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Exchanges in Transfer Property Act

Exchanges in Transfer Of Property Act


Definition (Sec. 118) 

When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being money only, the transaction is called an exchange.”

Exchange is a transaction where each party acquires property in which they had no previous interest. It involves the transfer of one thing for another, which can be movable or immovable.

Barter occurs when two movable properties are exchanged. Money can be involved in an exchange, but the transaction cannot solely involve the transfer of money for a thing. If one property's value exceeds the other, additional money may be paid to equalize the exchange without converting it into a sale.

However, if a significant sum is paid to equalize the exchange, it may be considered a sale. Exchanges include swapping the equity of redemption for mortgagee's rights. For an exchange to occur, both parties must be involved in transferring ownership of two things.

Unilateral transfers, such as a husband transferring property to a wife for maintenance, do not constitute an exchange.

Similarly, setting off one decree against another with a balance transferred is not an exchange. Exchanges are contracts and must not involve unlawful objectives, such as compromising criminal proceedings.

Mode of Transfer: Exchange how Effected (Sec. 118)

A transfer of property in completion of an exchange can be made only in the manner provided for the transfer of such property by sale.

The mode of transfer by way of exchange is the same as in the case of sales. Thus, a registered instrument is necessary in an exchange of  tangible immovable property of an value of Rs. 100 and upwards; and a reversion, or, other intangible thing.

In the case of tangible immovable property, of a value less than Rs. 100,exchange can be effected by a registered instrument or by delivery of the property In the case of movable property, the relevant portions, of the Sale of Goods Act will apply.


Exchange and Sale

Sections 118, 119, and 120 of the T.P. Act highlights that the Legislature treats exchanges similarly to sales in most respects. The procedures and formalities for executing a sale and exchange are alike.

A transfer of property through exchange follows the same process as a sale. According to Section 120, each party assumes the rights and liabilities of a seller for what they give and those of a buyer for what they take. 

The key difference between sale and exchange lies in the consideration. While a sale involves a price, which typically means money, an exchange lacks a price; instead, one specific thing is traded for another.

Money may be added to equalize the value of the exchange. If both items exchanged are money, it constitutes an exchange, not a sale. In an exchange involving money, there's an implied warranty regarding the genuineness of the money (Section 121).

Exchange and Partition

An exchange involves the reciprocal transfer of ownership between two individuals concerning two distinct properties. Conversely, a partition is merely an arrangement where co-owners transition from jointly owning property to individually owning specific portions.

Exchanges are established through contracts between the involved parties, while the right to partition is an inherent aspect of property ownership.

In an exchange, the individuals exchanging properties are the parties to the exchange. It's not possible for one party to claim prior ownership of the property received through the exchange.

However, in a partition, each person holds an equal interest in the entire property, without any concept of exclusive ownership.

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