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EXCHANGE[1]
(Ss. 118 to 121)
QUESTION BANK
Q.1 Define exchange. State rights and liabilities of the parties to exchange.
SHORT NOTES
1)Exchange
I. Definition of ‘Exchange” S. 118:-
When two persons mutually transfer ownership:-
- i) of one thing for the ownership of another,
- ii) neither thing or both things being money only,
-the transaction is called an “exchange”.
Thus, the exchange is the transfer of ownership in a property for consideration of ownership of another thing or property. In a sale, one thing is exchanged for the price in terms of money. However, in exchange, both things are property. For example, the transfer of ownership of a bike for the transfer of ownership of a car. Similarly, the transfer of ownership of a house for the transfer of ownership of land, etc. In exchange, one property may be movable, and another may be immovable.
However, the transaction is called ‘barter,’ and both things exchanged are movable. Barter is a very old mode of exchange. Before the discovery of ‘money,’ barter was the only way of transaction.
II. Characteristic of exchange:-
From the nature and definition of exchange, the following characteristics can be laid down viz-
1. Transfer of ownership:-
In exchange, ownership of one thing is exchanged for the ownership of another thing. Such a thing may be movable or immovable, or one thing may be movable and another immovable. However, neither thing nor both should be money because when one thing is money, the transaction becomes a sale, not an exchange.
2. Properties need not be of the same kind:-
In exchange, it is not necessary that both properties are of the same kind, i.e., they need not be movable or immovable. In other words, one property may be movable, and another may be immovable.
Similarly, where the property is transferred for consideration of another property and some money is paid to equalise the value of exchange, the transaction is an exchange. Thus, there may be an exchange if A exchanges his house of 1 lac for the land of B of Rs. 80,000 and also pays Rs. 20000.
3. Mode of transfer:-
The second part of the definition of ‘exchange’ under S. 118 provides that an exchange can be made only in this manner.[2] in which a sale is affected. Thus, the rules of registration, etc., are similarly applicable to both sale and exchange (discussed in the topic of sale).
III. Rights and liabilities of the parties to exchange:-
Ss. 119 to 121 deal with the rights and liabilities of the parties to the exchange.
1) Liability for loss due to defect in the title (S. 119):-
In fact, the exchange is a mutual transfer of ownership between two persons; if the title of one is defective, he is liable to make good the loss caused to another. If, due to a defect in title, the party receiving thing is deprived of the property, he can claim two remedies, viz-
(i) he can claim a return of property he has transferred, or
(ii) he may claim compensation for loss suffered due to defective title.
There is an implied covenant regarding the title, which is that it must be perfect for exchanging.
2) Same rights and liabilities as those of seller and buyer (S. 120):-
Every party to the exchange has the same rights and duties as the buyer and seller in the sale transaction. Each party has the right and is subject to the liabilities of a seller as to that which he gives, and has the rights and is subject to the liabilities of a buyer as to that which he takes. Thus, the provisions of S. 55 apply in the exchange of immovable property, and the provisions of the Sale of Goods Act of 1930 apply if there is the sale of movables.
3) Warranty of genuineness of money (S. 121):-
Where the money is transferred in exchange for money, the transaction is of ‘exchange’. For example, one can exchange 100 rupees currency notes for 10 notes of 10 rupees each. Where money is changed between the parties, there is an implied covenant that each party warrants the other genuineness of the money. Thus, one cannot exchange money for fake money.
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[1] विनिमय / अदलाबदल [विनिमय करना/ लेन- देन]
[2] प्रकारे