“DIFFERENCE BETWEEN EXCHANGE AND SALE”

PROPERTY LAW PROJECT

ARMY INSTITUTE OF LAW

SECTOR 68, MOHALI

PROJECT SUBMISSION IN PARTIAL FULFILLMENT OF B.A. LLB

Punjabi University, Patiala (Punjab)

SUBMITTED BY: SUBMITTED TO:

Surabhi Dwivedi Mrs. Bhupinder Kaur

ROLL NO. :1833

Submission year: August to December, 2020

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 DECLARATION

It is certified that the project work presented in this report titled ‘EXCHANGE’
embodied the results of original research work carried out by me. All the ideas and
references have been duly acknowledged.

Date: Oct 23rd, 2020 Name: Surabhi Dwivedi

Place: Mohali Roll No: 1833

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 ACKNOWLEDGEMENTS

I take this opportunity to express my humble gratitude and personal regards to Dr.
Bhupinder Kaur, for inspiring me and guiding me during the course of this project
work and also for her cooperation and guidance from time to time during the
course of this project work on the topic:- “DIFFERENCE BETWEEN SALE AND
EXCHANGE”.

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 TABLE OF CONTENT

Introduction To Sale
5-6

Introduction to Exchange
7-8

Difference Betweeen Sale and Exchange 9

Conclusion 11

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 INTRODUCTION TO SALE

Sale of Immovable Property: Explained as Under Transfer Of Property Act, 1882: “sale” is
a transfer of ownership in exchange for a price paid or promised or part paid or promised

Sale How Made:

Such transfer, in the case of tangible immovable property of the value of one hundred rupees and
upwards, or in the case of a reversion or other intangible thing, can be made only by a registered
instrument. In the case of tangible immovable property of a value less than one hundred rupees,
such transfer may be made either by a registered instrument or by delivery of the property.
Section 54 lays down a specific method for the execution of a sale deed with respect to
immovable property and completion of sale.

Contract of Sale:
A contract of sale is different from a sale, as it does not require registration. However, it does not
create a charge or an interest in the property. It is merely a document or an agreement that gives
a right to obtain another document, i.e., a sale deed. Therefore, it does not require registration
(Dave Ramushankar v. Bai Kailasgour1. However, some equities do arise in favour of the
transferee. For instance: where, despite an agreement of sale, the property is transferred to
another person, the subsequent transferee with notice of the earlier transaction holds the property
in trust for the prior agreement holder (Kondapalli Satyanarayan v. Kondapalli mayullu2

In the case of Ramesh Chand Ardavatiya v. Anil Pangwani 3, decided by Supreme Court the
owner of a piece of land entered into an agreement for its sale with B. On payment of the
advance amount, he handed, over the possession to B but failed to execute a sale deed in his
favour. B constructed a boundary wall, but this land was encroached upon by the trespassers on
behest of A.B. filed a suit in a court of law for a declaration that he was in peaceful possession of
property and sought a permanent injunction from the court restraining the trespassers from
interfering with his peaceful possession of the property. The court held that B is entitled to
protect his possession. Directions were issued that A should assert his title through due process
of law and was restrained from taking the law his own hands.
1
AIR 1974 Guj 69
2
AIR 1999 AP 170
3
AIR 2003 SC 2508

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The court observed that as,
“A contract for sale of immovable property is a contract that a sale of such property shall take
place on terms settled between the parties; it does not of itself create any interest in or charge on
such immovable property. However, still if a person who entered into possession over
immovable property under a contract for sale and is in peaceful and settled possession of the
property with the consent of the person in whom the title vests, he is entitled to protect his
possession against the whole world, excepting a person having a title better than what he or his
vendor possesses. If he is in possession of the property in part performance of the contract for
sale and the requirements of Section 53 A are satisfied, he may protect his possession even
against the true owner.

ESSENTIAL ELEMENTS OF SALE

Parties: in a sale there has to be a seller and buyer. The seller has to be competent to transfer the
immovable property to the buyer. Both parties i.e. the seller and the buyer have to be competent
to contract under the Indian Contract Act.

Subject Matter of Sale: Section 54 only governs the sale of immovable property. Immovable
property can be tangible or intangible. Tangible property is one that can be touched, such as a
house, a tree etc., while intangible property refers to property that cannot be touched such as a
right of fishery, a right of way etc.

Transfer of ownership: there has to be a transfer of ownership by the seller to the buyer.

Price: price is the essence of the contract of sale. It may be paid in a lump sum or in instalments
as agreed between the parties. A compromise, a decretal amount, an advance made by one person
to another, or an agreement to protect and defend the property at the purchaser‘s cost is a good
consideration for sale. Likewise, a family settlement is a valid consideration for an agreement to
sell. Where a son- in-law executed an agreement for sale in favour of his mother-in-law in
consideration of a family settlement, it was held that it amounted to a valid consideration for the
sale. The ordinary rule governing sale is that payment of consideration is simultaneous with the
time when the conveyance is executed by the seller. This rule can be deviated from in case of an

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agreement to the contrary by the parties (Chandra Shankar v. Abhia, 1952; Prasanta v. IC Ltd.,
1955). For example, A agrees to sell the land to B, and executes a sale deed for the same.
Ordinarily, the buyer would pay the consideration on the same day. However, if they agree to
pay the entire consideration or part of it at the time of the registration of the document, and partly
at the time of the execution or even subsequent to registration, this would be a valid sale.

The term “paid or promised to be paid” also suggests that this promise to pay must be genuine.
The buyer cannot escape his primary liability to pay the consideration and if he tries to evade
payment by dubious means, no title would pass from the seller to the buyer. For instance, if the
buyer pays money through a cheque which is dishonoured, the sale would not take effect (Inder
Kaur v. Tara Singh, 1978).The same rule would apply if there is an intention to the contrary
expressly incorporated in the contract, that the title would not pass unless the payment has been
made in full, or if consideration is paid in advance. This would entitle the purchaser to sue for
possession (Vidhyadhar v. Manikro, 1999).

INTRODUCTION TO EXCHANGE

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Exchange is transfer of ownership in a property for consideration of ownership of another
property. Transfer of ownership for consideration of money or price is sale. Transfer of
ownership without consideration is gift. Transfer of ownership for consideration of ownership of
another property is exchange. Exchange therefore in laymen’s language is where a property is
changed with another property. 4

Transfer of ownership of a house in consideration of transfer of ownership in an agricultural land

is exchange. Similarly transfer of ownership of a house in return of transfer of ownership of a
motor car is the transfer by way of exchange.

Where two persons mutually transfer the ownership of one property for the transfer of ownership
of another property, the transaction is exchange. Exchange is defined in Section 118 of the Act.

DEFINITION

Section 118 of The Transfer of Property Act defines exchange as the following,

“When two persons mutually transfer the ownership of one thing for the ownership of
another, neither thing or both things being money only, the transaction is called
exchange.”5

A transfer of property in completion of an exchange can be made only in manner provided for
the transfer of such property by sale.

Section 118 includes change of a movable property with another movable property or change of
movable with immovable property.

THE ESSENTIALS OF EXCHANGE

1. Transfer of ownership : Exchange in its most simplest form is the transfer of ownership
in case of any existing property. Moreover exchange is the transfer of absolute interest
,when a lessee surrenders a lease and landlord grants another lease to him in
consideration of such surrender, the transaction is not an exchange.6

4
https://www.legalbites.in/exchange-explained-as-under-transfer-of-property-act-1882/, last visited on 15-10-2020.
5
Transfer of Property Act, 1882 § 118.
6
Stya Kumar v. Satya Kripal, 1909 10 Cal. LJ 503.

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 2. Exchange includes Barter: Transfer of ownership in some movable property in
consolidation of transfer of ownership in another movable property is technically called
Barter. Definition of exchange given in this section includes barter.7

3. Properties need not be immovable: In exchange, the exchange can be done movable or
immovable. The subject matter of exchange can also be movable. Ownership of
immovable property may be transferred in return of ownership in movable property.

4. Mode of transfer: Section 118 provides that a transfer of property in completion of an

exchange can be made only in a manner prescribed for the transfer of such property by
sale. Therefore the formalities of Section 54 are to be compiled with. Where both the
parties are movable , an exchange may be effected only by delivery of possession without
registration.Where the properties are immovable and of value less than 100, registration
is optional, but in case the value of immovable properties is more than hundred then the
registration of the document is very much compulsory.8

An unregistered deed of exchange in relation to an immovable property is inadmissible in

evidence as per section 118.9

DIFFERENCE BETWEEN EXCHANGE AND SALE

7
Commr. Of Income Tax v. Motor &Gn. Stores(P) Ltd., AIR 1968 SC 200.
8
Birbal v. Barfi Devi, AIR 2008 NOC 1874; Nivrutki Kushaba Binnar v. Sakhubai, AIR 2009 Bom 93.
9
Shyam Narayan Prasad v. Krishna Prasad and Ors., AIR 2018 SC 3152.

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Provisions of sections 118,119 and 120 shows that the legislature has put exchange on the same
pedestal with sale in almost every respect. An exchange is similar to sale in so far as it is also
mutual transfer of ownership of one thing for the ownership of another but differs from sale in
that neither of the things transferred is price of the other. The distinction between transfer by way

of sale and exchange lies in nature of ‘consideration’ for such transfer. Where goods are

exchanged for other goods, the contract is one for barter or exchange. The fact that consideration
for contract for sale must be in monetary terms under S. 3(1) Sale of Goods Act, 1870,
distinguishes a contract of sale from a contract of exchange. In Aldridge Vs. Johnson 10 where the
contract involved transfer of 52 Bullocks in exchange of 100 Quintals of barley and the
difference in value was payable in money, the transaction was held to be a contract of sale.

10
318 SO. 2D 870 (1975)

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 CONCLUSION

The difference between a sale and an exchange is that in a sale the price is paid in money while in an
exchange it is paid in another property by way of barter. The sale is always for a price, which means
money or the current coin of the realm while no price is paid in an exchange, there is only a transfer of
one specific property for another. And although payment of price may be made in addition to the
transfer of property, by way of equality of exchange, such payment does not make the exchange lose its
character as such.

BIBLIOGRAPHY
Books
1. Transfer of property Act, 1882, Universal publications

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 2. Transfer of property Act, GP Tripathi, Central Law Publications.
Websites
1. https://heinonline.org
2. indiankanoon.org
3. shodhganga.inflibnet.ac.in
4. www.jstor.org
5. www.delhihighcourt.nic.in
6. dictionary.thelaw.com
7. repository.uchastings.edu
8. cbseacademic.nic.in
9. docs.manupatra.in
10. www.legalservicesindia.com
11. www.merriam-webster.com
12. www.law.cornell.edu
13. www.barcouncilofindia.org

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