Rule against perpetuity

Rule against perpetuity is the rule which is against a transfer making them
inalienable for an indefinite period or forever. Where a property is transferred in
such a way that it becomes non-transferable in future for an indefinite period, the
property is tied up forever. This disposition would be a transfer in perpetuity.
In any disposition perpetuity may arise in 2 ways
1. by taking away from the transferee his power of alienation
2. by creating future remote interest.
Rule against perpetuity is also known as the rule against remoteness, which
prohibits the non-vesting of interest beyond a certain period.
To put in the other words, the rule against perpetuity connotes that the right of
alienation cannot be so as to make the transfer impossible for an indefinite period.
For instance, A conveys his property to B for life and to C for life after the death of B.
On the occasion of death of B the property will vest in B's upcoming heirs for life
after that it will continue in the following chain.
Diagram:
A to B > C > D >...
Here, the Transfer of Property is inalienable for the owner and hence, it is void as to
the rule against perpetuity. CR- Cadell v Plamer
Legal Provision:
Section 14 of the Transfer of Property Act 1882 contains the rule against perpetuity.
It reads as follow:
No transfer of property can operate to create an interest which is to take effect after
the lifetime of one or more person 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 rule against perpetuity fixes the maximum period of time for which vesting of
property cannot be postponed. According to section 14, a transfer cannot operate
validly if the interest created under such transfer is to take effect after the lifetime of
living person and after the minority of the person in existence at the expiration of
lifetime. Moreover, the actual period of gestation may also be added to such period.
So, the maximum period should be computed as follows -
 • the life of living being plus
• the period gestation and
• the period of minority
The life of living being:
Here to safeguard against violating section 5 of Transfer of Property Act, transfer
has to be taken place latest; during lifetime of prior interest holder otherwise the
transfer shall fail.
Period of gestation:
when a child is in the mother's womb i.e., “it is a child en ventre sa mere” at the time
of the expiration of interest of the prior interest holder and since for the purpose of
being a transferee a child in mother's womb is competent person, the latest period
up to which the vesting may be postponed would be the life to the prior interest
holder plus period of gestation plus minority of the ultimate beneficiary. The period
of gestation shall not be counted in addition to minority if the ultimate beneficiary is
already a born person.
Period of minority:
The governing law in regard of minority is the Majority Act 1875.
As per section 3 of the said act, a person is said to be a major who attains the age of
18 years. It further states that a person for whom a guardian is appointed by the
Court of words, is said to be major at the age of 21 years. Thus, the minority period
is normal 18 years and it extends in certain cases to the age of 21 years.
Essential Conditions
The essential conditions of the rule against perpetuity as given in this section are as
follows:
1. There is a transfer of property.
2. The transfer is for the ultimate benefit of an unborn person who is given
absolute interest.
3. The vesting of interest in favor of ultimate beneficiary is preceded by life or
limited interests of living person (s).
4. The ultimate beneficiary must come into existence before the death of the
last preceding living person.
5. Vesting of interest in favor of ultimate beneficiary may be postponed only up
to the life or lives of living persons plus minority of ultimate beneficiary; but
not beyond that.
Extent of perpetuity
1. Under Section 14, the maximum permissible remoteness of vesting is the life
of the last preceding interest plus minority of the ultimate beneficiary.
Accordingly, property may be transferred to A for life and then to B for life
and then to the unborn when he attains the age of majority.
2. A and B hold property successively for their lives; therefore, the property is
tied up for their lives one after the other.
3. After the death of B (the last preceding interest) although it should vest in the
ultimate beneficiary immediately but, under this section the property may be
allowed to vest in the unborn child when he attains the age of majority.
4. Minority terminates at the age of eighteen years or, when the minor is under
supervision of Court, at the age as twenty-one years.
But, in Saundara Rajan v. Natarajan the Privy Council held that since at the
date of the transfer it is not known whether or not a guardian would be
appointed by Court for the minor in future, for purposes of Section 14 the
normal period of minority would be eighteen years.
5. So, the vesting may be postponed up to the life of the last person (B) holding
property for his life and the minority (18 years) of the ultimate beneficiary.
Section 14 is also connected with other sections 5,10,13,15,16,18
➢ Section 5 defines " Transfer of Property."
➢ Section 10 elucidates that a transfer alienating the power of alienation from
the transferee is void.
Rule against Double Possibilities:
Section 13 of the Act embodies the rules what is known is England as the 'rule
against double possibilities."
According to this rule, a remainder limited to child of an unborn person, after-life
estate to the unborn parent, is void. The underlying principle of this rule is that a
person disposing of property to another should not be allowed to fetter the free
disposition of property in the hands of more generations than one.
Conditions of transfer to unborn person:
The conditions to be complied with this section:
1. An interest is created for the benefit of an unborn person who is not in
existence the date of transfer;
2. A prior interest created by the transferor;
3. Whole remaining interest to the unborn person
CR- Isaac Nissim Silas and others vs Official Trustee of Bengal,1957
It was held that, under S-13 the interest created in favor of the unborn person
cannot be made effective unless the interest extends to the whole of remaining
interest of the transferor.
➢ When prior interest not valid:
As per section 16, a prior interest fails when the ulterior benefit fails in want of any
requirements under sections 13 & 14.
➢ Under section 20,
unborn child acquires the vested interest as soon as it is born, unless any condition
is included in transfer.
Remoteness of vested interest
Regard must be had to the ascertain possible event.
How to decide the remoteness of vesting
o Wait and see approach
It looks on measuring future interest on the basis of the fact exists at the end of the
measuring life.
o Second Look Doctrine
It works on measuring future interest on the basis of the fact existing on the date of
its exercise of power.
o Cy-pres Doctrine
It means so close; as near as possible to the specified time. Under this doctrine, if
dispute arises, the court can amend itself the legal instrument and reduce it to the
specified time.
o New Uniform Statutory Rules (USA)
It extends time limit up to a flat waiting period of 90 years after the creation of
interest.
The policy underlying the rule
As Mulla said, "It is illogical to imagine a dead person below the grave controlling
properties above his grave."
It's important to ensure free and active circulation of property both for trade and
commerce as well as for the betterment of the property. There are people who want
to retain their property in their own families from generation to generation. This
will be a loss to the society because it will be deprived of any benefit arising out of
that property. Free and frequent circulation is important and the policy of the law is
to prevent the creation of such perpetuity.
The Succession Act,1925: -
Section 114: This section is similar to the section 14 of TP, which contains the rule
against perpetuity. (Applicable for both testamentary and non-testamentary
transfer)
Exceptions: -
1.Transfer for Public benefit
Under section 18 of the Act, in case of any gift to charities, thus in case of a transfer
for the benefit of the public in the advancement of religion, knowledge, commerce,
health safety or any other object beneficial to mankind, the rule does not apply.
2. Personal Agreement
The rule is not applicable in regard of personal agreement.
3. Covenants of Redemption
This rule does not offend the covenants of redemption on a mortgage.
4. In this, there is an option of purchasing a land and there is no question of any kind
of interest in property, so this rule does not apply.
5. Perpetual Lease
The rule does not apply to contracts for perpetual renewal of lease.
6. Land purchased by Corporation
Where the land is purchased, or property is held by a corporation.
7. Vested interest
When the interest has once vested, it cannot be made for remoteness.
8. Where there is no transfer of interest, rather only a charge is created.