Saturday, December 11, 2010

Rule against perpetuity

What is perpetuity?
Perpetuity means indefinite period. A perpetuity, as defined by Lewis in his well known book, ‘‘Lewis on Perpetuities’’ , is ‘a future limitation, whether executory or by way of remainder, and of either real or personal property which is not to vest until after the expiration of , or will not necessarily vest within, the period fixed and prescribed by law for the creation of future estates and interests.’
Rule against perpetuity is the rule which is against a transfer making the property inalienable for an indefinite period or for ever.
In India section-14 of The Transfer of Property Act of 1882 provides that vesting can be postponed up to the life or lives of the last person plus the minority of the ultimate beneficiary. Minority in India terminates at the age of 18 years.
Section-14 of T.P.Act read as ‘no transfer of property can operate to create an interest which is to take effect after the lifetime of one or more persons living at the date of such transfer, and the minority of some person who shall be in existence at the expiration of that period, and to whom, if he attains full age, the interest created is to belong.'
The true object of the rule against perpetuity is to restrain the creation of future conditional interest in property.
Jekyll M.R. in ‘Stanley v. Leigh’ has observed that if the rule were otherwise then ‘a great mischief would arise to the public from estates remaining for ever or for a long time inalienable or in transferable from one hand to another, being a damp to industry and a prejudice to trade, to which may be added the inconvenience and distress that would be brought on families whose estates are so fettered.’
What the rule applies to is not the contract, which in itself is not illegal, but the right of property or limitation which arises from the contract.
Gray on ‘The Rule against Perpetuity’- ‘the rule against perpetuity concern rights of property only, and does not affect the making of contracts which do not create rights of property.’
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