A Project of property law II on

Implied contract by seller

FOR VIII TRIMESTER

SUBMITTED TO: SUBMITTED BY:

DR. SUSHMA SHARMA DEEPAK KANERIYA

ASS. PROFESSOR 2012BALLB76

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Table of index

Declaration..........................................................................................3

Introduction.......................................................................................4

Implied contract by seller..............................................................3-5

Rights and liabilities of seller..........................................................6-8

Implied contract by seller with respect to TPA.............................8-9

Conclusion.........................................................................................10

Bibliography.....................................................................................11

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Declaration

The text reported in the project is the outcome of my own efforts and no part of this project has

been copied in any unauthorized manner and no part in it has been incorporated without due

acknowledgement.

DEEPAK KANERIYA2012BALLAB 76

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Introduction

Section 54 define “sales” as the transfer of ownership in consideration for a price paid or

promised or part paid and part promised.

If we divide the section in two fold then we will clearly extract two ingredients which define sale

which are as follows:

1. Transfer of ownership

2. Price is the consideration i:e the technical name for consideration under section 54 is

price and in case of lease is rent and price is the essence of the contract.1

Transfer of ownership

Sale is a transfer of ownership. Ownership is absolute interest in the property. Ownership is

absolute interest in the property. Therefore, in a sale there is transfer of all the rights in the

property sold; no right in respect of property are left with the transferor (seller).

Ownership means bundles of rights and liability of property.2 So, when ownership is transferred,

there is transfer of all the rights in property by transferor to transferee. In other words nothing

less than ownership or absolute or absolute interest may be transferred by way of sale. Lease is

also a transfer of property but there is transfer of only partial interest (right to use or enjoyment

of property).3

1 Morgan v. millman (1858)2 Section 55 of transfer of property act 1882 deals with the rights and liabilities of the seller and buyer.3 Vijay kumar v. Devesh behari saxena, AIR 2008 ALL 66 (DB), the ownership of a plot was tranferred for a consideration of rupees 20 lakh. The document was held to be a sale not lease.

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Similarly, mortgage too is transfer of property but, it is transfer of merely a limited interest in the

mortgaged- property.

The provisions of the section do not bar a benami transaction. There is no embargo on getting the

property registered in the name of one person although the real beneficiary of the transaction

would be another person.4

Money consideration

Ownership must be transferred in exchange of money. The money in exchange of ownership is

called ‘price’. However, for a valid sale the amount of money is an irrelevant factor.

Essentials:-

1. It should be in money.

2. Fixed before transfer of title.

However in some cases it has held by the courts that money is not a sine qua non for the

completion of the sale.5 The courts said that the registered sale deed executed in favours of the

purchaser who entered into the possession without payment of price would be a sale.6

4 Jai narain parasrampuria v. pushpa devi saraf, (2006)7 SCC 756.5 Krishnamma v. mali, (1920) Mad. 712 6 Tatiya v. Babaji, (1898)Bom.

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Implied contract by seller

Section 9 of Indian contract act 1872 which follows as:

In so far as the proposal or acceptance of any promise is made in words, the promise is said to

be express. In so far as such proposal or acceptance is made otherwise than in words, the

promise is said to be implied.

The section talks about that an implied promise is to be inferred form certain facts such as a

course of dealings between the parties.7 In other words when there is an express contract in

existence, there is no question of an implied contract.8 Implied contracts and express ones are

both equally binding upon the parties. The difference between them is confined to the manner of

proving them.

Implied contract by seller with respect to transfer of property act 1882

Section 55 of transfer of property act 1882, laid down rights and liabilities of buyer and seller

respectively.

Rights and duties of buyers and seller can be further classified into two heads.

1. Rights and liabilities before completion of sale.

2. Rights and liabilities after sale is complete.

The reason behind this classification is that sale is a transfer of property the process of which

begins with the constitution of contract and ends with transfer of ownership from seller to buyer.

7 Section3 of indian contract act 1872 I;e mode of communication.8 Printing and mining corporations of india limited v. gandhi industrial corporation (2007) 13 SCC 236.

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Therefore the rights and liabilities before the completion of sale are contractual in nature.

Whereas the rights and liabilities after the sale are proprietary in nature I;e concerning ownership

of property.

Rights and liabilities of seller

Sale is the transfer of ownership as buyer paid consideration in the form of money thereby

concluded transaction I;e completion of sale. Once sale is complete all rights and liabilities in the

property which are owned by the seller, pass on to the purchaser. But, since the seller is the

owner of his property, he has full liberty of transferring it to the buyer on any terms and

conditions as he likes. In such circumstances, the rights and liabilities of the seller and the buyer

would be subject to those terms and shall not be governed by the provisions of sections 55. In

case, there is any specific condition subject to which the sale is being made, it must be clear and

unambiguous.

Before sale is completed, the seller’s duties are as under:

1. To disclose material (latent) in the property or title if any.9

2. To produce the title deeds for inspection.10

3. To answer relevant questions as to title.11

4. To execute conveyance.12

5. To take care of the property and title deeds.13

6. To pay the outgoing.14

9 Section 55(1)(a) of TPA 1882.10 Section 55(1)(b) of TPA 1882.11 Section 55(1)(c) of TPA 1882.12 Section 55(1)(d) of TPA 1882.13 Section 55(1)(e) of TPA 1882.14 Section 55(1)(f) of TPA 1882.

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Seller’s duties (liabilities) after sale

1. To give possession to the buyer.15

2. To covenant for title.16

3. To deliver title deeds on receipt of the price.17

Sale is a transfer of ownership or absolute interest. When a person contracts to sell his property,

it is implied that he must be owner of that property otherwise he would not have attempted to sell

it. Section 55(2) of the act lays down that in every sale the seller impliedly undertake that the

interest which he is transferring subsists and he has authority to transfer the same. This is known

as the “implied covenant for title”. Any express covenant or declaration that seller has title and

authority to transfer the property is not necessary.

The second paragraph of section 55(2) deals with cases where the seller affects the transfer in

some fiduciary capacity for example where the seller is guardian of minor’s property or where he

is a trustee of the property sold. This clause provides that in such cases, the seller is deemed to

have only covenanted that he has done no act whereby the property is encumbered or whereby he

is hindered from transferring it. The implied covenant for title does not apply as such in the cases

where vendor is selling property as the guardian of minor’s property or as trustee. It may be

noted that a trustee has the power to transfer the trust property but he has to declare that he is

selling trust property which is not his own. Therefore, where a trustee sells such property without

disclosing that the property is trust property , it may amount breach of covenant for title.

15 section 55(1)(f) of TPA 1882.16 section 55(2) of TPA 1882.17 section 55(3) of TPA 1882.

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However, since the rights and liabilities under section 55 are in absence of any contract to the

contrary, the parties may agree in express terms and enter into a contract in any manner contrary

to this provision. But such contract must expressely and clearly shows that buyer is not bound by

implied covenant for title as contemplated under this clause.

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Conclusion

So the general understanding with respect to the implied contract is the contract which is

concluded by the conditions. However as far as the Indian contract act 1872 prescribe that in

case where the express contract has been concluded between the parties in that case former will

prevail over implied contract. Implied contract can be made by seller through promise or through

some necessary implication and where the condition fulfilled contract shall be regarded as the

concluded one.

Transfer of property act 1882 under section 55 laid down rights and liabilities of the buyer and

the seller respectively. We all know that Sale is a transfer of ownership or absolute interest.

When a person contracts to sell his property, it is implied that he must be owner of that property

otherwise he would not have attempted to sell it. Section 55(2) of the act lays down that in every

sale the seller impliedly undertake that the interest which he is transferring subsists and he has

authority to transfer the same. This is known as the “implied covenant for title”.

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Bibliography

1. The transfer of property by Dr. R.K.Sinha, central law agency, 13th edition.

2. The transfer of property by Avtar Singh allahabad law agency, 10th edition.

3. The indian contract act by Mulla, lexis nexis publication,13th edition.

4. Manupatra

5. http://indiankanoon.org/

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