Will or Settlement Notes

 Will or Settlement

How should you leave your assets behind?

A person can leave his assets to his/her blood relative or anyone either by a deed of Will or by a deed of Settlement or by forming family trust.

Deed of Will is a Testamentary document i.e. it will take effect only after the lifetime of the maker of that Will, called Testator.

Whereas a Deed of Settlement (to the family members) is instant document to take effect immediately on the execution of that deed. 

Whereas a Deed of Settlement (outside the family members), which is otherwise called a ‘Gift deed’ and it is also a kind of settlement.

Deed of Will

Will is a testamentary document (i.e. it will take effect only after the lifetime of the maker of that Will).

Privileged Will is a kind of Will, applicable to members of the Army, Airforce, and Naval forces, while they are in the warfare.

Unprivileged Will is a kind of Will, applicable to all others, i.e. the general public.

Only a Hindu, or a Christian can make his Will and bequeath (dispose) his properties (either movable or immovable or any other transferable assets).

A Muslim cannot make a Will and bequeath his entire property, but only his 1/3^rd share, that too, with the consent of all the other sharers, as per the Shariat law (Muslim law).

Will with Executor:

A Hindu, or a Christian can make his/her Will and thereby bequeathing his/ her properties to the legatees (beneficiaries) through his/her named Executor. The said Executor, after the death of the Testator (maker of that Will), would disburse / distribute the properties as per the terms of the said Will.

If there is no Executor appointed in the Will, the legatees (beneficiaries of the said Will) can themselves disburse the properties as per the terms of the said Will.

Will Executed in Madras City:

The Indian Succession Act 1925 is applicable to the Indian Christians regarding succession of the property of a Christian, who died intestate (i.e. died without any Will).

The Indian Succession Act 1925 provides certain provisions in case of an Indian Christian or a Hindu who had executed his Will within the City of Madras (i.e. if the Will related property situate within the original jurisdiction of the Madras High Court. That is, the old 100 divisions of the Chennai Corporation area).

Probate of a Will:

If an Indian Christian or a Hindu executed his/her Will and thereby appointed an Executor or many Executors, and such property situate within the old Madras City, then such Will should be produced before the Madras High Court and get it proved and to get a Probate order of that Will. Probate means to prove the execution of the Will and to prove the competency of the maker of that Will (called Testator).

If the Will does not contain any Executor, but that property situate within the old Madras City, then any one of the Beneficiaries of that Will, shall make an application before the Madras High Court, to get a “Letters of Administration of the Will”. It is also the same as in probate, by proving the said Will before the Court.

Mufassil Will:

If the property situate outside the old Madras City area, such Will need not be produced before any Court for any probate or letters of administration. But if any dispute arises, then such Will is to be produced before the concerned District Court and get it proved, through the witnesses of that Will.

Settlement deed:

Sec.126 of the Transfer of Property Act 1882 provides Gift of any property to anyone. 

This section applicable only to Hindus, and Christians. It will not apply to Mohammadens. Mohammadan gifts are called Hiba. Hiba is a Urdu word, and it means gift. As per Mohammedan law, i.e. Shariat law, the gift of property should be immediate one, i.e. the title of the property should transferred in the deed itself and possession also should be handed over on the day of gift itself. 

But in the case of Gift/ Settlement by a Hindu, or a Christian, handing over possession may be postponed to a later date or even after the lifetime of the Settlor/donor.

Settlement and Gift difference:

If the gift of property to the family members, it is called Settlement or Family Settlement. If the gift of property to any other third parties (apart from family members), it is a Gift. Therefore, gift and settlement are synonymous. 

Who are all Family members?

As per the Indian Stamp Act, 1899, the following persons are considered as ‘family members’ to the Settlor, viz, father, mother, husband, wife, son, daughter, grandchildren, brother, and sister. But all the other blood relations are not considered as family members.

Settlement in-presenti

The Settlement called as “in-presenti settlement” which means the Settlor (or the owner of the property) settled and passed on the title of the property to the Settlee on that Settlement deed itself. It is like that of a sale deed, in which the title passes to the buyer immediately.

Conditional Settlement:

Per contra, some Settlement deeds, though the title of the property (ownership of the property) is transferred to the Settlee in that Settlement deed itself, the possession of the settled property is retained by the Settlor himself for his lifetime or for the lifetime of his/her spouse. Here, the title alone is passed on the day of Settlement, but the delivery of possession is postponed to a future event.

Muslim Settlement or Hiba:

Whereas in a Muslim settlement, it is called a Hiba, both title of the property and the delivery of the possession of the property shall take effect in the settlement deed itself. It cannot be spitted as in the case of Hindu settlement. 

That is only difference between a Muslim Settlement or a Hindu/Christian settlement.

Difference between Settlement and Will:

Generally, in Settlement, title and possession would pass on the deed itself. In some case, though title passes immediately, possession would take after some event (i.e. after the lifetime of the Settlor).

But in the case of a Will, both title of the property and the possession of the property would take effect, only after the death of the maker of the Will, called Testator.

Suppose, in a Settlement deed, the Settlor postponed the title as well as the possession to take effect after his/her lifetime, then it is called a Will, though the name given to the document is ‘as if a Settlement deed’. The nomenclature (the name) does not define the deed, but only the contents (recitals) decide it.

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Minor's contract Part 3

 Minor's contract Part 3

Sec.10 of the Contract Act provides that all agreements contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.

Sec.11 of the Contract Act which lays down that every person is competent to contract who is of the age of majority. It follows that a person who is not the age of majority is not a person competent to contract and make a lawful contract within the meaning of Sec.10 of the Contract Act.

Under the English law a minor’s contract was only voidable at his option. Even under the Indian Contract Act was also to be regarded as such.

Under the Common Law of England a minor’s contract is not generally void but voidable at this option and if it appeared to the English Court to be for his benefit it should even be binding specially if the contract was for necessaries.

But in 1903 the Privy Council in Mohori Bibee vs. Dharmodas Ghose emphasizes the difference between the Indian law and the English law and clearly lays down that the Indian Contract Act makes it essential that all contracting parties should be competent to make a contract and a person who by reason of infancy is incompetent to contract, cannot make a contract within the meaning of the Act. 

While minor could not enter into a contract, the natural guardian who was representing the minor, could do so and that there is nothing either in the Contract Act or in the Partnership Act which prevents a natural guardian to enter into a contract of partnership for and on behalf of the minor. 

A guardian’s capacity to act for and on behalf of the minor within the two limits expressed by the Privy Council that he must do so within the scope of his authority and for the benefit of the minor, is unquestioned.

But even a guardian while he can supply the deficiency suffered by the minor in age in law cannot supply the defects which the law prohibits. 

If the law, as Sec.30 of the Partnership Act prohibits a minor to become a partner in a firm, then no guardian acting on his behalf can over-reach that law and argue that as the guardian is a major, the minor becomes a partner of the firm which the law expressly prohibits because his guardian did it for him. Such a contract will be hit by Sec.23 of the Contract Act on the ground that it is forbidden by law. Therefore in such a case the guardian’s contract on behalf of minor resulting in making the minor a partner in a firm will be void ab initio and not voidable.

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Minor’s Contract Part 2

 Minor’s Contract Part 2

The promise of infants should never have been held to be promises in law or to constitute a consideration for another promise.

There is nothing in the Contract Act which prevents an infant from being the promisee. The Indian Law recognized the capacity of the minor to accept a promise.

Sec.7 of the Transfer of Property Act makes capacity to contract, the limit of the capacity to transfer. The Section applies to property in general.

This Section does not in terms declare that a transfer by a person incapable of contracting is wholly void; nor does it prohibit it. The persons who are incapable of contracting are capable of transferring.

A transfer by an incompetent person is wholly void,

The Transfer of Property Act 1882 when enacted came into force only in limited areas though now it has been extended to nearly the whole India.

Even a gift of money by an infant was held good in Taylor vs Johnson (1898) 171. In the case of money in which not merely possession but title passes by delivery, a payment or delivery of money, even by an infant should be held sufficient to pass property.

As regards transfers of immovable property in all cases where the transfer can only be made by an instrument in writing registered, a minor may not be able to make a transfer at all; for an instrument executed by a minor cannot be admitted to registration. Sec. 35 of the Registration Act.

Sec.26 of the Negotiable Instruments Act. In a vast majority of cases promissory notes are made in consideration of a loan of money and if a minor were incompetent to pass property in money and cannot therefore be a payee, it would have been so enacted in the Act. A minor can evidently draw a bill or issue a cheque on his banker (a cheque is only a species of bill). No doubt he cannot be made liable on the bill, but his banker evidently can honour his cheque.

Sec.22 of the English Bills of Exchange Act which is quite similar to Sec.26 of the Indian Negotiable Instruments Act.

If a minor can pay by a cheque, it would be absurd to hold that he cannot pay cash so as to pass title to it. 

A minor partner can apparently transact the business of a partnership and if the partnership was a money lending business, he can make loans. (Sec.253 Clause (3) of the Contract Act).

Sec.7 of the Transfer of Property Act is in consonance with the principles laid down in England and America in respect of transfers by persons of deficient or limited contractual capacity. 

In Sections 35 and 38 of the Specific Relief Act ‘contract’ is used in the sense of both executed contract and executory contract, i.e. transfers and promises.

A promise by a minor may be void as it is not a contract, but a conveyance by a minor was not void.

Whether a minor can be a transferee of property?

The provisions of the Transfer of Property Act and the Trusts Act make it clear that an infant can be a grantee though he cannot ordinarily be a grantor.

Infants cannot make grants, they may accept them. (Palmer vs Low).

According to the Indian Contract Act, a minor is incompetent to make a contract. According to the Contract Act, a contract by a minor must be regarded as void and not merely voidable.

The contract should be for the benefit of the minor.

Even the Judges in England came to the conclusion that marriage was for the benefit of the minor. There is no question that in India it would be considered to be for the benefit of the minor.

Specific performance is merely a relief and not the cause of action; the cause of action is the breach of contract.

A contract of apprenticeship is held to be good because it is considered to be for the benefit if the minor. In the same way a contract of marriage is for the benefit of the minor.

Neither a contract of personal service nor a contract of marriage can be ordered to be specifically performed so that in either case the apprentice or the girl cannot be compelled to carry out his or her part of the contract against his or her wishes. However, if it is an enforceable contract, the other result, namely, the liability in damages of the party making the breach of the contract, would follow.

Doctrine of mutuality

The doctrine of mutuality in the matter of contracts entered into on behalf of the minor by the guardian can arise where the subject-matter is minor’s separate estate and all the cases which have refused performance of executory contracts relate to properties belonging separately to the minor.

A minor is not personally bound by any contract made on his behalf by his guardian.

A contract for sale of immovable property does not of itself create an interest in or charge on such property. (Sec.54 of the Transfer of Property Act).

If it is a contract of purely personal nature and no personal liability can be imposed on the minor, it must logically follow that the minor cannot be compelled to perform the contract; for the same reason he cannot take advantage of the contract and ask for specific performance. The purchaser therefore can only claim compensation against the guardian and not against the minor or his property, except in the case where the guardian uses the money obtained from the purchaser for the improvement of the minor’s estate, a case which stands on a separate footing.

Sec.24A of the Specific Relief Act debars the purchaser from claiming the relief of specific performance against the minor.

Under the Mohomedan law, a guardian has no authority to deal with the estate of a minor. As such, a contract to sell or purchase entered into by such guardian was held to be void and not binding on the minor. 

The position of a guardian of a Hindu minor is slightly different. The guardiain under the Hindu Law has the authority to charge the property of a minor or to sell it on grounds of necessity or benefit to the minor. Even so, it was not within the competence of the guardian of a minor to bind the minor’s estate by contract for purchase of immovable property. 

A distinction was also made between ‘executed contracts’ and ‘executory contracts’. In the case of executed contract, it was held even though it was for the benefit of the minor, it could not be specifically enforced.

Thus, upto 1948 it was firmly settled that a Hindu guardian could alienate infant’s property only in case of necessity and for the benefit of the estate and that he had no authority to enter into a contract to purchase property for the minor and that such contract could not be specifically enforced.

In the case of ‘executed contracts’, it was, however, held that the transaction could be set aside only on proof that the guardian had no authority to enter into a contract or that it was not for the benefit of the minor.

Whatever might be the case with regard to the position of minors belonging to other regions even with regard to contracts for sale of property which are governed by the provisions of the Guardians and Wards Act, so far as Hindu minors are concerned, there is no difficulty in holding that the guardian of a Hindu minor is competent to enter into a contract of sale of the minor’s property if it is for the necessity of the minor or the minor’s estate.

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Minor’s contracts Part 1

 Minor’s contracts Part 1

The Judicial Committee held that a guardian had no power to bind the minor and the minor was not entitled to specific performance of the contract. (Mir Sarwarajan vs Fakirudding Mahamed, 39 Cal. 232: 39 IA 1 PC).

A guardian’s contract for sale, though supported by necessity or benefit, cannot be specifically enforced against the minor. (Ramakrishna Reddiar* vs Chidambra Swamigal, 54 MLJ 412: AIR (15) 1928 Mad 407 & Raghunathan vs Ravuth Kanni, ILR (1938) Mad 928: AIR (25) 1938 Mad 765).

A minor, who had attained majority, could specifically enforce a contract of sale entered into by his guardian when the purchaser had entered into possession of the property under the contract, but had not paid the consideration. (Adinarayana vs Venkasubbiah, AIR (27) 1940 Mad 625).

But Courts in India enforced a guardian’s contract for sale of the ward’s property if the transaction was supported by necessity or was beneficial to the minor. (Innatunnissa Bibi vs Janakinath, 22 CWN 477: AIR (5) 1918 Cal 877).

The Judicial Committee held that a contract for sale of the ward’s property concluded by a guardian competent to act and being for the ward’s benefit is enforceable against the minor. (Subramaniam vs Subba Rao, ILE (1949) Mad 141: AIR (35) 1948 PC 95).

Therefore the decision in Ramakrishna Reddiar* (AIR (15) 1928 Mad 407) cannot be accepted as correct statement of law.

Under the Hindu law (Old Hindu law) a guardian has the power to sell or mortgage the estate of his minor ward for the necessities or benefit of the minor, is too well established to require any citation of authority.

A guardian cannot do indirectly what the minor cannot do directly by entering into a contract.

That except in the case of necessaries supplied to a minor within the meaning of Sec.68 of the Contract Act, the creditor cannot obtain the estate of a minor on the basis of a contract entered into by the guardian and could only avail himself of the right of subrogation. 

If the guardian’s contract is unsupported by necessity or benefit to the minor, it would be in excess of his powers as guardian and the contract would be unenforceable against the estate of the minor on that ground.

Both in British India and in England, many contracts for marriage are made while one of the parties is a minor. In England, the question arose that whether the minor could claim damages for breach of such a contract. The question was decided in Holt vs Ward (1732) 2 Stra. 937, and held that in England the contracts of minors at that date were held under common law to be voidable or void, that is to say, the minor could enforce performance of the contract as against the other adult party, but the adult party could not enforce it against the minor.

Therefore the Infants Relief Act of 1874 was passed which made certain contracts by minors mentioned therein void. That Act, however, left contracts of marriage untouched.

In India, upto the decision of the Privy Council in Mohori Bibee vs Dharmadas Ghose (1903) 30 Cal. 539, that the contracts of minors were voidable.

An infant is capable of acquiring property by gift which the law requires must be accepted. Sec.127 of the Transfer of Property Act shows that a donee who is not competent to contract, an infant is within the category, can accept a gift even of property burdened with an obligation though he will not be bound by the acceptance and can repudiate it when he becomes competent to contract. (Subramania Iyer vs Sitha Lakshmi, ILR (1903) AC 6).

An infant may be admitted to the benefits of a partnership though he cannot be made personally liable for any obligation of the firm. (Sec.247 of the Contract Act).

Similarly a minor may accept a trust and can be a trustee though he cannot execute a trust involving the exercise of discretion. (Sec.10 of the Indian Trust Act).

All these indicate that what is meant by the proposition that an infant is incompetent to contract or that his contract is void if that the law will not enforce any contractual obligation of an infant.

As for the infant’s legal position with reference to transfers of property, he is undoubtedly capable of holding property and can acquire property not only by inheritance or bequest but also by gift. 

Sec.7 of the Transfer of Property Act lays down generally that a person competent to contract may make a transfer but that Act nowhere says that a person cannot be a transferee of property unless he is competent to contract.

There is a substantial distinction between a ‘contract for a sale’ and ‘a sale’. A sale effects a transfer the property, while a mere contract for a sale does not.

The English law on the point as summarized in Halsbury’s Laws of England (Vol. XVII, pages 75 and 76. The acquisition of property being generally beneficial, an infant can take property, both real and personal in manner whatever, either by descent, intestacy or will, or by purchase or gift or other assurance inter vivos except where it is necessarily prejudicial to do so.

A purchase of property, or the acceptance of a gift of property, by an infant is voidable by him. But in the meantime the property is vested in him.

Among writers of textbooks Dr Rash Behari Ghosh, the learned author in India, states the law correctly when he say (page 195) that an infant being a person capable of holding property can well be a mortgagee and that the disabilities which attend the creation of a mortgage do not attach to the acceptance of a security.

In America also the law seems to be that an infant can take a mortgage (see Jones on Mortgages, Article 131).

A mortgage transaction according to the definition of the Transfer of Property Act imports the existence of a loan or debt or an engagement which may give rise to a pecuniary liability and a transfer of an interest in specific immovable property to secure the repayment of the debt or the performance of the engagement.

Unless there is a binding promise to pay money either personally or out of the property of the person bound, there cannot be any mortgage at all.

A debt has been defined as a sum of money due by certain and express agreement. (Bouvier’s Law Dictonary, Vol-I, page 786; Blackstone, page 154).

Different modes of enforcing the security are prescribed by the Transfer of Property Act and the only mode by which a simple mortgagee can enforce the security is by bringing the property to sale through Court.

It is settled law that an infant cannot bind himself by a promise. But whether the converse follows is the question. 

A promise in law or an enforceable promise is a contract as defined by the Contract Act. A contract should be supported by lawful consideration. If the promise is an enforceable promise, it becomes a contract.

Even in unilateral contracts, there must be two parties, and there must be an assent or agreement of the minds of both the parties. In unilateral contracts, only one of the parties is under a legal obligation. The contract is therefore one sided, though the consent of both the parties is essential. (Street’s Foundation of Liability, Vol. II, p.53).

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