Rights and liabilities of buyer and seller

Rights and liabilities of buyer and seller
In sale there are at least two parties involved there are the buyer and seller. The obligations
imposed by section 55 are covenants and are in the nature of statutory obligations. Rights
and liabilities of the buyer and seller can be categorised into two –
1. Before completion of sale

2. After completion of sale
I. Before completion of sale
A. Seller liabilities
 To disclose material defects [S. 55(1)(a)]
the seller is bound to disclose to the buyer any material defect which is present either in the
property or in the title of the seller to the property. About such a defect only the seller is
aware but not the buyer and the buyer could not discover that defect with ordinary care. It is
necessary that the defect must be a material defect about which if the buyer had known he
would not have purchased that property.
The material defect must be of such a nature that it might be reasonably supposed that if
the buyer had been aware of it he might not have entered into the contract at all, for he
could be getting something different from what he contract to buy. [i]
 To produce title-deeds [Section 55 (1)(b)]

The seller is bound to bring all the documents of title relating to the property in his
possession or power for the inspection of the buyer. The seller is bound to produce all the
documents demanded by the buyer for his examination. The buyer should examine all the
documents relating to the property for his own protection.
 To answer questions as to Title [Section 55 (1)(c)]

The seller is bound to answer to the best of his information all the relevant questions put to
him by the buyer in respect of the property or its title. Since the buyer is getting the
ownership of the property it is in his interest that he must be fully satisfied about the
ownership rights of the seller and his authority to make the transfer.
 To execute a proper conveyance [Section 55(1)(d)]

Conveyance means the transfer of ownership. This is done by the signing of the sale deed
or putting thumb-impression on the sale deed by the seller. The duties of both the seller and
the buyer under this clause are reciprocal. When the buyer makes the payment, the seller
has to execute the conveyance. It must be in proper place and proper time. But what is
proper place and time, it has not been specified in the Act.
In case there is no stipulation fixing the time of execution and the seller makes
unreasonable delay in executing conveyance, the proper course is to give notice making
time the essence of the contract.[ii]
 To take care of property and title-deeds [Section 55(1)(e)]

This clause lays down the duty of the seller between the contract of sale and delivery of
property. Within this time, the property remains with the seller but only in trust for the buyer.
He holds the property as a trustee of the buyer because he has already executed the
conveyance, only the delivery of the property is to be made. The seller has to preserve the
property as well as title-deeds.
The extent of care required by this clause is such care as an owner of ordinary prudence
would take of his own property. This duty continues till the possession of the property is
given to the buyer. If the seller fails in performing his duty, he will have to compensate the
buyer for the loss occasioned to him.
 To pay outgoings [Section 55 (1)(g)]

This clause says that the seller is bound to pay all public charges and rent accrued due in
respect of that property up to the date of sale, the interest on all encumbrances, to
discharge all encumbrances on the property then existing.
The buyer has a right to require the seller to produce evidence that the property is free from
encumbrances. The liability exists before the completion of sale and continues thereafter
whether the existence of such charges is discovered before or after the completion of sale.
[iii]
B. Seller’s Right before sale

 Right to take rents and profits [Section 55(4)(a)]
The seller is entitled to the rents and profits of the property till the ownership of it passes to
the buyer. Sale is completed when the ownership is transferred to the buyer. Till the
ownership is transferred the seller continues to be the owner of the property and in that
capacity, he becomes entitled to the rents and profits of the property. Till that time the seller
has every right to enjoy the profits of the property.
C. Buyer’s liabilities before completion of sale

 To disclose facts materially increasing value of property [Section 55(5)
(a)]
The buyer is bound to disclose to the seller any fact as to the nature or extent of the seller’s
interest in the property of which the buyer is aware but of which he has reason to believe
that the seller is not aware, and which materially increases the value of such interest.
In Summers v. Griffiths[iv], an old lady, contracted to sell a property at much less price
believing that her rights in the property were not absolute. The buyer ha d knowledge of
the fact that the lady’s interest in the property was perfect and absolute but he did not
disclose it to the lady. He was held liable for fraud and sale was set aside.
 To pay the price [Section 55(5)(b)]
The buyer is bound to pay or tender, at the time and place of completing the sale, the
purchase-money to the seller or to such person as he direct; provided that where the
property is sold for free from encumbrances, the buyer may retain out of the purchase-
money the amount of any encumbrances, the buyer may retain out of the purchase money
the amount of any encumbrances on the property existing at the date of the sale, and shall
pay the amount so retained to the persons entitled thereto.
D. Buyer’s rights before completion of sale

 To charge for price prepaid [Section 55(6)(b)]
When the buyer properly declines to accept delivery, he becomes entitled to refund of
earnest (if any) and for the costs (if any) also awarded to him in a suit to compel specific
performance of the contract or to obtain a decree for its recession.
The principle underlying this section is a trite principle of justice, equity and good
conscience. The charge would last until the conveyance is executed by the seller and
possession is also given to the purchaser and ceases only thereafter.
If immovable property is charged and converted into another property or money then the
charge will fasten on that converted property or money. The charge is available not only
against the seller but also against all persons claiming under him.[v]
II. After completion of Sale

A. Duties of seller
 To give possession [Section 55(1)(f)]
The seller is bound to give, on being so required, the buyer or such person as he directs,
such possession of the property as its nature admits. The seller is to give possession of
property either to the buyer or his authorised person whenever the buyer so requires.
In case of tangible immovable property, the physical control is to be given over property. In
the case of intangible immovable property, the possession is symbolic.
 Implied covenant for title [Section 55(2)]

The seller shall be deemed to contract with a buyer that the interest which the seller
professes to transfer to the buyer subsists and that he has the power to transfer the same.
Such a covenant is implied in every sale of immovable property and it is not required to be
expressly mentioned in a sale deed.
 To deliver title-deeds on receipt of price [Section 55(3)]

Where the whole of the purchaser-money has been paid to the seller, he is bound to deliver
to the buyer all documents of title relating to the property which are in the seller’s
possession or power.
After the completion of sale when the ownership of property passes on to the buyer, and he
pays the price of the property, the seller becomes bound to deliver all the title deeds relating
to that property to the buyer which are in his possession or power.
The proviso to this clause lays down that –
 Where the seller retains any part of the property comprised in such documents, he
is entitled to retain them all, and
 Where the whole of such property is sold to different buyers, the buyer of a lot of
greatest value is entitled to such documents.
B. Seller’s rights after-sale
1. Charge upon property for unpaid price [Section 55(4)(b)] – This clause says,
that where the ownership of the property has passed to the buyer before payment
of the whole of the purchase-money, the seller becomes entitled to a charge upon
the property –
 In the hands of the buyer,
 Any transferee without consideration, or
 Any transferee with notice of non-payment,
 For the amount of the purchase money or if any part of the purchase money
remaining unpaid, and
 For interest on such amount of purchase money or any part unpaid from the date
on which the possession has been delivered
C. Buyer’s liability after completion of sale
 To bear loss to the property [Section 55(5)(c)]
where the ownership of the property has passed to the buyer, the buyer is bound to bear
any loss arising from the destruction, injury or decrease in value of the property not caused
by the seller. Therefore, if any loss occurs to the property either by way of accidental
destruction or deterioration after the ownership has vested in the buyer, the buyer will bear
the loss.
 To pay outgoings [Section 55(5)(d)]

Where the ownership of the property has passed to the buyer, as between himself and the
seller, the buyer is bound to pay all the public charges and rent which may become payable
in respect of the property, the principal money due on any encumbrances subject to which
the property is sold and interest thereon afterwards accruing due.
After the completion of the sale, the buyer becomes the owner of the property and he
becomes liable to pay the outgoings, for example, Government dues, taxes, rents and
revenue etc. This liability is in between the seller the buyer.
D. Buyer’s Right after completion of sale

 Benefit of increment [Section 55(6)(a)]
Where the ownership of the property has passed to the buyer, the buyer is entitled to the
benefit of any improvement in the property or increase in the value of the property and to
the rents and profits thereof. The buyer is not only entitled to the rents and profits of the
property but also the increase in the value of the property and any improvement in the
property.

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Rights and liabilities of buyer and seller

1. Before completion of sale

 To produce title-deeds [Section 55 (1)(b)]

 To answer questions as to Title [Section 55 (1)(c)]

 To execute a proper conveyance [Section 55(1)(d)]

 To take care of property and title-deeds [Section 55(1)(e)]

 To pay outgoings [Section 55 (1)(g)]

B. Seller’s Right before sale

C. Buyer’s liabilities before completion of sale

D. Buyer’s rights before completion of sale

II. After completion of Sale

 Implied covenant for title [Section 55(2)]

 To deliver title-deeds on receipt of price [Section 55(3)]

The proviso to this clause lays down that –

 To pay outgoings [Section 55(5)(d)]

D. Buyer’s Right after completion of sale

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