Introduction

Sections 118 to 121 of the Transfer of Property Act, 1882 (TPA) deals with the concept of Exchange. It is the same as sale but differs in consideration. Here the consideration is another thing, not money.

Exchange

• Section 118 of TPA defines Exchange.
• This Section states that 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 an exchange.
• A transfer of property in completion of an exchange can be made only in the manner provided for the transfer of such property by sale.
• The definition does not exclude the payment of money altogether. If one of the two properties which are to be exchanged exceeds the other in value, the transfer would nonetheless be an exchange, even if some money is paid by the owner of the property in addition in order to equalize the value of both properties.
• Illustrations:
  • Exchange of X’s pen for Y’s book.
  • A’s house worth Rs. 2000 is to be exchanged for B’s field worth Rs. 1200 and in pursuance of this bargain, B agrees to pay A Rs. 800 in case. Such a transaction is an exchange.

Essentials of Exchange

• There must be a minimum of two parties and two properties, one of each belonging to each one of them.
• No other form of consideration should be involved besides the properties.
• There must be a transfer of a thing for another thing and both or either of these things may be movable or immovable.
• The object of exchange must not be unlawful.

Right of Party Deprived of Thing Received in Exchange

• Section 119 of TPA deals with the right of a party deprived of a thing received in exchange.
• It states that if any party to an exchange or any person claiming through or under such party is by reason of any defect in the title of the other party deprived of the thing or any part of the thing received by him in exchange, then, unless a contrary intention appears from the terms of the exchange, such other party is liable to him or any person claiming through or under him for loss caused thereby, or at the option of the person so deprived, for the return of the thing transferred, if still in the possession of such other party or his legal representative or a transferee from him without consideration.

Rights and Liabilities of Parties

• Section 120 of TPA deals with the rights and liabilities of parties.
• It states that save as otherwise provided in this Chapter, each party has the rights and is subject to the liabilities of a seller as to that which he gives, and the rights and is subject to the liabilities of a buyer as to that which he takes.
• In exchange each party is subject to the rights of the buyer and seller in relation to the property that he receives and gives respectively.

Exchange of Money

• Section 121 of TPA deals with the Exchange of money.
• It states that on an exchange of money, each party thereby warrants the genuineness of the money given by him.