Conditional Transfer- Condition Precedent and Condition Subsequent

conditional transfer

Transfer means an act by which a property is transferred from one or more living person to another. Such a transfer can take place in present or in future. A person can transfer his property to one or more living persons or to himself and one or more living persons. Transfer of property can take place in the form sale, exchange, gift, mortgage, lease, actionable claim or charge under the Transfer of Property Act 1882. Section 5 of the Act defines the term transfer.[i]

A transfer may be absolute transfer or conditional transfer.

  • An absolute transfer of property is when the transferee becomes the unconditional owner of the property transferred to him immediately. For example, A transfers his property to B, his son as a gift.
  • A conditional transfer of property is when the transfer of property is dependent on a condition, that is there are conditions attached to the transfer of such property. For example, A transfers his property to B on the condition that B scores 90% in his examination.

Conditional Transfer

The relevant provisions of  conditional transfer have been explained under sections 25 to 34 of the Act. Conditional Transfer means a transfer that is dependent on a condition attached to it. That is when the vesting of an interest created by a transfer depends on the fulfilment or non-fulfilment of a condition, it is said to be a conditional transfer. A condition is something that makes the existence of a right dependent on the happening or not happening of a thing. A condition can be condition precedent, condition subsequent or conditional limitations.[ii]

Illustration

A transfers property to B on the condition that B should marry his daughter C. Such a transfer of property is a conditional transfer, due to the condition imposed by A on B to marry his daughter C.

Condition Precedent

A condition precedent is that which precedes the transfer of property. When an interest is created in the transfer of a property but the vesting of such interest is dependent on the fulfilment of a condition prior to the transfer, this condition imposed is called a condition precedent. In other words, the condition must be fulfilled before the transfer is executed by the transferor. Therefore the interest is made to accrue before the completion of the contingency.[iii]

Illustration

X agrees to transfer his house to Y provided Y marries his daughter A. Such a condition imposed should be fulfilled before the transfer takes place, hence it is known as condition precedent.

Essentials of Condition Precedent

1. The condition imposed must be fulfilled before the actual transfer takes place.

2. The interest created in the transfer will vest in the transferee after the fulfilment of the condition.

3. When the condition precedent becomes impossible or immoral to be performed the transfer will be declared as void.

4. When the condition imposed is substantially complied with, it is deemed to have been fulfilled.[iv]

Condition precedent becomes impossible or unlawful

Under section 25 when the condition imposed becomes impossible or unlawful or immoral to be complied with, the interest accruing in the transfer of such property dependent on the condition fails. That is, where the condition is void the transfer becomes void too. [v]

When the condition precedent becomes –

Impossible to be performed– a condition which no longer can be fulfilled in any circumstance is said to be impossible. A condition precedent may become impossible to be performed when the subject matter is destroyed or there is no means to fulfil such a condition etc.

Illustration

X agrees to transfer his property to Y, provided Y sells his horse to Z. At the time of such transfer, Y did own a horse. Therefore the condition precedent was to sell the horse to Z, but Y did not own any horse on the date of such transfer therefore the condition imposed is void and transfer of property is also void.

Unlawful – when the condition imposed is unlawful or forbidden by the law or defeat the provisions of law or fraudulent or opposed the public policy and is immoral or injures any person or property the transfer becomes void.

Illustration

A agrees to transfer his property to B, provided B murders C. The condition of murdering B is forbidden by law, hence the transfer of the property will be void.

Fulfilment of Condition Precedent

Under section 26 when the condition to be fulfilled for the transfer of property is substantially complied with or fulfilled, such a condition is deemed to have been fulfilled. In other words, the interest made to accrue in the transfer will vest in the transferee if the transferee has substantially complied with the condition precedent imposed by the transfer. The doctrine of Cy-pres will apply to this section. [vi]

Illustration

X transfers rupees 1000 to Y on the condition that Y shall marry with the permission of A,B,C,D. Subsequently A dies. Y obtains permission from the other three (i.e. B,C and D). The condition is deemed to be fulfilled.

In Gonendra Mohan Tagore v. Rajah Jotindra Mohan Tagore,[vii] A agrees to transfer his property to B, if B marries C with the permission of X,Y,Z. Subsequently, Z dies. B obtains permission from X and Y and marries C. In such a case B has deemed to comply with the condition and the transfer is to take place.

Conditional transfer to one person coupled with transfer to another on failure of prior disposition

Under section 27 when a prior transfer is dependent on a condition and if the prior transfer fails of non-fulfilment of the condition, the property is to vest in another person. In such a case ulterior transfer instead of failing, is accelerated due to the failure of the prior transfer. In other words where an interest is created on the transfer of property in favour of one person and in the same transaction an ulterior disposition is created of the same interest in favour of another person, when the prior transfer fails the ulterior disposition takes place upon its failure. [viii]

Illustration

X transfers his house to Y on the condition that he shall transfer his field to Z. If he does not transfer his field, the house will be transferred to B. Hence if Y does not transfer his field to Z, the house of X will go to B.

Underwood v. wing [ix] A transfers his property to his wife B, in case she dies in his lifetime the property should be transferred to C. A and his wife B die in an accident together and it cannot be proved as to who died first. The disposition in favour of C cannot take place.

Condition Subsequent

Condition subsequent is a condition which is required to be fulfilled after the transfer of a property. The interest vested in the transferee after the transfer of property is affected by the completion or non-completion of a condition after the vesting of the interest resulting from the transfer. The condition imposed either destroys or divests the right upon happening of an event.[x]

Illustration

A gifts a property to B on the condition that B should marry C within three months from such a transfer. Hence the property vests in B at present but if B does not marry C within three months the transfer will fail.

Venkatarama v. Aiyasami[xi] X who was under a sentence of transportation for life, transferred his field to Y, with a proviso that in case he returns from Port Blair, Y’s interest shall cease. X returned from Port Blair and hence the court held that X can claim back his field from Y. 

Characteristics of Condition Subsequent

1. When a condition subsequent is imposed on the transfer, the fulfilment or non-fulfilment of such a condition will defeat the transfer.

2. The transfer of property is effected immediately and the interest in such a property vests in the transferee unless the condition subsequent is fulfilled or not fulfilled.

3. In case where the condition subsequent is impossible or unlawful, the condition will be ignored and the interest created by the transfer in the transferee will still vest in him.

4. A condition subsequent should be strictly fulfilled.[xii]

Condition that transfer will cease to have effect in case a specified uncertain event takes place or does not take place.

Under section 31 and 32 of the Act, when a property is transferred on the condition that should take place after the transfer, such that the condition is an uncertain event which does or does not happen the transfer will cease to have effect when the condition subsequent is fulfilled or not fulfilled. The condition imposed shall not be invalid.[xiii]

Illustration

X transfers a farm to Y for his life, with a condition that if Y cuts a tree from the farm, the transfer will cease to have effect. Subsequently, Y cuts a tree from the farm. Y loses life- interest in the farm.

Section 33 lays down that when a property is transferred and an interest is created subject to a condition that the persons taking it must perform a specified act, but no time limit is specified for the performance of such an act, the condition is broken when he proves the performance of the act is impossible temporarily or permanently.[xiv]

Effect of fraud preventing the fulfilment or non-fulfilment of the condition imposed

Section 34 states that when a property is transferred with a condition precedent or subsequent imposed on the transferee to be fulfilled. In such a case when the time is specified for the completion or non-completion of the condition and if the performance of the condition is prevented by fraud of a person who would benefit directly, such a further time is to be allowed by the transferor to the transferee for the performance of the act as is required to be make up for the delay caused by the fraud. In case no time is specified for the performance of an act then the condition is deemed to have been fulfilled. [xv]

Ulterior transfer conditional on happening or non-happening of a specified event (Section 28,29,30)

When a property is transferred an interest therein may be created to accrue to any person with the condition superadded that in case a specified uncertain event happens or does not happen such an interest is to pass to another person. The condition imposed should be strictly complied with. If the ulterior disposition is not valid, the prior disposition will not be affected by it. [xvi]

Frequently asked question

What is the difference between condition precedent and condition subsequent?

  • Condition precedent must be fulfilled before the transfer of propertyand condition subsequent must be fulfilled after the transfer of property and on the failure of such condition the transfer will cease to have effect.
  • In case of condition precedent vesting of interest is postponed till the fulfilment of the condition and in case of condition subsequent, the vesting of an interest in the property transferred takes place immediately.
  • Condition precedent imposed should be valid in the eyes of law and should not be impossible. If it impossible or unlawful the transfer will be void. Whereas when the condition subsequent invalid, it is ignored and the transfer will still be effective.
  • When the condition precedent is substantially complied with it is deemed to have been fulfilled whereas, the condition subsequent needs to be strictly complied with.
  • When the interest is vested in the transferee after the completion of the condition precedent imposed, it can never be divested due to non-fulfilment of condition. Where when the interest is vested in the transferee it can be divested due to non-fulfilment of condition subsequent.[xvii]

Edited by Sakshi Agarwal

Approved & Published – Sakshi Raje

Reference

[i]Prakash Chandra, Conditional Transfer

https://www.academia.edu/37504281/CONDITIONAL_TRANSFER_SECTION_25_OF_TRANSFER_OF_PROPERTY_ACT_1882

[ii] The Transfer of Property Act 1882 , N.H.Jhabvala 2018

[iii] Ibid.

[iv] Ibid.

[v]Transfer of Property Act, section 25

[vi] Transfer of Property Act, section 26

[vii] (1874) 11A 387

[viii] Transfer of Property Act, section 27

[ix] ( 4 De G.M. and G. 633) 

[x] Ibid.

[xi](1922) 43 Mad. L.J. 340

[xii] Ibid.

[xiii] Transfer of Property Act, section 31 and 32

[xiv] Transfer of Property Act, section 33

[xv] Transfer of Property Act, section 34

[xvi] Transfer of Property Act, section 28, 29, 30

[xvii]Ibid.

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I am Dhruvi Dharia from University of Mumbai Law Academy (UMLA), pursuing B.B.A.-LL.B.(Hons.) I have a penchant for studying Corporate laws like Companies Act, Securities Law, Insolvency and Bankruptcy Code, mergers and acquisitions etc. and strong inclination towards numbers. I am also a budding Company Secretary and one level away from becoming one. I aspire to become a Corporate Lawyer in the future. I have always enjoyed reading and working on various legal matters whenever given a chance to. I constantly try to better myself by reading various Acts, articles, interviews of eminent lawyers and professionals and researching on various topics. I like reading on various contemporary legal issues and articles and I sometimes attempt writing on the same. Apart from academics in my free time I like drawing, painting and travelling to new destinations.