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Contingent Interest in Transfer of Property Act


Contingent Interest
Contingent Interest

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Contingent Interest (Sec. 21)


Where, on a transfer of property, an interest therein is created in favour of a person to take effect only on the happening or not happening of a specified uncertain event, such a person acquires a contingent interest in the property.  Such interest becomes a vested interest in the happening of the event in the first case, and when the happening of the event becomes impossible in the second case.” 


A contingent interest is characterised by the absence of any current proprietary rights or enjoyment, with both contingent upon future uncertain events that may or may not occur.


For instance, if an estate is bequeathed to A until their marriage, and thereafter to B, B's interest is contingent since it hinges on the condition precedent of A's marriage—a circumstance that may or may not materialise. Until A's marriage, B possesses no proprietary interest in the estate and cannot alienate it.


However, upon A's marriage, B's contingent interest transforms into a vested interest due to the occurrence of the condition (A's marriage).


In essence, a contingent interest is entirely reliant on the fulfilment of a condition, such that if the condition remains unmet, the interest is invalidated.


In the event of the transferee's demise before acquiring possession, the contingent interest lapses, and the property reverts to the transferor. Nonetheless, a contingent interest remains transferable.



Contingent interest and Spes successionis

A contingent interest differs significantly from a mere chance, such as an heir apparent inheriting an estate or a relative potentially receiving a legacy. While spes successionis (chance of succession) cannot be transferred, contingent interests are transferable.


Contingent ownership of a right represents more than a mere possibility of future acquisition; it is founded on the present existence of an incomplete title.


To grasp the disparity between contingent interests and spes successionis, consider the following scenarios:


1. A, a Hindu, passes away, leaving behind a widow B and a brother C. In this case, C merely has a chance of inheriting A's estate.


2. A, also a Hindu, settles his separate property on his wife B for her lifetime, with remainder to his potential son, and in the absence of a son, to C. Here, C's interest is contingent and thus transferable. His contingent interest surpasses a mere chance of ownership; it depends on the condition of A not having a son.


In essence, while both contingent interests and spes successionis involve future outcomes, contingent ownership represents a present, albeit incomplete, entitlement, making it distinguishable from mere chances or possibilities.



Illustrations


  • An estate is transferred to A if he shall pay Rs. 500 to B. A’s interest is contingent until he paid Rs. 500 to B.


  • An estate is transferred to A for life, and after his death to B, if B shall then be living. But if B shall not then be living, to C. B and C each take a contingent interest in the estate until the event which is to vest it in one or the other has happened.


  • A sum of money is transferred to A “in case he shall attain the age of 18” or “when he shall attain the age of 18”. A’s interest in the sum of money so transferred is contingent until the condition is fulfilled by his attaining that age.


  • If B dies issueless, then property to go to X; here X’s interest is contingent On the other hand, when A transfers to B Rs.100 to be paid to him upon his attaining the age of 18, B has a vested interest in Rs. 100. Here the interest is one of which the enjoyment is postponed. The words “to be paid” or “payable” at a certain age do not make the interest contingent. On the other hand, a gift “at a certain age” or “if” or “when” a certain age is attained, is contingent



Exception to Sec. 21

The exception to Sec. 21 lays down that an interest cannot be said to be contingent merely from the fact that the person becomes entitled to the interest upon attaining a particular age, when at the same time 


(a) the income arising from such interest is given to him absolutely till he reaches that age, or 


(b) the income or so much thereof as may be necessary is directed to be applied for his benefit. 


For example, A transfers to B Rs.500 a year upon his attaining the age of 18, and directs that the interest shall be applied for his benefit until he reaches that age. The interest is vested.

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