Property Law for Business

Property is the thing over which the right of ownership is exercised

Definition of property

According to John Austin ownership is said to exist when:

When the right is available against the whole world (Jus in rem)

Over a determinate thing Indefinite in point of disposition, and Unlimited in point of duration

Classification of property

Movable Property Immovable property

Tangible Property: Physical existence can be measured

Intangible Property: copyrights, patent rights

Movable and Immovable property

Transferable Non-transferable

Ex: Vehicles, books, utensils etc.

Ex: Land, houses, trees attached to the ground

Need not be registered Registration is compulsory

sales tax and central sales tax

Stamp duty is to be paid

Delivery of the movable property completes the transaction

Registration on the name of the transferee completes the transaction

Sale of Goods Act, 1930

Section 4 (1) of the Act, 1930 defines the contract of sale of goods:

It is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. It may be absolute or conditional

….contd Sale of Goods Act, 1930

Section 4 (3) deals with the concept of an agreement to sell:

The transfer of property in goods is to take place at a future time or subject to some condition thereafter to be fulfilled.

Sale and Agreement to sell

Executed contract Executory contract

Existing and specific goods Future and contingent goods

Risk of loss is borne by the buyer even though the seller possesses the goods

Loss falls on the seller

The seller can sue if the contract is breached

In case of breach, the seller can sue for damages

Sale and Agreement to sell

The seller will not have the right to re-sell – the subsequent buyer will not have good title to the goods

He can re-sell and the buyer will acquire good title. The original buyer can claim for damages.

Jus in rem ‘Jus in personam’

Performance of a contract of sale

Three stages: Passing of risk Transfer of possession of the goods and Transfer of ownership of title from the

seller to the buyer.

Essential elements of a sale

Parties: Two subject matter: immovable Transfer or conveyance:

Either registration or delivery of possession of the goods

Price or consideration

Transfer of Title

The seller must have a good title to the goods

Sale by a non-owner will not be transferring a better title

A person who does not possess the title cannot transfer the title

Nemo dat Quod non habet

‘No person can give a better title than what he has’ Shaik Buddan Sab vs. Nagamma (1977)

The defendant sold 12 acres of land to the plaintiff in 1947. The defendant has no right over the 6 acres of land. The plaintiff was asked to vacate and dispossess the 6 acres of land in 1967 by the true owners.

Nemo dat Quod non habet

The plaintiff sued the defendant for damages for 6 acres of land. The plaintiff took the ground of the nemo dat quod non habet

The defendant took the plea of caveat emptor’

Is the defendant liable to pay the amount back to the plaintiff?

….contd Nemo dat Quod non habet

Sale by non-owners: Where the goods are sold with the

consent of the true owner Sale by an agent Sale by one of the joint owners Sale with the consent of the true owner Sale by an unpaid seller

….contd Nemo dat Quod non habet

The Pawnee of the goods

A thief or finder of a negotiable instrument endorsed in blank or payable to bearer

Finder of goods – perishable in nature or Finder of goods - where the lawful charges

incurred in respect of goods amount to 2/3rds of its value and where the owner refuses to pay the charges

Borrowing against property as security

Borrowing against Property as Security Hypothecation Pledge and Hypothecation –

Bank Advances Mortgage of Immovable Property

Hypothecation

Parties to hypothecation: Hypothecator Hypothecatee

Hypothecator holds the goods as an agent but not as the owner. The goods are liable to be returned to the hypothecatee under certain circumstances.

Hypothecation

If the hypothecator refuses to return the goods, the hypothecatee has a right to claim in the court of law.

Difference b/w Pledge and Hypothecation: Possession

Hypothecation

Caselaw: In Bank of Chittor vs. Narsimhulu, A Cinema projector and some accessories were pledged with a bank.

The bank allowed the property to remain with the pledgers, since it is very important for running cinema. Later on the pledgers sold the machinery. It was held that the sale was subject to pledge.

Mortgage

Section 58 (a) of the Transfer of property Act, 1882 defines mortgage:

A mortgage is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced by way of loan, an existing or future debt or the performance of an engagement which may give rise to a pecuniary liability.

Mortgage

Parties to a mortgage: Transferor is called a “mortgagor” Transferee a “mortgagee” The principal money - “mortgage-

money” The instrument – mortgage-deed

Mortgage

Essential Features of a mortgage: Two parties – competent Transfer of interest Of Specific immovable property Such transfer is to provide security of

payment Consideration Registration

Kinds of Mortgage

Simple mortgage – possession & personal liability

Mortgage by conditional sale – Agree to sell

Usufructuary Mortgage - right to enjoy the benefits

English mortgage – repay on certain date, condition of

retransfer, enjoy the benefits Mortgage by deposit of title deeds- delivers the

title deeds, regtn not compulsory

Anomalous mortgage: combo of simple and usufructuary

Hire Purchase of Property( ICA,1872)

Nature of Hire-purchase Agreement: The goods are delivered on the

condition that the amount will be paid in timely installments

Title is acquired on payment of last installment only

The hirer can terminate the agreement- before the property passes on to him

Ingredients of Hire purchase Agreements

Hirer Owner Hire Hire-purchase price

It should be in writing and signed by both the parties

Contents of Hire-purchase agreement

The cash price and the hire-purchase price of the goods

The date of commencement of the agreement

The date, number and the amount of installments

The name of the person to whom the installment is to be paid.

Lease of property

Transfer of the possession of property for a fixed period of time

It shall specify the beginning and end of the term of lease

Right of interest in immovable property is transferred

Consideration is Rent or premium

Essentials of a Lease

The parties Subject-matter Demise or partial transfer Term or period of lease Consideration or Rent

Termination of Lease

Section 111 to 113 of the TP Act deals without the termination of lease:

By lapse of time By happening of an event By termination of lessor’s interest By merger On the expiration of the notice to quit

Exchange (Sec.118)

Two persons Mutual agreement to transfer the

ownership of one thing for the ownership of another

Essentials of a valid exchange

Presence of two parties Exclusive Ownership of property Mutual transfer of reciprocal estate Transfer of property includes movable

and immovable property Consideration for transfer is not price Formalities of sale must be complied

with

Gift (Section 122)

A gift is a transfer of ownership voluntarily or gratuitously

Parties to the Gift: Absence of consideration The Donor and the donee The subject matter The transfer and acceptance

Registration of Gift (S. 123)

Registration of a gift deed is compulsory in case of immovable property

Revocation of Gift (S.126) An incomplete gift can be revoked at

any time Mutual consent

Revocation of Gift

Under Mohammedan Law a gift may be revoked even after the delivery of possession:

Husband to wife Prohibited degrees of relation Charity or for any religious purpose

Revocation of Gift

Death of the donee Subject matter of gift is destroyed. When the gift is sold by the donee when some property is received in

exchange of the gift