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Rights and Liabilities of Parties to Exchange in TPA

Rights and Liabilities of Parties to Exchange
Rights and Liabilities of Parties to Exchange


Right of Party Deprived of thing Received in Exchange (Sec 119)

If, due to any defect in the other party's title, one party to an exchange (or anyone claiming through or under them) is deprived of the property received in exchange, the other party is liable for any resulting loss.

The aggrieved party has the option to claim compensation for the loss or demand the return of the transferred property, provided it is still in the possession of the other party, their legal representative, or a transferee without consideration.

This section ensures that each party receives the property they were entitled to under the exchange agreement and offers a remedy in case of deprivation or failure to obtain possession.

This principle applies even if there is no subsequent deprivation but rather a failure to transfer the property at all.

In the case of Hari Shanker Mishra v Vice Chairman, Kanpur Development Authority, the court ruled that if one party surrenders a property they have no title to in exchange for another property, the receiving party can refuse to complete the exchange if the surrendering party had no rightful claim to the original property.

After the exchange is concluded, it becomes the responsibility of the party receiving the property to safeguard it. If they are unlawfully dispossessed of the property, they cannot demand its return from the other party under the exchange agreement.

However, the rule outlined in Section 119 is subject to any contractual agreements between the parties that may specify otherwise.

Rights and Liabilities of Parties to an Exchange (Sec. 120)

Save as otherwise provided in this Chapter, each party has the rights and is subject to the liabilities of a seller as to that which he gives, and has the rights and is subject to the liabilities of a buyer as to that which he takes.”

In an exchange, each party is subject to the rights of the buyer and seller in relation to the property that he receives and gives respectively. 

Exchange of Money (Sec. 121) Transfer of Property Act (TPA)

On an exchange of money, each party thereby warrants the genuineness of the money given by him.”

So, when money is paid for forged bills or forged currency notes, the money may be recovered. Money (coins or currency notes) can be exchanged with money, of the same or different denominations or even different currencies.

Sale, Mortgage, Exchange and Lease Compared 

Sale, mortgage, exchange, and lease are distinct methods of transferring property rights, each with its own characteristics.

A ‘sale’ involves the complete transfer of ownership in the property from one party to another in exchange for a price. This means that the buyer gains full ownership rights over the property, while the seller relinquishes all ownership rights.

On the other hand, a ‘mortgage’ only transfers a partial interest in the property. In a mortgage agreement, the borrower (mortgagor) pledges the property as security for a loan, thereby granting the lender (mortgagee) certain rights over the property until the loan is repaid.

However, the mortgagor retains ownership of the property, albeit subject to the rights of the mortgagee.

An ‘exchange’ also involves the transfer of ownership, but unlike a sale, it does not involve the exchange of money as consideration. Instead, ownership of one property is exchanged for ownership of another property.

In an exchange, both properties have equal value, and neither property is exchanged solely for money. If money is involved in an exchange transaction, it ceases to be a sale and becomes an exchange.

Lastly, a ‘lease’ transfers only the right to use and enjoy the property for a specified period, without transferring ownership. In a lease agreement, the landlord (lessor) grants the tenant (lessee) the exclusive right to occupy the property for a predetermined period, usually in exchange for rent.

However, the landlord retains ownership of the property throughout the lease term.

While a sale involves the complete transfer of ownership for a price, a mortgage transfers only a partial interest in the property, an exchange transfers ownership of one property for another without involving money as consideration, and a lease transfers only the right to use and enjoy the property without transferring ownership.

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