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Distinction between Vested and Contingent Interest in TPA


Distinction between Vested and Contingent Interest
Distinction between Vested and Contingent Interest

Content:-


A vested interest signifies an immediate proprietary right or entitlement in property, where ownership is certain and not subject to any future conditions. In contrast, a contingent interest depends on the occurrence of uncertain future events for its realisation.


While a vested interest grants the holder present ownership and the right to enjoy the property, a contingent interest hinges on the fulfilment of conditions precedent, and until those conditions are met, the interest remains incomplete and uncertain.



Vested Interest

  • Section 19 of the Transfer of Property Act deals with vested interests. It defines a vested interest as an immediate and absolute right to property, without any dependency on uncertain future events.


  • A vested interest grants the holder a present proprietary right in the property, including the right to transfer it to another party.


  • Section 6 of the Act emphasizes the transferability of vested interests, allowing the transferee to transfer the interest even before obtaining possession of the property.


  • Additionally, Section 14 of the Act specifies that a contract for the sale of property does not create any interest in the property itself unless it's backed by some kind of vested interest.



Contingent Interest

  • Section 21 of the Transfer of Property Act addresses contingent interests. It defines a contingent interest as one that is dependent on the happening or non-happening of future uncertain events.


  • Contingent interests are not immediately transferable, as they are subject to the fulfillment of certain conditions precedent. Until those conditions are met, the interest remains uncertain and incomplete.


  • Section 6 also acknowledges that contingent interests are transferable, but their transfer is contingent upon the occurrence of the events upon which the interest is dependent.


  • Moreover, Section 22 of the Act provides that if a contingent interest is created for the benefit of a person unborn at the time of the transfer, the interest cannot take effect unless and until the person comes into existence and the contingency is fulfilled.






Difference between Vested Interest and Contingent Interest


Vested Interest

Contingent Interest

  1. A vested interest is created in favour of a person - without specifying the time when it is to take effect, or specifying that it is to take effect forthwith, or on the happening of a certain event.

  1. A contingent interest is created in favour of a person - to take effect only on the happening or not happening of a specified uncertain event, which may or may not happen.

  1. It is ownership

  1. It is only a chance of becoming an owner; however, it is different from spes successionis.

  1. It does not depend upon the fulfilment of any condition; it creates an immediate right, though the enjoyment may be postponed to a future date. Thus, the owner’s title is already perfect. 

  1. It is solely dependent upon the fulfilment of the condition (after which it becomes a vested interest),so that if the condition is not fulfilled, the interest may fall through. Thus, the owner’s title is as yet imperfect, but is capable of becoming perfect

  1. It is not defeated by death of the transferee before he obtains possession.

  1. Whether it passes on the death of the transferee or not depends on the nature of the contingency

  1. It is both transferable as well as heritable. If the transferee of a vested interest dies before actual enjoyment, it passes on to his heirs.

  1. It is transferable. Whether it is heritable or not depends on the nature of the contingency. If The transferee dies before obtaining possession, the contingent interest fails, and does not pass on to his heirs. 

  1. In a vested interest, there is a present immediate right, even when its enjoyment is postponed. 

  1. There is no present right of enjoyment; there is a mere promise for giving such right; and such promise may be nullified by the failure of the condition.

  1. A makes a gift to B of Rs. 100 to be paid to him on the death ofC. B gets a vested interest, as the event, namely, C’s death is certain.

  1. 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.


In summary, while vested interests confer immediate and absolute rights to property, contingent interests are contingent upon the occurrence of uncertain future events.


The Transfer of Property Act lays down provisions to govern both types of interests, ensuring clarity and legal certainty in property transactions.



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