Rights and Liabilities of Buyer and Seller

    Sale refers to the transfer of ownership for consideration, which is a price paid by the buyer to the seller.[1] For sale, two parties are necessary, i.e., seller and buyer. The seller is the person who transfers the ownership in favor of another person and in whose favor the seller transfers ownership is known as the buyer. Both the seller and buyer must be competent to contract. This contract of sale creates certain rights and liabilities over the buyer and seller. These rights and liabilities of buyer and seller (i) before the sale and, (ii) after the sale, will be explained in this article.

    Seller

    Seller’s duties before the Sale

    1. DISCLOSURE OF MATERIAL DEFECTS: The seller must disclose all the material defects over the property. Seller is bound to disclose all latent material facts but not the latent fact. The latent material fact is that which can’t be discovered by doing a reasonable investigation and the latent defect is that which is obvious and a buyer can discover by doing a reasonable investigation . In the case of latent defects, the principle of caveat emptor (buyer be aware) implies. If the seller fails to inform the buyer about the latent defect, it leads to misrepresentation, and the buyer has the right to repudiate the contract of sale.[2]
    2. PRODUCTION OF TITLE DEEDS: The seller is bound to produce title deeds on the demand of the buyer for examination and his(buyer’s) satisfaction. Seller is bound to arrange for all the documents, required for review, that are in his possession or power.[3] If the seller fails to produce documents, the buyer has the right to get his money back, which he paid in advance, and has the right to repudiate the contract.[4]
    3. ANSWER RELEVANT QUESTIONS AS TO TITLE: The seller must satisfy the buyer with all the questions related to title deeds. There is a chance that the buyer will not meet with the title deed and have some questions related to the property regarding the title of ownership, rent, etc. the seller is bound to give all the answers associated with the title. Still, if the buyer didn’t ask any question, the seller must inform the buyer.[5]
    4. DUTY TO EXECUTE CONVEYANCE: The seller must execute conveyance, i.e. transfer the ownership. The sale deed will be completed by the seller’s signature or thumb impression on the sale deed. Once the buyer makes the payment, the seller is required to execute the conveyance. [6]
    5. CARE OF PROPERTY AND TITLE-DEEDS: After the execution of contract of sale, the seller must take care of the property and the title deed as the property’s owner until it is delivered to the buyer. The seller acts as a trustee of the buyer between the execution of conveyance and property’s delivery.[7]
    6. PAYMENT OF OUTGOINGS: The seller must clear all the outgoing payments over the property. Before the sale, the seller has to pay all the government taxes, revenues, and rent over the property. The buyer is not bound to pay any outgoings due before the sale of the property. Seller is bound to pay these outgoings up to the date of the sale.[8]

    Seller’s duties after Sale

    1. GIVING POSSESSION OF PROPERTY: Seller is bound to give possession of the property after the sale. After execution of title deeds, the seller has to deliver the possession to the buyer or any person authorised by the buyer.[9]
    2. DELIVERY OF TITLE DEEDS: After completing the sale, the seller has to transfer title deeds to the buyer, who thereafter, becomes the rightful owner of the property and title deeds is no use of the seller. Seller is bound to transfer all other documents related to the property and is required by the buyer.[10]

    However, the proviso to Section 55(3) provides that:

    1. Where the seller retains that part of the property with him which is of greatest value and, such property is included in the documents, the seller is entitled to retain all the documents with him.
    2. Where the whole of such property is sold to several buyers the person who purchases the largest part of property would be entitled to retain all the documents.

    Seller’s right before Sale

    Before completing the sale, the seller has all rights over the property since he still remains the owner of the property and has the right to get rents, profits, and other benefits over the property. But after the transfer of ownership, this right belongs to the buyer, and the seller has no right to get all these benefits.[11] 

    Seller’s after before Sale

    1. SELLER’S LIEN OR CHARGE: After completion of sale, if the consideration or any part of it remains unpaid, the seller acquires a lien or charge on the property. The completion of sale does not depend on the payment of price but on the delivery of possession. Therefore, the only way to get unpaid price is by creating a charge over the property.[12]
    2. INTEREST ON UNPAID PRICE: Seller also has a right to get interest on the unpaid price. If the buyer is already in possession of the property, the seller is entitled to claim interest on the unpaid amount from the date on which such possession was delivered, and not from the date of transfer of ownership. The seller has a right not only to get his unpaid price but also to an interest in it.[13]
    3. TRANSFER OF SELLERS CHARGE: The charge created in favor of the seller is an unsecured money debt, and therefore is an actionable claim. Actionable claim is transferable in nature and therefore, so is charge. The charge created in favour of seller can also be transferred to a third person and it can be transferred through a registered instrument.[14]

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    Buyer

    Buyer’s duties before Sale

    1. DUTY OF DISCLOSURE: The buyer must disclose all the material facts to the seller before the execution of the sale, as may increase the value of the property, and of which the seller is unaware. Where the buyer is aware of any material fact which increases the value of property, he/she is bound to inform the seller of the same.[15] In case the buyer is aware that the seller has absolute rights over the property, but fails to inform the seller, the same would amount to fraud on the part of the buyer.[16]
    2. PAYMENT OF PRICE: After completion of the sale, the buyer is bound to pay the full amount to the seller, but he/she is not bound to make the whole payment before the execution of the sale. Before the sale, the buyer must pay the part of the amount of promises to make full payment when implementing the sale.[17]

    Buyer’s duties after Sale

    1. TO BEAR THE LOSS TO PROPERTY: This is the buyer’s duty to bear the property’s loss after the sale because after becoming the property owner, the seller is not liable to pay for any loss over the property. The buyer can’t blame the seller for any loss unless it is proved that the loss did occur because of the seller’s fault.[18] And in case of fire, if the seller has insurance over the property, the buyer is liable to restore the amount of insurance the seller has paid.
    2. TO PAY OUTGOINGS: After transfer of ownership, the buyer is the owner of the property and entitled to pay all the taxes, rents, and revenues over the property. Seller is not liable for paying any taxes after the transfer of ownership. The buyer must pay all the liabilities over the property due after the sale. [19]

    Buyer’s right before Sale

    BUYER’S CHARGE: This right occurs when the sale doesn’t execute means the seller refuses to sell, and the buyer already paid some amount in advance. This situation creates buyers’ charges, and the buyer is entitled to get his money back with interest on it, and interest will be paid from the date of transfer of money from the date of delivery of possession.[20] But if due to the fault of buyer sale doesn’t execute, then the buyer doesn’t have a charge on it and can’t claim his money back.

    Buyer’s right after Sale

    According to Section 55 (6) (a)[21] of the Act, the buyer is entitled to get all the rights over property inclusive of all rents, profits, and also any other benefits over the property. The buyer becomes the property owner after completion of the sale or, in other words, after the transfer of ownership, and he/she is entitled to all the benefits from the date of transfer of ownership.

    Conclusion

    For sale, there should be a transfer of ownership in exchange for money. If there is no consideration, the sale is not valid. The transfer of ownership without consideration is known as a gift. Consideration is an essential feature of sales. There are various rights and liabilities of the buyer and seller, which they are obliged to fulfill. But initially, the rights of sellers are the same determined as the liabilities of buyers. If any of the parties fail to fulfill their liabilities, the contract can be terminated.

    References

    [1] The Transfer of Property Act, 1882, s. 54.

    [2] The Transfer of Property Act, 1882, s. 55 (1) (a).

    [3] The Transfer of Property Act, 1882, s. 55 (1) (b).

    [4] Bishandas v. Haji Fazal, AIR 1937 Pesh 8 (C).

    [5] The Transfer of Property Act, 1882, s. 55 (1) (c).

    [6] The Transfer of Property Act, 1882, s. 55 (1) (d).

    [7] The Transfer of Property Act, 1882, s. 55 (1) (e).

    [8] The Transfer of Property Act, 1882, s. 55 (1) (g).

    [9] The Transfer of Property Act, 1882, s. 55 (1) (f).

    [10] The Transfer of Property Act, 1882, s. 55 (3).

    [11] The Transfer of Property Act, 1882, s. 55 (4) (a).

    [12] The Transfer of Property Act, 1882, s. 55 (4) (b).

    [13] Bhag Mal v. Shiromani Gurdwara, AIR 1934 Lah. 348.

    [14] The Transfer of Property Act, 1882, s. 55 (4) (b).

    [15] The Transfer of Property Act, 1882, s. 55 (5) (a).

    [16] Summers v Griffiths, (1866) 35 Beav. 27.

    [17] The Transfer of Property Act, 1882, s. 55 (5) (b).

    [18] The Transfer of Property Act, 1882, s. 55 (5) (c).

    [19] The Transfer of Property Act, 1882, s. 55 (5) (d).

    [20] The Transfer of Property Act, 1882, s. 55 (6) (b).

    [21] The Transfer of Property Act, 1882, s. 55 (6) (a).


    BY NIDHI | GEETA INSTITUTE OF LAW, DELHI, NCR

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