PROJECT ON

“Vested and Contingent Interest”

SUBMITTED TO - Prof. Anant Pawar

SUBMITTED BY – Vivekanand Jha
ID NO. – 27
[LLB 2nd Year – 2022- 2023]

KLE COLLEGE OF LAW,

NAVI MUMBAI

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Contents

TITLE: -.............................................................................................................................................................. 3

ABSTRACT: - .................................................................................................................................................... 3

KEYWORDS: -................................................................................................................................................... 3

INTRODUCTION: - .......................................................................................................................................... 3

LEGAL PROVISION: -..................................................................................................................................... 4

VESTED INTEREST:- ...................................................................................................................................... 4

CHARACTERISTICS OF VESTED INTEREST:- ........................................................................................ 5

CONTINGENT INTEREST:- ........................................................................................................................... 5

CONTINGENT INTEREST OCCURS ON THE FOLLOWING CONDITIONS:- ..................................... 6

CHARACTERISTICS OF CONTINGENT INTEREST:- ............................................................................. 6

DIFFERENCE BETWEEN CONTINGENT AND VESTED INTEREST .................................................... 7

CONCLUSION: ................................................................................................................................................. 7

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TITLE: -

Vested Interest and Contingent Interest

ABSTRACT: -

Transfer and exchange of property is extremely normal in the everyday existence of a person.
There are different laws under the Indian Law connected with property matters. Yet, initially, what
do we mean by the term property? Property might be characterized as any physical or virtual
substance claimed by an individual or a gathering of people who hold the possession and privileges
on the property. Property can be moved or sold starting with one individual then on to the next by
different means as indicated by the laws in India. The Transfer of Property Act, 1882 (ToPA)
manages the exchange of properties between one individual to another.

Transfer of Property Act deals with vested and contingent interest. Vested Interest is created where
there is a condition of the happening of a specified certain event. While Contingent Interest is
created on fulfilling a condition of happening of a specified uncertain event. In this research we
will discuss each and every aspect of these two interests.

KEYWORDS: -

Property, Transfer, Owner, Vested Interest, Contingent Interest, Death, Uncertain Event, Act

INTRODUCTION: -

Property transfer and exchange is very common in the day-to-day life of an individual. There are
various provisions under Indian Law related to property matters. But firstly, what do we mean by
the term property? Property may be defined as any physical or virtual entity owned by an
individual or a group of individuals who hold ownership and rights on the property. Property can
be transferred or sold from one person to another by various means according to the statutes in
India. The Transfer of Property Act, of 1882 (ToPA) deals with the transfer of properties between
one living person to another living person (InterVivos). the Transfer of Property Act is an
extension of the law of contracts and runs parallel to the succession laws.

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 Vested Interest and Contingent Interest are two key interests that are considered while transferring
a property. They are clarified under The Transfer of Property Act, 1882 alongside the fundamental
circumstances connected with the property.

LEGAL PROVISION: -
Section 19 of the Transfer of Property Act, 1882 - Vested interest, - When a condition exists
for the occurrence of a specific event, vested interest is generated.
Section 21 of the Transfer of Property Act, 1882 Contingent Interest. is created on fulfilling a
condition of happening of a specified uncertain event.

VESTED INTEREST:-
Section 19 of the Transfer of Property Act, 1882 states about Vested Interest. It is an interest
which is created in favour of a person where time is not specified or a condition of the happening
of a specified certain event. The person having the vested interest does not get possession of that
property but has the expectancy to receive it upon the happening of a specified certain event.1
For example, A promises to transfer his property to B upon him attaining the age of 22. B will
have a vested interest in A’s property till the time he does not get possession of it.
The transferer and the transferee enter into a contract of transfer of property and the transferer
makes a certain condition for the fulfillment of the transfer of property and upon the completion
of the condition, the transferee gets possession of the property. The transferee may not get
possession of the property immediately after making a contract but he can expect it after the
fulfillment of the specific certain condition.
For the fulfillment of a contract related to the transfer of property by vested interest, the condition
of the contract must be certain. An impossible event or uncertain event is not considered to be a
vested interest. Conditions that are meant to happen in the future, for example, death, aging, etc
are considered certain events. The fulfillment of the contract is solely based on the happening of
certain events. If the transferee dies before the enjoyment of property, the interest is not defeated
by the death and the right to enjoy the property is vested in the legal heirs of the transferee. In the
cases of Pearey Lal Vs Rameshwar Das 2, it was held that vested interest is not even defeated by

1
Section 19 of the Transfer of Property Act, 1882
2
AIR 1918 Mad 294
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 the death of the devisee before he obtains possession and his representatives will be entitled to its
benefit.
There are the important aspects of a vested interest as stated above: –
1) Interest should be vested: This is the basic meaning of the provision that lays down that
interest should be created in favour of a person where time is not specified or a condition
of the happening of a specified certain event. A person should profess to transfer a
particular property in order for this interest to be created.
2) Right to enjoy property is postponed: When interest is vested in a person, he does not
immediately get the possession of that property and hence cannot enjoy that property.
But any person who is not a major and has a guardian is only entitled to the vested interest after
he attains majority.

CHARACTERISTICS OF VESTED INTEREST:-

There are three main characteristics of a Vested Interest as follows:-

1. Vested interest does not depend on an uncertain event. It depends on a certain event which
must happen. It creates a present or immediate right though the right to enjoyment is
postponed.
2. Vested interest is not defeated by death. On the death of the transferee, the interest is passed
to the heir of such transferee.
3. Vested interest is a transferable right as well as a heritable right. Nothing can stop the
interest from vesting in the person in favor of whom the transfer is to be made.

CONTINGENT INTEREST:-
Section 21 of the Transfer of Property Act, of 1882 states about Contingent Interest. It is an
interest that is created in favor of a person on a condition of the happening of a specified uncertain
event. The person having the contingent interest does not get possession of that property but has
the expectancy to receive it upon the happening of that event but will not receive the property if
the event does not happen as the condition is not fulfilled3. Contingent interest is entirely
dependent on the condition imposed on the transfer.

3
Sec 21 Transfer of Property Act, of 1882
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 Contingent Interest is an interest that is created in a property in favor of a person to whom such
property is transferred based on the occurrence or happening of an uncertain event that may or
may not happen in the future. It is defined under Section 21 of the Transfer of Property Act, of
1888. The contract of transfer of property completes after the completion of a condition that is
uncertain in nature. This interest in the property can become a vested interest in favor of the person
to whom it is transferred on the happening of the event or when the happening of the specified
event fails or becomes impossible.
For Example, A and B come into a contract of transfer of property where, A is the transferor and
B is the transferee of the property and A puts a condition that the property will be transferred to B
only if he sells his house to C. here, B may or may not sell his house to C and therefore it is an
uncertain event. If B sells the property to C then the interest becomes vested interest.

CONTINGENT INTEREST OCCURS ON THE FOLLOWING CONDITIONS:-

1. When interest is created in favour of a person to whom such property is transferred, and such
interest depends upon the happening of a specified uncertain event.
2. The transfer of interest depends upon an uncertain event that may or may not happen.
3. The contingent interest in the property can become a Vested interest in the happening of that
event.
4. The right of enjoyment of ownership or possession of the property depends upon the
happening of that uncertain event that may or may not happen.

CHARACTERISTICS OF CONTINGENT INTEREST:-

There are three main characteristics of contingent interest which are as follow-

1) The interest in a specific property transferred will be subject to a condition that is uncertain
i.e., it may or may not take place. Only on fulfillment of such a condition will the
contingent interest in the property become a vested interest in the transferee.
2) If the transferee dies before acquiring the interest in the property, the contingent interest
will lapse and the transferor will remain the owner of the property.
3) The contingent interest can be transferred i.e. it is a transferable right. However, if the
contingent interest is heritable or not depends on the contingent event and nature of the
transaction.
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DIFFERENCE BETWEEN CONTINGENT AND VESTED INTEREST
❖ Section 19 of the act defines vested interest. Vested interest is an interest in a property
transferred to a person on the happening of a certain event. Whereas section 21 defines
contingent interest. Contingent interest is an interest in a property transferred in favor of a
person on the happening of an uncertain event that may or may not take place.
❖ Vested interest in property creates an immediate interest in the property through the right
to enjoyment is postponed. Whereas contingent interest solely depends on the fulfillment
of a specific condition. The interest in the property is created in favor of a person on
fulfillment of the condition.
❖ Vested interest is not defeated by the death of the transferee. Whereas contingent interest
passes on the death of the person or not depends on the nature of the transaction and
contingency.
❖ Vested interest is a transferable and heritable right. Whereas contingent interest is
transferable but is heritable or not depending on the nature of contingency.

CONCLUSION:

The Transfer of Property Act, 1882 deals with vested interest and contingent interest.
The concepts of vested interest and contingent interest are very important to understand as there
are many sections relating to these concepts.
Section 19 to 24 of the Transfer of Property Act 1882 explain the provisions related to vested
interest and contingent interest. Such interests are acquired in immovable property in favour of the
transferee on the transfer of such property to him. Such transfer of interest might take place
immediately or on the occurrence of a specified event.
The transfer of property involving Contingent interest takes effect only after the condition is
fulfilled, if the condition is not fulfilled then the transfer will not take effect. The conditions are
required to be fulfilled and they have to mandatorily synchronize with the preamble rules that talk
about justice, equity, and good conscience, the three major principles of the natural law upon which
this whole act is based.

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