Exchange is defined in section 118 of the Transfer of Property Act, 1882. The exchange of property in this act relates to immovable property** only. The exchange of moveable property is governed by the Sale of Goods Act. The literal meaning of exchange is giving and taking of something.
In the early decades, the concept of exchange was known as barter system. The people used to exchange their things and commodities with others who are in need of them. And in return, they used to get something which is useful for themselves.
Essentials of Exchange
1. There must be two persons for the purpose of exchange.
2. Their intention to transfer the things must be with mutual consent. If either of them has not given consent, then it is not exchange.
3. There must be a transfer of ownership of a thing from one person to another and vice-versa.
4. Any of the thing which is getting exchanged can be any immoveable property but not money. Money can’t be a property in exchange. (If money is involved, it becomes sale and not exchange.) (But money can be exchanged if both parties exchange money. Like A gives 71 rupees to B, and receives 1 dollar from A. See next to next heading.)
5. The exchange takes place between the parties like the process of sale. One person transfers his ownership to the other person, and likewise, other person does.
Rights and Liabilities of Parties in Exchange
Both the parties in exchange have equal rights over one another. When the person is transferring the ownership to the other, he is considered to be at the position of a seller, and he holds all the rights which a seller has while selling property. The person who receives the property is considered a buyer, and he has all the rights which a buyer possesses by virtue of being a buyer.
The rights are gained after considering the position a person is holding. If a person is at the receiving side, then he has the rights of a buyer like getting property in a fit condition and, if not in a fit state, may claim for damages. He has the right to possess all rights over that property after getting transferred.
Can There Be Exchange of Money
It is a written rule that money can’t be a thing in exchange. But section 121 of the Transfer of Property Act says that if money is exchanged between the parties, then the parties must assure the other party regarding the genuineness of money he has given to the other. The proving of the genuineness of money is essential, if exchanged.
There are many events where money can get exchanged. For example, a person visiting the U.K requires the currency of that country only. So when he exchanges his money in rupee to get money in pounds, it is an exchange of money.
Valuation of Things in Exchange
The definition of exchange nowhere provides any provision or statement relating to the valuation of things transferred in exchange. The parties exchanging things may transfer any value of a thing with the other person. It is immaterial that both the things do not have equal valuation. So the parties exchanging things must transfer it voluntarily and mutually.
If any person receives anything damaged or destroyed, then he may claim for damages or may seek permission from the court to return it to the transferor.
** Note: The Transfer of Property Act specifically deals with the transfer of immovable property except for a few provisions like where a thing’s price is less than Rs 100; it can be made by delivery of goods. Here no registration is required.
Likewise, it is not expressly provided in Section 118 of TPA (‘Exchange’ defined) as to what property it includes and excludes.
The matter of transfer of property under the act has always been debatable. Some researchers say it includes, and some say it does not include. Therefore we interpret it with the help of interpretation clause.
Specifically, the Transfer of Property Act deals with immovable property, and where the subject matter of transfer is movable property, it is dealt under the Sale of Goods Act.