Vested Interest and Contingent 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.
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 an 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.

Section 120 of the Indian Successions Act, 1925 lays down the exceptions for contingent
interest.

Section 22 states about the transfer to a group or class of members with a contingent interest.
For example, there is a transfer to a group of 5 people, and the condition is that the property
will be vested in persons who attain the age of 40 years on this particular date. The persons
who have attained this age will get an interest in the property and people who have not, will
not get an interest in that property.

Section 23 states about a transfer that happens after happening of an event that was
mentioned in the transfer involving contingent interest. This provision simply lays down one
of the two branches of Section 21 that laws down about contingent interest. The two branches
are happening of an event and non-happening of an event. This Section states about what
happens after the happening of the specified uncertain event.

Section 24 states about a transfer to a group or class of members who will get the property on
a condition that they shall be living at the specified date. This is also a contingent interest as
the event mentioned here is an uncertain event. The transfer will only take place for those
people who satisfy the condition of surviving at a particular date. The legal heirs of the
deceased cannot claim an interest in that property as a transfer involving a contingent interest
solely depends upon the fulfilment of the condition.

Difference between Vested & Contingent Interest

Sign Ground of
Vested Interest Contingent interest
number Difference

Vested interest is provided Contingent interest is provided

1. Section in Section 19 of the Transfer of in Section 21 of the Transfer of
Property Act, 1882. Property Act, 1882.

It is an interest which is created in

It is an interest which is created
favour of a person on a condition of
in favour of a person where time
the happening of a specified uncertain
is not specified or a condition of
event. The person having the
the happening of a specified
contingent interest does not get the
certain event. The person having
2. Definition possession of that property but has the
the vested interest does not get
expectancy to receive it upon
the possession of that property
happening of that event but will not
but has the expectancy to receive
receive the property if the event does
it upon happening of a specified
not happen as the condition is not
certain event.
fulfilled.

The condition involves The condition involves a specified

a specified certain event. A uncertain event. There is a chance of
3. Condition
certain event means an event that the happening or non-happening of
will eventually happen. that particular event.

Vested Interest does not entirely

depend on the condition as the
Contingent interest is entirely
condition involves a certain
dependent on the condition imposed
Fulfilment of event. It creates a present right
4. on the transfer. Interest is only
conditions that is in effect immediately,
transferred to the transferee on the
although the enjoyment is
fulfilment of the condition imposed.
postponed to the time prescribed
in the transfer.

5. Right of This right is created as soon as There is mere chance to be having the
 Ownership the interest is vested. ownership rights.

Death of the person who is Death of the transferee before getting

having this interest will not have the possession of the property will
Death of
6. any effect over that interest as result in the failure of continent
transferee
after the deceased, the interest interest and the property will remain
will vest in his legal heirs. with the transferor.

Contingent interest is a Transferable

Transferable and Vested interest is a Transferable right, but whether it is heritable or
7.
heritable? and heritable right. not, it depends upon the nature of
such any transfer and the condition.

There is present, immediate There is no present right of

The present right
8. right even when its enjoyment is enjoyment, there is a mere expectancy
of enjoyment.
postponed. of having such a right.

X professes to transfer the property

X professes to transfer the
‘O’ to Y on the condition that he shall
property ‘O’ to Y when he attains
construct a well in his property. If he
9. Examples the age of 20. There is a vested
constructs, Y shall get contingent
interest with Y for the property
interest in the property until the
‘O’.
condition is not fulfilled.

The Transfer of Property Act, 1882 deals with two kinds of interest that are vested interest
and contingent interest. The concepts of vested interest and contingent interest are something
that is very important to understand as there are many sections relating to these concepts. The
main point to understand about both the concept is that the transfer of property involving
Contingent interest takes effect only after the condition is fulfilled, if the condition is not
fulfilled then the transfer will not take effect.
The conditions are required to be fulfilled and they have to necessarily comply with the rules
of the preamble that talk about justice, equity and good conscience, the three major principles
of the natural law on which this whole act is based upon. In a transfer of property involving
vested interest, the transfer is not invalidated if the condition mentioned is not fulfilled. The
reader will get to know about the basic meaning and interpretations of the sections involving
the two concepts with the help of various examples. The author has tried to explain the two
concepts by discussing all the aspects of both for a better understanding of the provisions.
Towards the end, the author has also discussed certain judicial pronouncement in a brief
manner as to make sure that the reader understands the concept in a more direct and easier
way and so that he can get into more and more specific details of the two concepts.