Transfer by a Person Having Authority to Revoke a Former Transfer
Chapter Nineteen
Syllabus topic 1.2, "General principles of transfer of property"
Pages 98 to 100 of 378
In one line
If you kept the power to cancel a transfer and you then transfer the same property to somebody else for value, the law treats the second transfer as your cancellation of the first.
In exam wording: section 42 provides that where a person transfers immovable property reserving power to revoke the transfer, and subsequently transfers the property for consideration to another transferee, the later transfer operates in favour of that transferee, subject to any condition attached to the exercise of the power, as a revocation of the former transfer to the extent of the power.
Why the section exists
A transferor sometimes keeps a power of revocation, a reserved right to undo the transfer. The question the section answers is a practical one about form. Suppose he never executes a formal deed of revocation, but simply transfers the property again, for value, to a new buyer. Has the first transfer been revoked?
The obvious answer is that a man who sells property to a second person is plainly exercising the power he kept to take it back from the first. Section 42 makes that inference a rule of law, so the second transferee does not have to prove the transferor's state of mind or hunt for a document that was never written.
The principle is that revocation may be by conduct, not only by a formal instrument, and a second transfer for consideration is conduct that admits of only one meaning.
Broken down
One, the first transfer must have reserved a power to revoke. If no power was reserved, there is nothing to exercise and the section does not apply. The transferor is then simply a person transferring property he no longer owns, and the second transferee must look to section 43 or elsewhere.
Two, there must be a subsequent transfer of the same property for consideration. A gratuitous second transfer does not attract the section, which speaks of a transfer "for consideration".
Three, the operation is in favour of the later transferee. The revocation works because the section is protecting the person who paid.
Four, it operates subject to any condition attached to the exercise of the power. If the power was exercisable only in stated circumstances or by a stated procedure, those conditions still apply.
Five, it revokes the former transfer only to the extent of the power. If the power was to revoke part, only that part goes.
The Act's illustration puts all five together:
A lets a house to B, and reserves power to revoke the lease if, in the opinion of a specified surveyor, B should make a use of it detrimental to its value. Afterwards A, thinking that such a use has been made, lets the house to C. This operates as a revocation of B's lease, subject to the opinion of the surveyor as to B's use of the house having been detrimental to its value.
Transfer by a Person Having Authority to Revoke a Former Transfer
The illustration is careful. The second lease does operate as a revocation, but the condition attached to the power does not vanish: the surveyor's opinion is still required. A's belief that the house was misused is not a substitute for it.
A worked example
Ganesh grants a lease of his warehouse at Bhiwandi to Hiten, reserving a power to revoke the lease if Hiten stores inflammable goods there. Ganesh comes to believe that Hiten is storing paint thinner, and without saying anything to Hiten he grants a fresh lease of the same warehouse to Irfan for a premium.
Does the second lease revoke the first? Yes, under section 42, and Ganesh need not have executed a deed of revocation. The grant to Irfan for consideration operates as an exercise of the reserved power.
But the condition survives. The power was exercisable only if inflammable goods were being stored. If Hiten was in fact storing nothing of the kind, the condition on which the power depended has not been satisfied, and the revocation does not stand against him.
If Ganesh had reserved no power at all, section 42 would have nothing to work on. Hiten's lease would continue, and Irfan would take subject to it.
If Ganesh had gifted the warehouse to his brother instead of leasing it to Irfan for a premium, the section would not apply, because it requires a subsequent transfer for consideration.
What it does NOT mean
It does not create a power of revocation. The power must have been reserved by the earlier transfer. The section only says how an existing power may be exercised.
It does not dispense with the conditions on the power. The words "subject to any condition attached to the exercise of the power" keep them alive, as the illustration shows.
It does not revoke more than the power allowed. Revocation is to the extent of the power and no further.
It does not apply to a gratuitous later transfer. Consideration is required.
It does not apply to movable property. The section speaks of immovable property.
Distinctions
| Section 42 | Section 43 | |
|---|---|---|
| The transferor's position at the first transfer | He owned the property and kept a power to revoke | He had no authority and said he had |
| What the section does | Treats the later transfer as an exercise of the power | Lets the earlier transferee take the interest the transferor later acquires |
| Who is protected | The later transferee, for consideration | The earlier transferee, for consideration |
Transfer by a Person Having Authority to Revoke a Former Transfer
Quick revision
- Section 42 applies where a transfer of immovable property reserved a power to revoke.
- A subsequent transfer for consideration of the same property operates as a revocation of the first.
- It operates subject to any condition attached to the exercise of the power.
- It revokes only to the extent of the power.
- The illustration: a lease revocable on a surveyor's opinion; a later lease to C revokes B's lease, but the surveyor's opinion is still required.
- The underlying principle: a power of revocation may be exercised by conduct, and a second transfer for value is unambiguous conduct.
Test yourself
1. What must the first transfer contain for section 42 to apply? A reserved power in the transferor to revoke the transfer. Without it there is nothing for the later transfer to exercise.
2. Must the transferor execute a deed of revocation? No. The subsequent transfer for consideration itself operates as the revocation, which is the whole point of the section.
3. Does the second transfer override a condition attached to the power? No. Section 42 makes the operation subject to any condition attached to the exercise of the power, so a condition such as a surveyor's opinion must still be satisfied.
4. A grants a revocable lease to B and later gifts the property to his nephew. Is B's lease revoked? No. Section 42 requires a subsequent transfer for consideration, and a gift is not one.
5. If the reserved power allowed revocation of only half the property, what does a later transfer of the whole revoke? Only the half covered by the power. The section revokes the former transfer to the extent of the power and no further.
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.