Persons Competent to Transfer
Chapter Six
Syllabus topic 1.2, "Persons competent to transfer"
Pages 29 to 32 of 378
In one line
To transfer property you must be able to make a contract, and you must either own the property or be authorised to dispose of someone else's.
In exam wording: section 7 provides that every person competent to contract and entitled to transferable property, or authorised to dispose of transferable property not his own, is competent to transfer such property either wholly or in part and either absolutely or conditionally, in the circumstances, to the extent and in the manner allowed and prescribed by any law for the time being in force.
Why the section exists
Section 6 has just said what may be transferred. That is only half of a valid transfer. A thing may be perfectly transferable and the transfer still fail because the person purporting to make it had no capacity or no title. Section 7 supplies the other half.
The section also quietly settles that a transferor need not part with everything. He may transfer wholly or in part, and absolutely or conditionally, which is the statutory basis for life interests, part shares and the conditional transfers of sections 25 to 34.
Broken down: the three requirements
One, competent to contract. Section 7 does not define this; section 4 sends the reader to the Indian Contract Act 1872. Section 11 of that Act provides that every person is competent to contract who is of the age of majority according to the law to which he is subject, who is of sound mind, and who is not disqualified from contracting by any law to which he is subject. Section 12 explains soundness of mind: a person is of sound mind for the purpose of making a contract if, at the time he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests.
So three classes lack capacity: minors, persons of unsound mind, and persons disqualified by law. The age of majority in India is eighteen, and twenty-one where a guardian of the person or property has been appointed by a court under the Guardians and Wards Act 1890.
A transfer by a minor is void. A minor may, however, be a transferee. Nothing in section 7 requires capacity in the person receiving; the section is about who may transfer. A minor can therefore take a gift or buy property through a guardian, and a mortgage in favour of a minor who has advanced money is good.
Soundness of mind is judged at the time of the transfer. A person usually of unsound mind may transfer during a lucid interval, and a person usually of sound mind may not transfer while he is not, which is what section 12 of the Contract Act says in terms.
Persons Competent to Transfer
Two, entitled to the transferable property. The transferor must have title, and the property must be transferable, which sends the reader back to section 6. A person cannot give a better title than he has. Where he has a limited interest, for example a life interest, he can transfer only that, and it ends when his interest ends.
Three, or authorised to dispose of transferable property not his own. This is the alternative limb and it is what makes agents, guardians, trustees, executors, receivers and attorneys able to convey. The authority must be real and must extend to the transaction: a power of attorney to manage land does not by itself authorise a sale of it.
And in the manner allowed by law. The closing words subject everything to any other law in force. A guardian selling a minor's immovable property needs the permission of the court under section 8 of the Hindu Minority and Guardianship Act 1956; a trustee is bound by the trust deed and the Indian Trusts Act 1882; a company acts through its board under the Companies Act 2013.
A worked example
Consider four proposed sales of a flat at Mulund.
One. Nikhil, aged seventeen, sells the flat he inherited. He is not competent to contract under section 11 of the Contract Act 1872, so he is not competent to transfer under section 7. The sale is void, and no lapse of time and no ratification on turning eighteen will cure it, because there was never a contract to ratify.
Two. Nikhil's mother, as his natural guardian, sells the same flat without applying to the court. She is a person authorised to dispose of property not her own, so she satisfies the third limb of section 7. But the closing words require the manner allowed by law, and section 8 of the Hindu Minority and Guardianship Act 1956 requires the previous permission of the court for a sale of a minor's immovable property. Without it the sale is voidable at the minor's instance.
Three. Prakash, who holds the flat for his lifetime under his father's will with a remainder to his sister, sells it outright. He is competent to contract and entitled to property, but only to a life interest. He passes what he has: the buyer takes an interest that ends on Prakash's death, and the sister takes thereafter.
Four. Prakash's attorney, holding a power of attorney "to let, manage and collect rents", executes a sale deed. He is not authorised to dispose of the property, only to manage it, so the third limb is not satisfied and the deed conveys nothing.
Persons Competent to Transfer
What it does NOT mean
It does not require the transferee to be competent. A minor can receive property. Section 7 speaks only of who may transfer.
It does not mean an owner can always transfer. Section 6 may make the property untransferable, other laws may disqualify him, and the closing words subject him to the manner prescribed by law.
A transfer by a minor is void, not voidable. This follows from a minor's agreement being void under the Contract Act, and it is why ratification on majority does not help. A fresh transfer after majority would be needed.
Unsoundness of mind is not a permanent status for this purpose. It is tested at the moment of the transfer, by section 12 of the Contract Act.
Authority is not general. An agent conveys only what his authority covers.
Distinctions
| Section 6 | Section 7 | |
|---|---|---|
| Question asked | What may be transferred | Who may transfer |
| Defect it catches | The subject matter is not transferable | The person lacks capacity, title or authority |
| Effect | Transfer void | Transfer void, or voidable where a protective statute is breached |
| Both required? | Yes. A competent person cannot transfer a spes successionis, and an owner who is a minor cannot transfer his own land |
| Transferor | Transferee | |
|---|---|---|
| Must be competent to contract | Yes, s.7 | No |
| Must have title | Yes, or authority | No |
| A minor may be | No | Yes |
Quick revision
- Section 7 has three requirements: competent to contract; entitled to transferable property, or authorised to dispose of property not his own; and acting in the manner allowed by law.
- Competence comes from sections 11 and 12 of the Contract Act 1872 through section 4 of this Act: majority, sound mind, not disqualified.
- Majority is eighteen, or twenty-one where a court has appointed a guardian under the Guardians and Wards Act 1890.
- A transfer by a minor is void and cannot be ratified. A minor may be a transferee.
- Sound mind is judged at the time of the transfer; a lucid interval will do.
- The third limb covers guardians, agents, trustees, executors and receivers, and the authority must cover the transaction.
- A transferor passes only what he has; a life tenant passes a life interest.
- The closing words import other statutes, for example section 8 of the Hindu Minority and Guardianship Act 1956.
Test yourself
1. State the three requirements of section 7. Competence to contract; entitlement to the transferable property, or authority to dispose of transferable property that is not his own; and that the transfer is made in the circumstances, to the extent and in the manner allowed and prescribed by law for the time being in force.
2. Can a minor be a transferee? Yes. Section 7 governs only who may transfer. A minor may take a gift, be a mortgagee, or buy through a lawful guardian.
Persons Competent to Transfer
3. A man who is usually of unsound mind sells his land during a period when he understands perfectly what he is doing. Good or bad? Good. Section 12 of the Contract Act 1872 makes soundness of mind a question at the time the contract is made, so a transfer in a lucid interval is valid.
4. A holds a life interest and sells the property absolutely. What does the buyer get? A life interest measured by A's life. Nobody can transfer more than he has, and on A's death the property goes to whoever holds the remainder.
5. Does an agent with a power of attorney to manage property have power to sell it? No, unless the power says so. The third limb of section 7 requires authority to dispose of the property, and a power to manage is not that.
6. Why can a minor's void transfer not be ratified on his attaining majority? Because a minor's agreement is void from the start, so there is no transaction in existence for the major to adopt. A fresh transfer is required.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.