What if one has vested interest or contingent interest

What is the meaning of vested interest? What is the difference between vested and contingent interest?

Section19 of the Act provides that where, on a transfer of property, an interest therein is created in favor of a person, without specifying the time when it is to take effect, or in terms specifying that it is to take effect forthwith or on the happening of an event which must happen, such interest is vested, unless a contrary intention appears in the terms of the transfer.

A vested interest is not defeated by the death of the transferee before he obtains possession. Thus, a gift to ”A” on the death ”B” creates a vested interest in A, even during B”s lifetime, for there is nothing more certain than his death. But, a gift to A on the marriage of B creates, only, a contingent interest, for, B may never marry; but, that contingent interest becomes vested if and when B marries.

A vested interest is different from a contingent interest as defined in Section 21. When an interest is vested, the transfer is complete, but when an interest is contingent, the transfer depends upon a condition precedent when that condition is fulfilled. When the transfer is complete, that interest becomes vested. If that condition refers to an event which is certain to occur, the interest, dependent upon it, is not contingent but vested. If, it is an uncertain event, it is contingent. For, the condition may never be fulfilled and the transfer may never take effect.

The distinction between a vested and contingent interest may seem simple, but, in practice, it is not always easy to distinguish the one from the other. The difficulty arises from the fact that, a vested interest is not, necessarily, in possession. An interest may be vested, yet, not in possession, in following three cases set out in the explanation to the section 19 of the Act i.e.

  1. by a provision postponing an enjoyment; or
  2. by intervention of a prior interest; or
  3. by provision for accumulation of income. Again, an interest may be vested although it is liable to be divested by a subsequent condition.

For instance, where A executed a gift deed in favor of B, but, directed that B was not to take possession of a portion of the property until after the death of A and A”s wife. In such a case, B has a vested interest, enjoyment only being postponed until the happening of an event (in this case death of A and A”s wife) which is certain.


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