Case Laws: Requirements of Oral exchange and whether oral exchange reduced in writing is valid if it is not signed by one of the executants.

1. Alka Bose v. Parmatma Devi¹

(Supreme Court of India) | 17-12-2008

In this case, it was observed by apex court that even an oral agreement to sell is valid. If so, a written agreement signed by one of the parties, if it evidences such an oral agreement will also be valid. In any agreement of sale, the terms are always negotiated and thereafter reduced in the form of an agreement of sale and signed by both parties or the vendor alone (unless it is by a series of offers and counter-offers by letters or other modes of recognized communication). In India, an agreement of sale signed by the vendor alone and delivered to the purchaser, and accepted by the purchaser, has always been considered to be a valid contract. In the event of breach by the vendor, it can be specifically enforced by the purchaser. There is, however, no practice of purchaser alone signing an agreement of sale.

Relevant Para is as follows:-

“All agreements of sale are bilateral contracts as promises are made by both – the vendor agreeing to sell and the purchaser agreeing to purchase. On the other hand, the observation in

S.M. Gopal Chetty (supra) that unless agreement is signed both by the vendor and purchaser, it is not a valid contract is also not sound. An agreement of sale comes into existence when the vendor agrees to sell and the purchaser agrees to purchase, for an agreed consideration on agreed terms. It can be oral. It can be by exchange of communications which may or may not be signed. It may be by a single document signed by both parties. It can also be by a document in two parts, each party signing one copy and then exchanging the signed copy as a consequence of which the purchaser has the copy signed by the vendor and a vendor has a copy signed by the purchaser. Or it can be by the vendor executing the document and delivering it to the purchaser who accepts it. Section 10 of the Act provides all agreements are contracts if they are made by the free consent by the parties competent to contract, for a lawful consideration and with a lawful object, and are not expressly declared to be void under the provisions of the Contract Act.

The proviso to section 10 of the Act makes it clear that the section will not apply to contracts which are required to be made in writing or in the presence of witnesses or any law relating to registration of documents. Our attention has not been drawn to any law applicable in Bihar at the relevant time, which requires an agreement of sale to be made in writing or in the presence of witnesses or to be registered. Therefore, even an oral agreement to sell is valid. If so, a written agreement signed by one of the parties, if it evidences such an oral agreement will also be valid. In any agreement of sale, the terms are always negotiated and thereafter reduced in the form of an agreement of sale and signed by both parties or the vendor alone (unless it is by a series of offers and counter-offers by letters or other modes of recognized communication). In India, an agreement of sale signed by the vendor alone and delivered to the purchaser, and accepted by the purchaser, has always been considered to be a valid contract. In the event of breach by the vendor, it can be specifically enforced by the purchaser. There is, however, no practice of purchaser alone signing an agreement of sale.”

2. T. Jayaram Naidu And Another v. Yasodha And Others²

(High Court Of Judicature At Madras) | 04-12-2007

In this case, it was observed by the court that it is a settled proposition of law that for a valid contract of sale, the date of agreement, a definite sale consideration, the time limit for the performance of the contract are the essential factors. As the appellants have placed their claim based on an alleged oral agreement for sale, they are bound to establish the legal aspects that are required for a valid contract of sale.

Relevant Para is as follows:-

“15. As per Section 10 of Indian Contract Act, though a oral agreement for sale is also valid and legally enforceable, it is a settled proposition of law that the person claiming specific performance should establish the ingredients, which are basically necessary for the contract of sale. In the plaint, the appellants have stated that oral contract of sale was entered into on 23.09.1983 between the first appellant and late Amirthavalli Thayarammal. As contended by the learned counsel for the respondents, had there been any oral agreement for sale, at least the date of the same could have been stated in their reply notice dated 30.06.1986. The appellants have not stated what was the actual sale consideration as per the alleged oral agreement. On the other hand, the appellants/plaintiffs have stated that they had agreed to purchase the property for the market value of the property on the proposed date of sale and accordingly, they calculated the market value at Rs.1,28,407.50.

16. It is a settled proposition of law that for a valid contract of sale, the date of agreement, a definite sale consideration, the time limit for the performance of the contract are the essential factors. As the appellants have placed their claim based on an alleged oral agreement for sale, they are bound to establish the legal aspects that are required for a valid contract of sale. It is not in dispute that Amirthavalli Thayarammal died in the year 1985. The appellants have not stated any proposed time limit for the performance of the contract of sale based on the alleged oral agreement dated 23.09.1983, said to have been entered into between the first appellant and late Amirthavalli Thayaramma and others. Though rental agreements were made by the appellants with Amirthavalli Thayarammal on 19.11.1983 by way of written agreements and the rent amounts have been paid by them, on obtaining due receipts from Amirthavalli Thayarammal and others they have stated that the agreement of sale alone is oral. Further, it is seen that the appellants had sent various cheques towards payment of rent to the second respondent, for which copy of the letter, with details about the cheques and the postal acknowledgments have been produced and marked as Exs.A.14 to A.23. Under such circumstances, this Court is of the considered view that there could be no possibility for the first appellant to enter into an agreement for a sale orally with Amirthavalli Thayarammal and others, without reducing the same into writing.

17. The non furnishing of alleged date of the oral sale agreement in the reply notice sent by the appellants to the second respondent. The uncertain amount of sale consideration and the non- mentioning of time limit for the performance of the alleged contract, would also go to show that there was no oral sale agreement between the first appellant and the deceased Amirthavalli Thayarammal and the respondents 1 to 5, as alleged by the appellants. On the other hand, it has been established by oral and documentary evidence that the sixth respondent has purchased the suit property under Ex.B.5, registered sale deed, for valuable consideration and the same had also been intimated to the appellants by way of legal notices to attorn the tenancy, since the sixth respondent had become the land lady of the property, by virtue of the sale deed Ex.B.5.”

3. Nasib Kaur And Others v. Chand Rani And Others³

(High Court of Punjab and Haryana) | 01-09-2015

In this case, it was observed by the court that oral exchange is permitted in Punjab and if the same has been acted upon by the parties, i.e. the exchange of the properties have already been taken place and even possession exchanged prior to such exchange being rendered into writing, it is only a memorandum of exchange and the said document did not require compulsory registration as this instrument did not confer right on the parties for there was valid exchange between the parties and in pursuance of exchange the moment the possession was taken by the respective parties they became owners in possession of the property.

Relevant Para is as follows:-

“14. In Randhir Singhs case (supra), in paras 9 to 11, it has been held as follows:-

“9. The plaintiff has been non-suited by lower appellate court on the ground that document dated 07.4.2000 is unregistered although it required compulsory registration. This conclusion of the lower appellate court is illegal and unsustainable. As noticed hereinabove, there was oral exchange between the parties. Possession was also exchanged between the parties pursuant to oral exchange. It was thereafter that the document dated 7.4.2000 was executed as memorandum of exchange. A bare perusal of the said document also reveals that the exchange was not effected through this document. It was only a memorandum of exchange which had already taken place and even exchange of possession had already taken place. Section 118 of the Transfer of Property Act is not applicable in State of Punjab and consequently oral exchange is legally permissible. In view thereof, the memorandum of exchange dated 7.4.2000 did not require compulsory registration. In this conclusion, I am supported by judgment of this Court in the case of Kishori Lal Vs. Babu Ram and Others, . Consequently, there was valid exchange between the parties and pursuant to exchange the plaintiff has become owner in possession of the suit property.

10. Following substantial question of law arises for determination in the instant second appeal:-

“Whether the finding of the lower appellate court that document dated 7.4.2000 required compulsory registration and being un-registered did not have the effect of exchange is perverse and illegal?”

14. For the reasons already recorded, the aforesaid substantial question of law is answered in favour of the plaintiff-appellant and it is held that the aforesaid document did not require compulsory registration because it is only memorandum of exchange whereas oral exchange had already been taken place between the parties and even possession had also been exchanged.”

15. In view of the judgments which have been reproduced above, the law stands settled by this Court that oral exchange is permitted in Punjab and if the same has been acted upon by the parties, i.e. the exchange of the properties have already been taken place and even possession exchanged prior to such exchange being rendered into writing, it is only a memorandum of exchange and the said document did not require compulsory registration as this instrument did not confer right on the parties for there was valid exchange between the parties and in pursuance of exchange the moment the possession was taken by the respective parties they became owners in possession of the property. In view of the above, I find no merit in these appeals.”

¹ https://www.legitquest.com/case/alka-bose-v-parmatma-devi/46ADA

² https://www.legitquest.com/case/t-jayaram-naidu-and-another-v-yasodha-and-others/39646

³ https://www.legitquest.com/case/nasib-kaur-and-others-v-chand-rani-and-others/180D93