Definition, Contingent and vested interest in transfer of property

In case of transfer of property, a person may acquire a contingent interest as against a real interest or vested interest in the property. The relevant provisions to this aspect are contained under Section 21 of the Transfer of Property Act, 1882.
According to statutory provisions, where on a transfer of property an interest is created in favour of a person to take effect only on the happening of a specified uncertain event, or if a specified uncertain event does not happen, the person acquires a contingent interest in the property.

Such interest becomes a vested interest under these two circumstances:

In case where on a transfer of property, an interest is created in favour of a person to take effect only on the happening of a specified uncertain event, then on the happening of the event.

In case where on a transfer of property an interest is created in favour of a person to take effect only on the not happening of a specified uncertain event, then when the happening of the event becomes impossible. The not happening of the event should become absolutely certain, beyond doubt.

Such an interest becomes a vested interest in the transferee, either on the happening of the event or when the happening of the event becomes impossible, respectively. For example, if A's property is to be transferred to C in case A and B die before the age of 18. In such a case, C has a contingent interest in the property until A and B die under the age of 18. An interest would be contingent, when some contingency is to happen before the person is qualified to take the possession of the property.

These points of distinction between vested and contingent interest need to be noted:

A contingent interest is inalienable. On the other hand, vested interest is heritable and transferable.

A contingent interest depends solely upon the fulfilment of a condition, so that in case of non-fulfilment of the condition, the interest may fall thorough. On the other hand, a vested interest does not depend upon the fulfilment of any conditions and takes effect from the date of the transfer of property.

In case of a contingent interest there is no present right. However, there is a promise for giving one and is altogether dependent upon the fulfilment of the condition. As against this, in case of a vested interest, there is a present and immediate right. Only its use is postponed.

In case of a contingent interest, the transferee takes an interest of a contingent nature, which may be defeated by reason of non-fulfilment of the precedent conditions. This is not the case in case of a vested interest.

It is to be noted that where, under a transfer of property, a person becomes entitled to an interest in the property upon attaining a particular age and the transferor also gives to him absolutely the income to arise from such interest before he reaches that age, or directs the income to be applied for his benefit, then such interest is not contingent interest.