Rights of a Purchaser or Lessee Against a Person with No Title

The four rights

(a) Interest acquired after the contract

Where the vendor or lessor later acquires an interest in the property, the buyer may compel him to make good the contract out of it.

This is the statutory form of the principle that a seller who afterwards gets the title he lacked is treated as holding it for the buyer, and it stops him keeping the windfall.

(b) Concurrence or conveyance by others

Where somebody else's concurrence is needed to validate the title, and that person is bound to concur at the vendor's request, the buyer may compel the vendor to procure it. The same applies where a conveyance by others is needed and they are bound to convey at his request.

Note the limit: the third party must be bound to concur or convey at the vendor's request. The section does not enable a buyer to compel a stranger who is free to refuse.

(c) Redeeming a mortgage

Where the vendor professes to sell unencumbered property, the property is in fact mortgaged for an amount not exceeding the purchase money, and the vendor has only a right to redeem, the purchaser may compel him to redeem the mortgage, obtain a valid discharge, and where necessary procure a conveyance from the mortgagee.

The condition "for an amount not exceeding the purchase money" matters. Where the mortgage exceeds the price, the purchase money cannot clear it and the clause does not apply.

(d) Return of deposit, interest, costs and a lien

Where the vendor or lessor sues for specific performance and his suit is dismissed for want of title or imperfect title, the defendant, that is the buyer, has a right to:

• a return of his deposit, if any;
• interest on it;
• his costs of the suit; and
• a lien for the deposit, interest and costs on the interest, if any, of the vendor or lessor in the property.

The lien is the valuable part: the buyer is not left with a money decree against a seller who may have nothing, but has security over whatever interest the seller does hold in the property.

Sub-section (2): movables

The same provisions apply, as far as may be, to contracts for the sale or hire of movable property. The words "as far as may be" allow for the fact that some of the clauses, particularly (c), fit land better than goods.

Sections 13 and 17 together

A worked example

Chetan agrees to sell a flat to Dhara for eighty lakh rupees, Dhara paying eight lakh as deposit. It emerges that Chetan does not own the flat.

• Chetan inherits the flat from his mother two months later. Clause (a): Dhara may compel him to make good the contract out of that interest. He cannot keep the flat and return her deposit.
• The flat is jointly owned by Chetan and his brother, who is bound by a family arrangement to convey at Chetan's request. Clause (b): Dhara may compel Chetan to procure that conveyance. Had the brother been free to refuse, the clause would not help her.
• Chetan sold the flat as unencumbered; it is in fact mortgaged for thirty lakh, and he has only a right to redeem. Clause (c): the mortgage of thirty lakh does not exceed the price of eighty lakh, so Dhara may compel him to redeem, obtain a valid discharge, and if necessary procure a conveyance from the mortgagee.
• The mortgage is for one crore. Clause (c) does not apply, the mortgage exceeding the purchase money.
• Chetan sues Dhara for specific performance and the suit is dismissed because his title is bad. Clause (d): Dhara is entitled to the return of her eight lakh deposit with interest, to her costs of the suit, and to a lien for all of it on whatever interest Chetan has in the flat.
• Chetan wants to enforce the contract against Dhara although his title is imperfect. Section 17(1)(b) bars him: he cannot at the time fixed give a title free from reasonable doubt.
• The same facts, but the subject is a consignment of machinery. Sub-section (2) applies the section, as far as may be, to the sale or hire of movable property.

What it does NOT mean

"A contract by a person without title is void." It is not. It is unenforceable by him under section 17, and enforceable against him by the buyer under section 13.

"The buyer may compel any third party to convey." Only where that person is bound to concur or convey at the vendor's request.

"Clause (c) applies to any mortgage." Only where the property is mortgaged for an amount not exceeding the purchase money and the vendor has only a right to redeem.

"Clause (d) applies whenever the seller's title fails." It applies where the vendor or lessor has sued for specific performance and his suit is dismissed on that ground.

"Section 13 is confined to immovable property." Sub-section (2) extends it, as far as may be, to the sale or hire of movables.

Quick revision

• s.13(1): where a person contracts to sell or let immovable property having no title or only an imperfect title, the purchaser or lessee has four rights.
• (a) compel him to make good the contract out of an interest acquired after the contract.
• (b) compel him to procure the concurrence or conveyance of others bound to concur or convey at his request.
• (c) where he professes to sell unencumbered property that is mortgaged for an amount not exceeding the purchase money and he has only a right to redeem: compel him to redeem, obtain a discharge, and if necessary procure a conveyance from the mortgagee.
• (d) where the vendor sues and his suit is dismissed for want of title: the buyer gets the deposit back, with interest, his costs, and a LIEN for all three on the vendor's interest in the property.
• s.13(2): applies as far as may be to the sale or hire of movable property.
• Read with s.17: the vendor or lessor with no title, or who cannot give a title free from reasonable doubt at the time fixed, cannot enforce. A shield for the buyer, never a sword for the seller.

Test yourself

1. State the four rights in section 13(1). To compel the vendor or lessor to make good the contract out of any interest he acquires after the contract; to compel him to procure the concurrence, or the conveyance, of other persons who are bound to concur or convey at his request; where he professed to sell unencumbered property that is mortgaged for an amount not exceeding the purchase money and he has only a right to redeem, to compel him to redeem the mortgage, obtain a valid discharge and if necessary procure a conveyance from the mortgagee; and, where his own suit for specific performance is dismissed for want of title, to a return of the deposit with interest, to costs, and to a lien for all of them on his interest in the property.

2. How do sections 13 and 17 fit together? Section 17 bars a vendor or lessor who has no title, or who cannot at the time fixed give a title free from reasonable doubt, from obtaining specific performance. Section 13 gives the purchaser or lessee in the same situation four rights to enforce the contract against him. Want of title is therefore a shield for the buyer and never a sword for the seller.

3. What is the significance of the lien in clause (d)? It gives the buyer security rather than a bare money claim. Where the vendor's own suit is dismissed for want of title, the buyer recovers his deposit, interest and costs, and has a lien for them on whatever interest the vendor does hold in the property, so he is not left to enforce a personal decree against a seller who may be worth nothing.

4. When does clause (c) apply? Where the vendor professes to sell unencumbered property, the property is in fact mortgaged for an amount not exceeding the purchase money, and the vendor has in fact only a right to redeem it. If the mortgage exceeds the price the clause does not apply, because the purchase money could not clear the encumbrance.

5. Does section 13 apply to movable property? Yes. Sub-section (2) provides that the provisions of sub-section (1) apply, as far as may be, to contracts for the sale or hire of movable property. The qualifying words allow for the fact that some clauses, particularly the one on redeeming a mortgage, fit land better than goods.