RULE AGAINST PERPETUITY
MEANING OF PERPETUITY
The term perpetuity literally means forever or eternity or for unlimited time period.
TRANSFER IN PERPETUITY
When a property is being transferred in such a way that it becomes inalienable in future for an indefinite period of time, this is called transfer in perpetuity. Transfer in perpetuity may arise in two ways:-
By taking away from the transferee his power to transfer; By creating future improbable interest.
However , section 10 of Transfer of property Act states that a condition restricting transferee’s power to transfer is void.
RULE AGAINST PERPETUITY
The concept of rule against perpetuity is that according to this rule transfer cannot be made inalienable for an indefinite period or forever. This rule has been incorporated in Section 14 of the Act.
THE PERIOD OF THE RULE
1. Lives in being- According to the rule, interest must be conferred within 21 years of the person’s death.
2. Plus twenty-one years- This is the period in gross.
3. Periods of Gestation- The period of gestation may extend at the beginning and end of “lives in being” and at the end of 21 year.
OBJECT OF RULE AGAINST PERPETUITY
The purpose of this rule is to enable free circulation of the property for :-
To prevent the property from being tied up forever; Betterment in trade and commerce; Betterment of the property. Protecting the interest of owner of the property otherwise he will not be able to dispose of the property even in case of emergency.
PRINCIPLE BEHIND THE RULE
The basic principle upon which this rule is made is public policy. In absence of this rule against perpetuity, all the properties in the world would have been static and of no use to he economy as a whole.
· CONDITIONS NECESSARY:-
1. There is an alienation of property.
2. The transfer being made is for the benefit of an unborn child giving him absolute interest.
3. The transfer of interest to beneficiary is herald by life or limited interest of living persons.
4. The unborn person in favor of whom the transfer is done must be born before the death of last preceding living person.
5. Conferring of interest to beneficiary may be postponed only to the life of living person plus minority of the beneficiary; not beyond that.
· EXCEPTIONS TO THE RULE AGAINST PERPETUITY
1. Transfer for the benefit of public-where the property has been transferred for the benefit of the public in the advancement of religion, knowledge, commerce, health, safety, etc.
2. On personal agreement- personal agreement which do not create any interest in property are exempted from the rule against perpetuity as this rule is applicable only on transfer of property and not on personal agreement or contract.
· RELEVANT CASES
Ø Supreme Court observed and held:-
A contract is enforceable by and against the transferees of the original party. The rule against perpetuity only applies to contract that create rights of property. The parties of the contract’s rights are assignable. This rule deals only with the aspects of the law of property and it aims to restrict any creation of future unconditional interests in property. The Supreme Court therefore, held that the rule cannot be applied to an agreement of pre-emption though no time limit if there within which it has to be exercised.
Ø Bombay High Court in this case declared that when the gift was made of movable property in favor of son with gift of shares in the property to son’s sons son when the attained the age of 21 ,is void.
The rule against perpetuity restricts the period of certain limitations on the use and transfer of property. This rule provides that bestowing cannot postpone beyond the lifetime of any person living at the date of transfer. This rule has certain exceptions and is not absolute. Therefore the basis of the rule is that the liberty of alienation should not be exercised to its own destruction.
Author Details: Gitika Jain (3rd year BBA LLB, Amity University, Kolkata)