EXCHANGE

MEANING OF EXCHANGE [SECTION 118)

Exchange means to part with, give or transfer for an equivalent. Under section
118, a transaction is exchange when two persons mutually transfer the
ownership of one thing for the ownership of another, provided it is not an
exchange of money only. The definition of exchange is not limited to
immovable property. An exchange is therefore, not only exchange of land, but
also barter of goods.

In Sahera Khatun vs. Anwara Khatuna, the court defined exchange as a mutual
transfer between two persons of the ownership of properties where either both
the things may be money or neither of them may be money.

Ingredients of exchange

In Commissioner of Taxes vs. Hazi Ahsanul Haque, the court observed that
section 118 defines exchange as mutual transfer by two persons of ownership of
one thing for the ownership of another. Such exchange could be completed only
in the manner provided for transfer of property by sale, meaning thereby, only
upon registration of the conveyance. According to this observation, a reciprocal
transfer of properties may culminate into an exchange, if the following
ingredients are present in the transaction of such transfer:

a) Transfer of ownership:

In a transaction of exchange, there must be a transfer of ownership of one thing

for the ownership of another.

b) Of one thing for another:

The transfer of ownership must be reciprocal, that is a thing must be transferred

as the consideration of another thing.

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 c) The transfer should not be for money only:

If the transfer of ownership is made for money, then becomes sale. So in case of
an exchange, the transfer should not be for money only.

However, where property is transferred partly for price and partly for other
property, this transaction also becomes an exchange.

The mode of exchange

The mode of transfer by way of exchange is the same as in the case of sales.
Thus, a registered instrument is necessary in an exchange of: a) tangible
immovable property of the value of Tk. 100 and upwards; and b) a reversion or
other intangible thing.

Non-registration of the document can be cured by part performance under

section 53A. In case of tangible immovable property of a value less than Tk.
100 exchange can be effected by a registered instrument or by delivery of the
property. In case of movable property, the relevant portions of the Sale of
Goods Act will be applicable.

Exchange and sale distinguished

Sections 118, 119 and 120 of the Transfer of Property Act show that the
legislature has put an exchange on the same footing as a sale in almost every
respect. For example, a transfer of property by way of an exchange can be made
only in the manner provided for the transfer of such property by sale. Moreover,
each party has the rights and is subject to the liabilities of a seller as to that
which he gives and has the rights and is subject to the liabilities of a buyer as to
that which he takes.

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The only distinguishing point between sale and exchange is that while a sale is
always for a price which means money or the current coin of the realm, in case
of exchange there is no price but one specific thing is transferred for another;
money may be added to the thing to equalize the consideration. If one of the
things transferred is money, the transaction is not an exchange but a sale. If both
things transferred are money the transaction is not a sale but an exchange. In an
exchange of money there is an implied warranty as to the genuineness of
money.

RIGHT OF PARTY DEPRIVED IN EXCHANGE [SECTION

119]

The general rule is that each party to an exchange has the rights and is subject to
the liabilities of a seller as to that which he gives and has the rights and is
subject to the liabilities of a buyer as to that which he takes. Section 119 of the
Transfer of Property Act admits one of the exceptions to this rule owing to the
nature of the transaction in which there is as noted above no money price.

The exceptional rule is that where one of the parties to an exchange loses the
whole or part of the property received in exchange owing to a defect of title in
the person who gave it, he may at his option either claim that his property shall
be returned to him or he may ask for compensation or loss. If he adopts the
former remedy, he can sue the other party if he is still in possession of that
thing.

Leading Case: Sahera Khatun & another vs Anwara Khatun & others (44
DLR (AD) 86]

In this case, it was observed by the court that an exchange is a mutual transfer
between two persons of the ownership of properties, but either both the things

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should be money or neither of them should be money, a party to the exchange
when deprived of the thing received in exchange has his remedy under section
119. A third party too can raise the question of title of a party to the exchange.

RIGHTS AND LIABILITIES OF PARTIES [SECTION 120]

It has been described in section 120 of the Transfer of Property Act that each
party has the right and is subject to the liabilities of a seller as to that which he
gives and has the rights and is subject to the liabilities of a buyer as to that
which he takes. Accordingly, where the properties are immovable section 55 of
the Act will determine the rights and liabilities of the parties and where they are
movable the provisions of the Sale of Goods Act will be applicable.

In a case, it was observed by the court that an exchange implies an inter-change

of property with another and, except insofar as the price may not be payable in
money the rights and obligations attaching to an exchange are analogous to
those of a sale, so far as the parties thereto are concerned.

Exchange of money (Section 121):

According to Section 121, on an exchange of money, each party thereby

warrants the genuineness of the money given by him. Exchange is mutual
transfer of ownership. Where money is transferred in consideration of money, it
is also an exchange. Under section 121 the money transferred must be genuine.
The money given must not be counterfeit or fake money. The party who does
not get genuine money in return would be entitled to recover genuine money by
him.

Money here includes not only coins, but also currency notes. In an exchange of
money, there is no occasion for a warranty of title, as the title to money passes

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by mere delivery to one who receives it honestly. There is, however, an implied
warranty as to the genuineness of the money. A false coin, or a forged currency
note would involve total failure of consideration. This has been held with
reference to a forged banknote, a worthless cheque, and stolen goods.

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