CONCEPT OF VESTED INTEREST (S.19) AND CONTINGENT INTEREST (S.20) AND ITS DIFFERENCE

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CONCEPT OF VESTED INTEREST AND CONTINGENT INTEREST AND ITS DIFFERENCE



Concept of 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 the possession of that property but has the expectancy to receive it upon happening of a specified certain event.

For example, A promises to transfer his property to B on him attaining the age of 22. B will have vested interest in A’s property till the time he does not get the possession of it.

 Death of the person who is having this interest will not have any effect over that interest as after the deceased, the interest will vest in his legal heirs.

For example, in the above example, if B dies at the age of 21, then the interest vested in B will pass on to the legal heirs of B and they will be entitled to the property in the prescribed time period.

 There are the important aspects of a vested interest as stated above, all these are discussed in detail below:

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.

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.

For example, X agrees to transfer the property ‘O’ to Y and directs his guardian Z to give him the property when he attains the age of 22. Y gets vested interest once he attains the age of 18.

Time of vesting: The interest is vested right after the transfer is initiated. Nothing can stop the interest from vesting in the person in favour of whom the transfer is to be made.

Contrary Intention: The transferor can specify a particular time as to when the interest will be vested in the person who will receive the property.

Death of the transferee: If the transferee dies before getting the property in his possession, the interest vested in him will now vest in his legal heirs and they will get the possession of that property once the condition is fulfilled.

In the case of Lachman v. Baldeo, a person transferred a deed of gift in favour of another person but directed him that he will not get the possession of that property until the transferor himself dies. The transferee will have a vested interest even though his right of enjoyment is postponed.

 

Characteristics of Vested Interest

1) Vested interest creates a present right that is in effect immediately, although the enjoyment is postponed to the time prescribed in the transfer. It does not entirely depend on the condition as the condition involves a certain event.

2) Death of transferee will not render the transfer invalid as the interest will pass on to his legal heirs.

3) Vested interest is a Transferable and heritable right.

Section 20 of the Transfer of Property Act, 1882 states about vested interest to an unborn child. The interest in the property will be vested in him once he is born. The unborn child may not get the right of enjoyment of the property immediately after having vested interest.

 

Concept of Contingent Interest

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

For example, A agrees to transfer the property ‘X’ to B on the condition that he shall secure 90 % in his exams. This condition is uncertain and the happening of the event or not happening is in doubt and therefore B here acquires a contingent interest in the property ‘X’. He shall get the property only if he gets 90 % and when the condition is fulfilled.

 In the case of Leake v. Robinson , the court held that whenever a condition involves a bequest that is to be given ‘at’ a particular age or ‘upon attaining’ a particular age or ‘after’ attaining this particular age, then it can be derived that the transfer involves a contingent interest.

Characteristics of Contingent Interest

A) This interest is entirely dependent upon the condition. It only happens when the condition is fulfilled.

B) Death of the transferee before getting the possession of the property will result in the failure of continent interest and the property will remain with the transferor.

C) Contingent interest is a Transferable right, but whether it is heritable or not, it depends upon the nature of such any transfer and the condition.

 

There are some important aspects surrounding contingent interest which are explained in detail below:

Interest: In a transfer if a condition is such that the transfer will take effect only upon the fulfilment of that condition and till that time, the interest is contingent.

Contingent Interest exists in wills: Any bequest to a wife, son or daughter can be a contingent interest if the condition provides so.

Exception: When a person who has expectancy in the rights of ownership of a particular property, and he for the time being till the happening of the event, gets any sort of income that arises from that property. This interest in the property does not come under the aspect of contingent interest.


Difference between Vested & Contingent Interest

Grounds of Difference

Vested Interest

Contingent Interest

Section

Vested interest is provided in Section 19 of the Transfer of Property Act, 1882.

Contingent interest is provided in Section 21 of the Transfer of Property Act, 1882

Condition

The condition involves a specified certain event. A certain event means an event that will eventually happen.

The condition involves a specified uncertain event. There is a chance of the happening or non-happening of that particular event. 

Fulfilment of Condition

Vested Interest does not entirely depend on the condition as the condition involves a certain event. It creates a present right that is in effect immediately, although the enjoyment is postponed to the time prescribed in the transfer.

Contingent interest is entirely dependent on the condition imposed on the transfer. Interest is only transferred to the transferee on the fulfilment of the condition imposed.

 

Right of Ownership

This right is created as soon as the interest is vested.

There is mere chance to be having the ownership rights. 

Death of Transferee

Death of the person who is having this interest will not have any effect over that interest as after the deceased, the interest will vest in his legal heirs.

Death of the transferee before getting the possession of the property will result in the failure of continent interest and the property will remain with the transferor. 

Transferable and heritable

Vested interest is a Transferable and heritable right.

Contingent interest is a Transferable right, but whether it is heritable or not, it depends upon the nature of such any transfer and the condition.

Present Right of Enjoyment

There is present, immediate right even when its enjoyment is postponed.

There is no present right of enjoyment, there is a mere expectancy of having such a right.





























































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