A gift is usually viewed as an exchange of property ownership when the sender is willing to make the transfer with no cost or compensation in terms of money. It can be movable or immovable property, and the parties could be two living individuals, or the transfer could be made only after the sender’s death. If the transfer is made between two living people, it is referred to as inter vivos. If it takes place after the transferor’s death, it is referred to as testamentary. Testamentary transfers do not come under Section 5 of the Transfer of Property Act; therefore, only inter vivos transfers are classified as gifts under this Act.
What can be referred to as a gift
Section 122 of the Transfer of Property Act defines a gift as transferring an existing moveable or immovable asset. These transfers must be made without consideration and voluntarily. The person who makes the transfer is known as the donor, while the recipient is known as the donee. The donor must accept the gift. This section defines the term “gift” as a gratuitous transfer of ownership of an existing property. This definition encompasses the transfer of both moveable and immovable property.
Parties to a gift transfer
The donor has to be competent, i.e., he has the capacity and authority to make the gift. If the donor can make a contract, then he is considered to have the capacity to make the gift. This means that the person making the gift must be of the age of majority and have a sound mind. Companies, registered societies, and institutions are called juristic individuals and can also make gifts. A gift from someone who is insane or a minor is not valid. Apart from capacity, the donor must also have the right to make a gift. The donor’s right is defined by his rights to ownership in the property prior to the transfer as a gift is the transfer of the ownership.
The donee does not need to be competent to contract. He could be any living individual at the time of making the gift. Gifts made to an insane person, a minor, or even a child in the mother’s womb are legal if a competent person accepts it on their behalf. Legal entities like firms, institutions, or companies are considered competent donee, and any gift given to them is legal.
These are the essentials of a valid gift:
- Transfer of Ownership
- Existing Property
- Transfer without any consideration
- Voluntary Transfer with free consent
– Transfer of Ownership
The donor has to give up his absolute stake in the property and vest the property in the transferee, i.e., the donor. Transfer of absolute interest means that the property is transferred to someone else, i.e., rights and liabilities of that property. In order to be able to effect this type of transfer, the person who is making the gift must possess the right to ownership of the property.
– Existing Property
The property, which is the gift, could be of any kind immovable, movable, tangible, or intangible. However, it must exist at the time of making the gift, and it must be transferable as per the terms of Section 5 of the Transfer of Property Act.
Gift of any kind of future property is declared to be unenforceable. Also, the gift of spes successionis (expectation of succession) or the chance of inheriting property, or merely the right to sue, is null and void.
– Transfer without any consideration
A gift should be unintentional, i.e., the ownership of the property has to be transferred without any consideration. Even a small amount of property or a small amount of money offered by the donor in exchange for the transfer of a large property would make the transaction either an exchange or a sale. In this section, consideration will be the same as defined in section 2(d) of the Indian Contract Act. The consideration is pecuniary in the sense that it is monetary, i.e., in the sense of money. Transfers of property in exchange for services performed by the donor are gifts. But, a property transfer in exchange for the donee’s undertaking the liability of the donor isn’t unintentional, so it is not considered a gift as the liabilities grow into the form of financial obligations.
– Voluntary Transfer with free consent
The donor is required to give the gift freely, i.e., in the exercise of his free will and with his permission to give it freely. Free consent occurs when the donor is granted the absolute right to make the gift without force, fraud, coercion, or unjust influence. The donor’s decision to execute the gift deed must be independent and free. A voluntary act on the donor’s behalf also implies that the donor has signed the gift deed in complete awareness of the conditions and nature of the gift.
Methods of giving gifts
Section 123 of the Transfer of Property Act deals with the formalities required to complete a gift. The gift is legally binding by law only if these requirements are met. This section provides two ways to effect a gift based on the type of property. In the case of gifts of immovable property, registration is required. If the property is movable, the property may be transferred through the delivery of possession. Transfer of various types of property is described in the following sections:
1. Immovable properties
For immovable property, registration is mandatory regardless of the property’s value. Registration of a gift deed is a sign that the transaction is in writing, signed by the executor (donor), endorsed by two competent witnesses, and stamp duty for gift deed has been paid before the registration formalities are completed.
A donee who acquires possession of land under a non-registered gift deed cannot defend his property in the event of being evicted.
2. Movable properties
In the case of movable properties, registration can be completed by the delivery of the property. The registration process in these instances is not mandatory. A gift to a moveable property made by the delivery of possession is legal regardless of the property’s value. The manner of giving the property will depend on the property’s nature. Anything the parties agree to view as delivery can be done to transfer the goods or which has the effect of putting the property into the transferee’s possession could be considered a delivery.
Suspension or cancellation of gifts
This section defines two ways of cancellation of gift deed, and a gift can be revoked only in these circumstances.
1. Revocation through mutual agreement
When the donor and recipient both agree that the gift shall be suspended or cancelled when there is an event that isn’t dependent on the wishes of the donor, it is known as a gift subject to a condition set in a mutually agreed upon agreement. It should include the following elements:
- The condition has to be explicitly set out.
- The condition under which a gift can be cancelled should not rely only on the donor’s wishes.
- This condition must be legal under the laws that govern conditional transfers.
- The conditions must be agreed upon between the donor and the donee.
- Gifts revocable at the donor’s discretion will be null regardless if such conditions are mutually agreed upon.
2. Revocation by the rescission of the contract
A gift is a transfer, and it is thus accompanied by a contract for such a transfer. The contract could be implied or expressly stated. If the prior contract is canceled, then there is no doubt about the subsequent transfer. So, as per Section 126, a gift can be revoked on any basis on which its contract may be rescinded.