ideologies opposed to property as an institution

• Some forms of Anarchism are - opposed to property as an institution.

• Consider - Property is Theft

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Classification of Property

• Property is classified into different categories.

• They are: - General and Special Property

- Moveable and Immovable Property - Tangible and Intangible Property- Corporeal and Incorporeal Property- Real and Personal Property

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• The Property over which right in rem is available is – the General Property

• Property over which some interest is vested – but not right in rem is - the Special Property.

• A right in rem confers upon the owner 1. a right to enjoy that property exclusive of all others in the society; and

2. a right to take legal action if someone interferes with such right.

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• Most legal systems distinguish between different types of property - especially between land and all other forms of property.

In common law, property is divided into: • Real property - interests in land • Personal property - interests in anything

other than land.

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In the Legal Sense

Property means:• Assets of every kind, whether

- corporeal or incorporeal, - movable or immovable,

- tangible or intangible, - real or personal - and

• legal documents or instruments - evidencing title to or interests in such assets.

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• Property rights are usually thought of in terms of - a bundle of rights over

- a determinate thing or subject.

• Traditionally, they are: - right to control over use - right to benefits of property

(e.g. mining royalties, farm royalties) and - right to transfer or to sell.

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• Tangible Property – which is perceived by senses

• Intangible Property – which is conceived in mind

• Corporeal Property – which has a physical shape and structure; a body of its own

• Incorporeal Property – which does not posses physical shape or structure

• Corporeal and Tangible are synonyms • Incorporeal and Intangible are synonyms.

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Movable Vs. Immovable Property• Movable Property can

- pass hands easily

- transfer hand quickly

- be taken to anywhere without much - effort or - pain or - hardship

- perish or lose value or

- destroy early i.e. of lesser - longevity of life or - utility value.

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Immovable Property Defined.• Immovable Property– does not include

- Standing Timber - Growing Crops - Grass [Sec – 3 T.P.

Act]

This definition is - neither exhaustive - nor comprehensive - a negative definition.

So, we have to look for elsewhere for the meaning of the expression ‘Immovable Property’

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Indian Registration Act

• Defines Immovable Property as including - Land - Building

- Ferries - Fisheries - Hereditary allowances

- Rights to ways, Light and Air

- any other benefit to arise out of – land

and - things attached to the earth

or - permanently fastened to anything - which is attached to earth;

– but does not include - Standing timber - Growing Crops - Grass

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The General Clauses Act

• Includes under the head Immovable property - Land- benefits to arise out of land

and - things attached to the earth or - permanently fastened to

anything attached to earth.

• The attachment is – for permanent beneficial enjoyment of that – to which it is attached.

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Transfer of Property

• Transfer of ‘movable property’ often involves transfer of goods, i.e. mercantile goods and which is governed by the Sale of Goods Act, 1930.

• Transfer of ‘immovable property’ is carried out through the provisions of the Transfer of Property Act, 1882.

There are also some other enactments which deal with transfer of – 1. special type of properties or transfer – 2. under special conditions For example: transfer of shares - by Company Law transfer of money - by Negotiable Instruments Act transfer of property after death - by Succession Act either – testamentary will or – intestate succession.

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Transfer of property defined “Transfer of Property" means an act by which – a living person conveys property,– in present or in future– to one or more other living persons, or – to himself and one or more other living persons; and

• ‘to transfer property’ is - ‘to perform such act’.• The transfer is always ‘inter vivos’ [Sec-5]

• Inter vivos means ‘between living persons only’.• A power of attorney can transfer the property to himself. In

such an event, he acts both as ‘transferor’ and ‘transferee’.

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Section - 5 Contd.

• In this section "living person” includes - a company or - an association or - body of individuals,

whether incorporated - or not,

• but nothing herein contained shall affect

- any law for the time being in force and - relating to transfer of property to or by - companies,

- associations or - bodies of individuals.

What may be transferred Property of any kind may be transferred,

- except as otherwise provided by this Act or by any other law for the time being in force.

Section - 6 of the Transfer of Property Act enlists the kind of properties that cannot be transferred.

For Example: - The chance of an heir-apparent succeeding to an estate,

- the chance of a relation obtaining a legacy on the death of a kinsman, or

- any other mere possibility of a like nature cannot be transferred.

Some more examples of - Properties that cannot be transferred [Sec-6]

An easement cannot be transferred apart from the dominant heritage.

A mere right to sue cannot be transferred.

A public office cannot be transferred, nor can the salary of a public officer, whether before or after it has become payable.

Stipends allowed to military, naval, air-force and civil pensioners of the government and political pensions cannot be transferred.

Section – 6 (h)

No transfer can be made

(1) insofar as it is opposed to the nature of the interest affected thereby, or

(2) for an unlawful object or consideration within the meaning of Section 23 of the Indian Contract Act, 1872, or

(3) to a person legally disqualified to be transferee.

Persons competent to transfer [Sec-7]

• Every person - competent to contract and - entitled to transferable property,

or - authorised to dispose of transferable property not his own,

• is competent to transfer such property - either wholly or in part, and - either absolutely or conditionally, - in the circumstances, to the extent and - in the manner, allowed and prescribed

by any law for the time being in force.

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Oral transfer [Sec – 9]

• A transfer of property may be made without writing

`- in every case in which a writing is not expressly required by law.

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Operation of transfer [Sec – 8]

• Unless a different intention is - expressed or - necessarily implied,

a transfer of property passes forthwith - to the transferee.

• What passes forthwith? All the interest which the transferor is then

capable of passing - in the property and - in the legal incidents thereof.

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When the property is land

• Such incidents include, - the easements annexed thereto, - the rents and profits thereof accruing

after the transfer, and - all things attached to the earth;

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Where the property is Machinery attached to the earth

- the movable parts thereof;

Where the property is a house,

- the easements annexed thereto, - the rent thereof accruing after the

transfer, and - the locks, keys, bars, doors, windows,

and

- all other things provided for permanent use therewith;

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• Where the property is a debt or other actionable claim,- the securities there (except where such securities are also for other debts or claims - not transferred to the transferee) but not arrears of interest - accrued before the transfer;

• Where the property is money or other property yielding income, - the interest or income thereof accruing after the transfer takes effect.

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Transfer of Immovable Property

Under T.P Act: Incidents of Transfer may occur by way of1. Sale – Sec - 542. Mortgage – Sec - 583. Charge – Sec - 100 4. Lease/Rent – Sec - 105 5. Exchange – Sec - 1186. Gift – Sec – 1227. Licence – [Sec-52 of Easements Act]

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SALE [Sec – 54]

• Transfer of ownership – in exchange for a price.• Price - Paid or

- promised to be paid Or - Part paid or

- Part promised to be paid.• In sale - the general interest in the property is

transferred.• Price implies – Money only

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How Sale is Made ?

• In case of - tangible immovable property:

1. of valuing Rs.100/- and upwards can be made

- only by a registered instrument.

2. of value less than Rs. 100/- can be made

either – by Regd. Instrument or – by delivery of property.

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Mortgage – Sec 58

• Transfer of interest in specific immovable property 1 - for the purpose of - securing the payment of money

- advanced or- to be advanced - by way of loan

or - an existing or- future - debt

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• Transfer of interest in specific immovable property 2 - for the purpose of

- securing the performance of an engagement, which gives rise to a

- pecuniary or - monitory or

- financial - liability.

The transferor – is called as the ‘Mortgagor’The transferee – is called as the ‘Mortgagee’ The payment secured – is the ‘Mortgage Money’The instrument – is the ‘Mortgage Deed’.

• The mortgagor transfers the interest in specific immovable property towards the security of payment of the loan.

•The loan may be a - past or present or future loan. •The loan so advanced and the interest accruing upon it together called - ‘Mortgage Debt’.

•The instrument of transfer is called - ‘Mortgage Deed’.

The interest in immovable property transferred through mortgage deed is called - ‘Mortgage Property’.

The Mortgager has a right - to get back his property and interest therein - after clearance/payment of the mortgage debt due. • This right of mortgager is called - ‘the right of redemption’. as against • The right of mortgagee called

- ‘the right of foreclosure & sale’. [Sec - 60 & 67.]

Let us try to know more about the meaning of these two Legal Principles at this stage.

RIGHT OF REDEMPTION1. To redeem the mortgaged property is a legal right of

the Mortgagor.

The mortgagor buys back, or re-purchases or gets his property restored.

A mortgagor has a legal right to redeem his property after payment of the mortgage debt.

2. A mortgagee is bound to recognize the mortgagor’s right of redemption.

The mortgagee is bound to give back to the mortgagor after receiving back the debt amount - the mortgaged property and - all concerned documents related to the mortgage.

3. Whether the parties agree or not, - the right of redemption is always available to the mortgagor.

4. This right of redemption is a statutory right - independent of any agreement.

5. If any right is granted by the law independent of agreement, such right has a greater value.

It is permanent right in the eyes of law.

6. According to T.P. Act, and Sec-28 of the Contract Act:

- Any agreement against the right of redemption is void.

- The mortgagor’s right of redemption can not be refused or denied on the basis of any such void agreement.

- Any clog or impediment on the right of redemption is void.

7. The right of redemption is a natural consequence and legal effect of a valid mortgage. - Where there is a mortgage, there is right of redemption.

8. That is why it is said - ‘Once a mortgage is always mortgage’.

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9. In English Jurisprudence, - the right of redemption is a right of equity

Whereas in India it is - a legal and statutory right, though it was originally an equitable right.

RIGHT OF FORECLOSURE1. As the Mortgagor has the right to redeem the mortgaged property, the Mortgagee has got a right of foreclosure.2. Foreclosure means – to bring an end to the transaction of mortgage.3. The right of foreclosure is given to the mortgagee as a remedy, in case he is kept unpaid by the mortgagor. 4. If the mortgagee is - left unpaid and - the time promised for payment is over, - the mortgagee may go to the court and request for foreclosure.

5. However, the Court before passing an order of foreclosure, gives an opportunity to the mortgagor

for the repayment of the mortgage debt.

6. At this moment: – if the mortgagor makes payment, the property is given back to him; – if the mortgagor totally fails to make repayment, then the court passes the order of foreclosure.

7. The mortgagee becomes owner of the mortgaged property - after foreclosure of the mortgage.

8. The order of foreclosure can be passed by a competent Court only.

9. When the Court grants an order of foreclosure in favour of the mortgagee: – the transaction of mortgage ceases to exist – the right of redemption of the mortgagor is also dissolved.

Distinction between these two rights:

(i) The right of redemption is a primary right but a right of foreclosure is secondary right. (ii) If the mortgagor is ready to pay, then redemption will be ordered by the court. - It means Right of Redemption prevails over the Right of Foreclosure.

(iii) If the time agreed to pay has gone, even then the right of redemption continues - unless the foreclosure is ordered.

(iv) The mortgagor may exercise his right of redemption at any time during the continuance of the mortgage; but the mortgagee may avail his right of foreclosure only when – (a) the mortgagor has failed to pay and (b) the time agreed has elapsed.

(v) If the mortgagee wants, he can waive his right of receiving the payment of mortgage debt. But, if mortgagor waives his right of redemption such waiving is not legal.

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Different types of Mortgages

1. Simple mortgage2. Mortgage by conditional sale3. Usufructuary mortgage 4. Equitable mortgage5. English mortgage6. Anomalous mortgage.

1. SIMPLE MORTGAGE.

The elements to make a mortgage simple are: 1. The mortgagor did not transfer the possession of the

property to the mortgagee.2. The mortgagee advances the mortgage debt to the

mortgagor.3. The mortgagor accepts the personal obligations by

a promise to pay the mortgage debt.4. The mortgagor undertakes to pay and at the same

time gives to the mortgagee a right to cause sale of the mortgaged property, if the payment is not made.

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SIMPLE MORTGAGE

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5. If the mortgagor makes the payment, - he gets the property redeemed.

6. If mortgagor fails to pay, the mortgagee has a right to go to the court for sale of the mortgaged property.

7. The proceeds of the sale is adjusted in the payment of the loan.

2. MORTGAGE BY CONDITIONAL SALE.• This is a hybrid of sale and mortgage. It is a sale with a

condition of right to redeem the property covered by deed of ‘Mortgage by Conditional Sale’; Whereas Sale is always unconditional and for a price agreed upon.

In this type of mortgage 1. The mortgagor effects the sale of the

mortgaged property in favour of the mortgagee as a conditional sale.

2. The condition is that in case the mortgagor fails to pay debt, the conditional sale would be converted in to absolute sale.

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MORTGAGE BY CONDITIONAL SALE.

3. It is also implied condition that in case the mortgagor pays the debt amount, the conditional sale will be taken as to have been avoided.

4. After receiving payment towards the debt from the mortgager, the mortgagee should retransfer the property to the mortgagor.

5. The parties must have fixed the time for repayment of the mortgage debt.

6. Mortgagee does not become owner so long as the mortgage by conditional sale continues.

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MORTGAGE BY CONDITIONAL SALE.

7. The mortgagee does not become owner of the mortgaged property only because the time proposed has expired.

8. The conditional sale is required to be converted into absolute sale.

9. If the mortgagor neither pays the amount nor converts the conditional sale into absolute one - the mortgagee may apply to the court for the foreclosure of the mortgage. 53

MORTGAGE BY CONDITIONAL SALE.

10. Here we should notice that - the mortgagor has got a right of redemption, and - equally the mortgagee has got a corresponding right of foreclosure.

11. Only after the foreclosure of the mortgage - the mortgagee becomes absolute owner of the property.

Otherwise mortgage continues on the basis of the principal of - “Once mortgage is always mortgage”.

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3. USUFRUCTUARY MORTGAGE.

1. Usufruct means - profits, increase or benefits. 2. It refers to - profits of the mortgage property.

3. In this Mortgage, the mortgagor and the mortgagee agree that the usufruct of the mortgaged property should be adjusted against the payment of the mortgage debt.

4. A Usufruct mortgage always results into

(i) Repayment of Mortgage Debt; and (ii) Redemption of the Mortgage Property.

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4. EQUITABLE MORTGAGE.

1. It is a mortgage by deposit of title deeds of the mortgaged property.

2. It is also called Mortgage by Deposit of Title Deeds.3. The property is not transferred.4. The title deeds alone are given to the mortgagee as

security for repayment of debt.5. This reduces the burden of Stamp Duty and Registration

charges.6. Most of the Institutions lending - Home Loans, or

Industrial Loans to small and medium scale industries accept this type of mortgage as they are exempted from stamp duty and registration charges. 56

5. ENGLISH MORTGAGE

1. It is a kind of mortgage - in the English Jurisprudence.2. In this mortgage, there are two promises of reciprocal

nature.3.The mortgagor transfers the property absolutely to the

mortgagee for the mortgage debt. 4.The mortgagor not only effects the sale but also delivers

the possession of the property to the mortgagee. 5. The mortgagor also promises to pay the mortgage debt.6. In return, the mortgagee promises that he will sale the

mortgaged property to the mortgagor upon payment of the mortgaged loan.

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ENGLISH MORTGAGE

7. In this way, in English Mortgage there is a mutual promises between the parties that

(i) mortgagor will pay the debt; and

(ii) the mortgagee will re-sell the property.

8. In case the mortgagor fails to pay - the mortgagee has a remedy to go to the court of law for foreclosure.

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6. ANOMALOUS MORTGAGE.

1. Mortgage not falling under any of the above five (5) categories is called - ‘Anomalous Mortgage’.

2. Sometimes, it may be the mixture of

- one or two kinds of Mortgage.

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Distinguish

Sale1.Transfer of

ownership in property is made.

2. It is a permanent determining act on the part of the seller and he remains without any right in the property sold.

Mortgage1.Transfer of an

interest in specific immovable property is made.

2. Mortgagor remains the owner of the mortgaged property and he has a right to recover the mortgage property after paying mortgage debt.

Sale3. The sale is made for a

price paid or promised; or part paid and part promised.

4. A sale does not imply

existence of a debt.

Mortgage3. Mortgage is made for

advancing money as loan on the security of the property.

4. Mortgage does imply the existence of a debt on security of the immovable property.

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LEASE [Sec-105]

A lease of immovable property, express or implied, - is a transfer of right to enjoy that property;

Made – for a certain time or – in perpetuityIn consideration of – a price paid or promised or – money or – a share of crops, services

or – any other thing of value

to be rendered – periodically

or – on specified occasions

to the transferor – by the transferee, who accepts the transfer on such terms.

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Essentials of Lease.1. Two parties to Lease are – Lessor and Lessee2. There should be a transfer of right of

enjoyment of immovable property.3. The transfer may be express or implied 4. The transfer must be for a certain time,

or in perpetuity.5. The transfer must be for consideration.6. The parties should be competent to

grant and take on lease of such specific immovable property. 63

License. The term ‘License’ is defined under Section-52

of Easements Act as detailed below: Where one person grants – to another or – to a definite number of other persons

– a right to do (or) continue to do – in or upon the immovable property of the Grantor – something which would in the absence of such right be unlawful and

such right does not amount to – an easement interest or – an interest in the property right – is called a License. Parties: Grantor & Licensee.

Lease vs. License

1. Lease creates an interest in the property, – while License passes no interest in the property and merely makes an action lawful – which, without it, would have been unlawful.

2. Lease gives the tenant a right to exclusive possession of specific immovable property, – while a License confers no such right on the Licensee.

3. A Lease is assignable – but a License is not transferable.

4. A Lease is not revocable – while a License is revocable at any time. 65

Lease vs. License

5. A Lease is not determined by the Lessor making an assignment of the subject-matter – but a License is determined in such a case.

6. A Lessee can bring an action for trespass, – but the Licensee cannot sue in his own name.7. A Lease in some cases require registration, – but a License does not require registration.8. A Lease holder creates a heritable interest,

– but a License does not survive to the heirs and representatives of the Licensee.

9. A License is determined by the death of the Grantor – while Lease is not so.

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Exchange – [Sec-118]

When two persons - mutually transfer the ownership of - one property for another

- neither thing or both the things being money only then, the transaction is called an ‘exchange’. [if anyone thing is money the other is not – then no Exchange. In an Exchange - both the things should or should not be money only]

A transfer of property in contemplation of an exchange - can be made in manner provided for the transfer of such property by sale. [Procedure is - just like a Sale]

Where both the properties are movable, a delivery of things will effect an exchange.

Exchange – [Sec-118]

Where both the properties are immovable and their worth is more than Rs.100/- - a registration deed is essential.

When the worth of such immovable properties is less than Rs.100/-

- mere exchange will be enough to complete the transaction.

The essential condition of exchange is that - it must be a transfer of a thing for another thing

- both or either of the things may be movable or immovable

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Exchange – [Sec-118]

Examples of Exchange: Movables: - a motor bike for furniture; - a book for two other books

Immovable: - a house for another house; - a 400 yards of house site in a city - for one acre of agriculture land in nearby village etc…

Movable for Immovable: a five year old tractor with all auxiliary units and attachments for his shop owned in a commercial complex and established in a nearby town as a going business.

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Exchange – [Sec-118]

There may be transfer of property by exchange: partly in money and partly in other property.

For example: - If the parties exchange properties, and - if a small sum of money is paid by one to the other by way of adjustment of the value of the thing, then - it will not alter the nature of the transaction as an exchange.

The T.P Act includes ‘barter’ under Section -118 and it makes no difference between ‘exchange’ and ‘barter’.

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Among the following property transfers which are falling under the category of ‘Exchange’ & which are not?

1. Ram gives a Cheque of Rs.10 lakhs in contemplation of exchange of Bheem’s house.

2. Shyam having received a Rs. 1,000/- currency note, immediately gives in return to Ram ten hundred rupees notes.

3. Bheem delivers his lap-top to Shyam who in turn delivers his desk-top plus Rs. 2,500/-only to Bheem towards full and final settlement of the transaction.

4. Renuka receives a diamond ring from her friend Rita and relieves her from the debt liability of Rs. 15,000/-

5. Chandu transfers his 2 acres of mango garden at the out- skirts of Hyderabad city to Prakash for the later transferring his old two storied building situated near Shamshabad International Air Port, Hyderabad. 71

Gift – [Sec – 122]

Gift is – transfer of certain existing – movable or immovable property - – made voluntarily and – without consideration – by one person called ‘donor’ – to another person called ‘donee’. and – accepted by or on behalf of donee.

Such acceptance must be made during the life time of the donor while he is still capable of giving. [Competent]

If the donee dies before acceptance, the Gift is void. If the gift is not made voluntarily, [if made under coercion,

undue-influence, fraud, mistake, misrepresentation etc] - then, the Gift will become voidable and a suit to set aside such gift may be filed within 3 years.

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Essentials of a Gift1. The Donor2. The Donee3. Voluntary act expressed in writing - gift deed. 4. Absence of consideration [out of natural love and affection]

5. Subject-matter of Gift - Certain existing property]

6. Transfer - of ownership, 7. Acceptance of Gift by Donee8. Consequence of death before acceptance by donee:

- if donee dies: Gift is void - if donor dies: Gift is void. The reason in both the cases being ‘there is no transfer ‘inter vivos’. inter vivos means - between two living persons i.e. transfer must be between two living persons. 73

Charge [Sec – 100]

Where immovable property of one person is by – act of parties, or by – operation of law

made security for the payment of money to another and

the transaction does not amount to – a mortgage the latter person is said to have a charge on the property.

All the provisions which apply to a ‘simple mortgage’ shall apply to such charge.

Charge is of two types: – by act of Parties

– by operation of Law. 74

By act of Parties: – No particular form is necessary for creating a charge.

– But, adequate intention should be expressed to make property belonging to a person charged for payment of a debt mentioned in the deed.

By operation of Law: – This type of charge is not made by (i) Signature, (II) Attestation and (iii) registration - of instrument. – The act itself creates charge in favour of

Unpaid seller [Sec – 55(4) (b) For purchase money paid in advance [S – 55(6)(b)] Mortgagor on surplus sale proceeds [Sec – 73] A person to contribution [ Sec – 82]

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Essentials of a Charge

1. There must be immovable property;

2. The immovable property may be made security - (i) by act of parties or - (ii) by operation of Law;

3. The security should be for payment of money; and

4. The act does not amount to mortgage. 76

Actionable Claim [Sec – 3]

An ‘Actionable Claim’ is a claim (i) to any debt other than a debt secured by

– mortgage of immovable property; or – hypothecation or pledge of movable property; or

(ii) to any beneficial interest in movables, not in possession of the claimant - either – actual or – constructive.

which the civil courts recognise - as affording grounds for relief – whether such debt or beneficial interest

be – existent – accruing

– conditional or – contingent. 77

Attestation Attestation in relation to an instrument means and

must be deemed to have meant – attested by two or more witnesses; Each of whom has seen the executant sign or affix

his mark to an instrument; or Each of whom has seen some other person sign the

instrument in the presence or by the directions of the executant; or

Each of whom has received from the executant a personal acknowledgement of – his signature or mark or – the signature of such other person. 78

Attestation - 2 And, each of whom has signed the instrument

- in the presence of the executant.

Note: 1). It shall not be necessary that more than one of such witnesses shall have been present at the same time; 2). No particular form of attestation is necessary; 3). Mere attestation of a document does not show that the attesting witness had notice of its contents;4). The witness must have signed as a witness and not for any other purpose; and5). The witness must have signed in the presence of the executant.

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Some Doctrines under T.P Act.

Constructive Notice [Sec – 3] Perpetuity [Sec – 14] Election [Sec – 35] Ostensible Owner [Sec – 41] Lis Pendens [Sec – 52] Fraudulent Transfer [Sec – 53] Part Performance [Sec – 53-A] Clog on Redemption [Sec – 67] Foreclosure [ Sec – 68] Marshalling of Securities [Sec – 81] Subrogation [ Sec – 92] Tracking [Sec – 93]

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81

Distinguish Sale and Agreement to sell

• Sale• Transfer of property • the property passes from the seller to the

buyer immediately so that the seller is no more the owner of the goods sold.

• Agreement to sell• Transfer of property• transfer of property is to take place at a future

time or subject to certain conditions to be fulfilled.

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• SaleNature of Contract:• Sale is an executed contract.

• Agreement to sellNature of Contract:• agreement to sell is executory contract

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• SaleType of property• existing and specific property only.

• Agreement to sellType of property • future and contingent property • in some cases it may refer to unascertained

existing property.

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• SaleRisk of loss • if the property is destroyed, the loss falls on

the buyer even though the goods are in possession of the seller.

• Agreement to sellRisk of loss• if the property is destroyed, the loss falls on

the seller, even though the property are in the possession of the buyer.

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• SaleConsequences of breach• if the buyer fails to pay the consideration or • if there is a breach of contract by the buyer, • the seller can sue for the consideration even though the

property are still in possession.

• Agreement to sellConsequences of breach• if there is a breach of contract by the buyer, • the seller can only sue for the damages and • not for the price - even though the goods

are in the possession of the buyer.

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• SaleRight to re-sell

• the seller cannot re-sell the property

• except in certain cases, as for example, - a sale by a seller in possession after sale under Sec - 30, or - a sale by an un-paid seller under Sec - 54.

• If he does so the consequent buyer does not acquire title to the goods.

• Agreement to sellRight to re-sell

• in case of re-sale, the buyer - who takes the goods for consideration and without notice of the prior agreement, - gets a good title.

• In such a case, - the original buyer can - sue the seller for damages.

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• SaleGeneral property

• sale is a contract plus conveyance, and creates ‘jus in rem’, i.e., - gives right to the buyer to enjoy the property as against the world at large including the seller.

• Agreement to sell Particular property

• agreement to sell is merely a contract, pure and simple, and creates ‘jus in personam’ i.e., - gives a right to the buyer against the seller to sue for damages.

88

• SaleInsolvency of buyer

• if the buyer becomes insolvent before he pays for the property,

• the seller, in the having possession over the property must surrender it to the official receiver or assignee.

• Seller can only claim a ratable dividend for the unpaid balance consideration of the property.

• Agreement to sellInsolvency of buyer

• if the buyer becomes insolvent and has not yet paid the price,

• the seller is not bound to part with the property, until he is paid for.

89

• SaleInsolvency of seller

• if the seller becomes insolvent, • the buyer, being the owner, is entitled to recover the property

from the official receiver, or assignee.

• Agreement to sellInsolvency of seller

• if the buyer, who has paid the price, finds that the seller has become insolvent,

• he can only claim ratable dividend and • not the property because property in them has not yet passed

to him.