Sale and Exchange under Transfer of Property Act, 1882.

Property is one of the fundamental elements of the life of an individual. The Transfer of Property Act was enacted to provide definite statutory laws that regulated the transfer of property. Before the Transfer of Property Act in 1882, the laws relating to the transaction of property was customary. The Transfer of Property Act applies to and governs the transfers by ‘act of parties’. This has been mentioned in the preamble of the Act. One of the basic objectives of the Act is to harmoniously govern the transactions relating to property. In this Article, we will cover two of the specific transfers related to transfer of property, i.e., Sale and Exchange. 

Definitions: 

Before moving to legal definitions, let us first understand the general meaning of sale and exchange. The word ‘sale’ literally means ‘voluntary transfer of property from one person to another for a price.  Exchange means ‘to part with, give or transfer an equivalent’. Thus, according to section 54 and section 118 of the transfer of property act 1882: 

1. Sale (section 54) of the Transfer of property act, 1882, ‘sale is a transfer of ownership in exchange for price paid or promised or part-paid and part promised. 
2. Exchange (section 118) “when two persons mutually transfer the ownership of one thing for the ownership of another, neither things or both things being money only, the transaction is called ‘an exchange’.  

Section 54 further lays down the manner in which a sale of immovable property should be effected. In case of tangible immovable property of value rupees hundred and upwards or in case of reversion or any other intangible thing, a sale can be made only by a registered instrument. When the tangible immovable property is of value less than rupees hundred the sale can be made by a registered instrument or by the delivery of the property. The delivery of a tangible immovable property is said to have taken place when the seller places the buyer or another person on the direction given by the buyer, in possession of the property.   

Whereas, exchange means transfer of one thing for another thing and both or either of these things may be movable or immovable. There may be transfer of A’s cycle for B’s radio; A’s house worth Rs. 5000/- for B’s land and Rs.5000/-. 

Essential elements: 

Sale : 

• The seller and buyer (parties to the sale) must be competent to transfer: Both the seller and buyer must be competent to contract under section 10 of contract act, i.e the parties to transfer should not be; A minor, A person of unsound mind and A person disqualified by law. 
• Subject matter of sale: The subject matter of sale must be transferable immovable property. 
• Consideration of price:  A transfer of ownership will be sale only when the consideration for it is paid or promised or partly paid or partly promised. 

Exchange : 

1. There must be two different persons who mutually agree and two different things. 
2. The property may be movable or immovable, both movable, both immovable or one movable and another immovable. 
3. Each party is a seller and buyer in such type of transaction. 
4. The persons must be owner of things so transferred.
5. A transaction where there is no transfer of ownership, there can be no exchange. For instance, a family settlement or a partition would not be considered as an exchange. 
6. No price is paid in exchange, the consideration is property and not money. 
7. An exchange of immovable property of Rs. 100/- or more can be affected only by registered deed. 

In Misahul Enterprises v. Vijaya Srivastava, AIR 2003 Del 15 case, the Court opined that a contract of sale like other contracts must be based on a mutual agreement (mutuality) between the seller and the buyer.   

Difference between Sale and Exchange. 

1. Sale refers to immovable property only, whereas exchange refers to both movable and immovable properties.
2. The consideration in sale is price paid or promised and partly paid or partly promised, exchange on the other hand has the consideration for transfer of one property in exchange for another property. 
3. The seller has the charge from unpaid purchase-money in the case of sale and in exchange there can be no seller’s charge for unpaid purchase money.  

Modes of transfer: 

Sale : 

1. By registration of sale deed
2. By delivery of possession 
3. Exchange : 

Section 118 provides that an exchange of property will be affected in the same manner as in the case of sales. Thus where both the parties are moveable, delivery of things will affect an exchange. Such a contract may be in writing or orally. In case of tangible immovable property, section 54 of the TP act needs to be observed. Exchange of such tangible immovable property worth Rs. 100/- or more is mandatory to register, otherwise it is invalid. 

Rights and liabilities of seller and buyer under sale: 

In sale there are at least two parties involved, i.e.,  the buyer and seller. The obligations imposed by section 55 are covenants and are in the nature of statutory obligations. Rights and liabilities of the buyer and seller can be categorised into two –

Before completion of sale: 

Sellers liability-

• To disclose material defects[S.55(1)(a)] 
• To produce title-deeds [Section 55 (1)(b)]
• To answer questions as to Title [Section 55 (1)(c)]
• To execute a proper conveyance [Section 55(1)(d)]
• To take care of property and title-deeds [Section 55(1)(e)]
• To pay outgoings [Section 55 (1)(g)]

Sellers right-

• Right to take rents and profits [Section 55(4)(a)]

Buyers liability-

• To disclose facts materially increasing value of property [Section 55(5)(a)]
• To pay the price [Section 55(5)(b)]

Buyers right-

• To charge for price prepaid [Section 55(6)(b)]

After completion of sale. 

Duties of a seller-

• To give possession [Section 55(1)(f)]
• Implied covenant for title [Section 55(2)]
• To deliver title-deeds on receipt of price [Section 55(3)]

Rights of seller-

• Charge upon property for unpaid price [Section 55(4)(b)]

Buyers liability-

• To bear loss to the property [Section 55(5)(c)]
• To pay outgoings [Section 55(5)(d)]

Buyers right- 

• Benefit of increment [Section 55(6)(a)]

Rights and liabilities of parties to an exchange

Section 120 of the transfer of property act provides that “save as otherwise provided in this chapter, each party has the rights and is subject to the liabilities of a seller as to that which he gives, and has the rights and is subject to liabilities of buyer as to that which he takes” from the above provision it is clear that the rights and liabilities of the parties to exchange are as same as of the buyer and seller of the sale. 

Reference

S.R.Myneni, D. (2018). law of property. hyderabad: Asia law house.