Rule
S.55 is the most detailed section in the TPA on sale. It lists the rights and liabilities of the seller and the buyer of immovable property. They apply "in the absence of a contract to the contrary", so they bind the parties even when the sale deed is silent, but the parties may vary them by agreement.
The section is arranged in six rules. Rules (1) to (4) deal with the seller, and rules (5) and (6) with the buyer. Some duties arise before completion (for example, disclosure and production of title deeds) and some after ownership passes (for example, who bears loss and outgoings).
The seller knows the property and its history; the buyer usually does not. S.55 fills the gaps in the bargain with fair default terms, and its last paragraph makes a deliberate omission to disclose under S.55(1)(a) or S.55(5)(a) fraudulent.
| Provision | What it says |
|---|---|
| S.55(1)(a) to (g) | Seller's liabilities: disclose, produce deeds, answer, convey, take care, give possession, pay charges and discharge encumbrances |
| S.55(2) | Seller's implied covenant that the interest exists and he has power to transfer it |
| S.55(3) | Seller must deliver title deeds once the whole price is paid |
| S.55(4)(a) and (b) | Seller's rights: rents and profits until ownership passes; charge for unpaid price |
| S.55(5)(a) to (d) | Buyer's liabilities: disclose facts increasing value, pay price, bear loss, pay outgoings |
| S.55(6)(a) and (b) | Buyer's rights: benefit of improvements and rents; charge for price paid in advance |
| S.55, last paragraph | Omission to disclose under S.55(1)(a) or S.55(5)(a) is fraudulent |
Requirements
The seller's duty of disclosure under S.55(1)(a) has four elements. All four must be shown.
| # | Requirement | What to check |
|---|---|---|
| 1 | A material defect | In the property or in the seller's title to it |
| 2 | The seller knows of it | Actual knowledge of the seller |
| 3 | The buyer does not know of it | Buyer was unaware at the time of the contract |
| 4 | The buyer could not discover it with ordinary care | A defect a reasonable inspection or search would reveal is not covered |
Disclosure is not the only protection for the buyer. Even if an encumbrance is on the public record, the seller must discharge all existing encumbrances under S.55(1)(g), unless the property is sold subject to them.
Seller's rights and liabilities
| Liability or right | Clause | Content |
|---|---|---|
| Disclose material defects | S.55(1)(a) | Defects in the property or title that the seller knows, the buyer does not, and the buyer could not discover with ordinary care |
| Produce title documents | S.55(1)(b) | On request, all documents of title in the seller's possession or power, for examination |
| Answer questions | S.55(1)(c) | To the best of his information, all relevant questions about the property or title |
| Execute a proper conveyance | S.55(1)(d) | On payment or tender of the price, when the buyer tenders the conveyance at a proper time and place |
| Take care of the property | S.55(1)(e) | Between contract and delivery, the care an owner of ordinary prudence would take of the property and title deeds |
| Give possession | S.55(1)(f) | When required, such possession as the nature of the property admits |
| Pay charges and discharge encumbrances | S.55(1)(g) | Public charges and rent due up to the date of sale, interest on encumbrances due on that date, and (unless sold subject to them) all existing encumbrances |
| Implied covenant for title | S.55(2) | The interest the seller professes to transfer exists and he has power to transfer it. The benefit runs with the property |
| Deliver title deeds | S.55(3) | Once the whole price is paid, all title documents in his possession or power (with exceptions for part sales) |
| Rents and profits | S.55(4)(a) | Until ownership passes to the buyer |
| Charge for unpaid price | S.55(4)(b) | Where ownership passes before full payment: a charge for the unpaid price and interest, against the buyer, a transferee without consideration, or a transferee with notice of non-payment |
What must be disclosed and what need not be
| Must be disclosed (S.55(1)(a)) | Need not be disclosed |
|---|---|
| Hidden (latent) defects, such as structural cracks behind plaster | Patent defects visible on ordinary inspection, such as a cracked wall |
| Defects in title the buyer cannot find with ordinary care, such as a pending suit or an unregistered claim known to the seller | Matters a buyer of ordinary care would find, such as entries in the registration records (but see S.55(1)(g) on encumbrances) |
| Material facts affecting value known only to the seller, such as an acquisition or demolition notice served on him | General market conditions |
| Rights of third parties not apparent on inspection | Occupants the buyer can plainly see, such as a tenant in possession (S.3, Explanation II gives the buyer notice) |
Buyer's rights and liabilities
| Liability or right | Clause | Content |
|---|---|---|
| Disclose facts increasing value | S.55(5)(a) | Facts about the nature or extent of the seller's interest that the buyer knows, believes the seller does not know, and that materially increase its value |
| Pay the price | S.55(5)(b) | At the time and place of completion. If sold free of encumbrances, he may keep back the amount of encumbrances and pay it to those entitled |
| Bear loss | S.55(5)(c) | Once ownership passes, loss from destruction, injury or fall in value not caused by the seller |
| Pay outgoings | S.55(5)(d) | Once ownership passes, public charges and rent, principal of encumbrances the property is sold subject to, and later interest |
| Benefit of improvements and income | S.55(6)(a) | Once ownership passes, any improvement or increase in value, and the rents and profits |
| Charge for price paid in advance | S.55(6)(b) | Unless he improperly declined delivery: a charge for purchase money paid before delivery, with interest; and, if he properly declined delivery, for the earnest and costs of a suit |
| Inspect title | S.55(1)(b), (c) | He can demand production of title deeds and answers to questions, and make his own searches |
Illustrations
1. Latent defect
- Facts: Arun sells his house to Bala. Termites have eaten the foundation beams, which cannot be seen without breaking the floor. Arun knows, because a treatment two years ago failed, but says nothing.
- Result: Arun breaches S.55(1)(a). His omission is fraudulent (S.55, last paragraph). Bala can claim rescission or damages.
- Why: The defect is material, known to Arun, unknown to Bala, and not discoverable with ordinary care.
2. Patent defect
- Facts: The same house has a visible crack across the living room wall. Bala inspects the house, sees the crack and buys.
- Result: No breach of S.55(1)(a). Bala cannot later complain of non-disclosure.
- Why: A defect that ordinary inspection reveals is outside S.55(1)(a).
3. Seller's charge for unpaid price
- Facts: Arun sells the house to Bala for Rs.40 lakhs. Bala pays Rs.30 lakhs on registration and promises the rest in three months. He takes possession and never pays the balance.
- Result: Arun has a charge on the house for Rs.10 lakhs and interest from the date possession was delivered (S.55(4)(b)).
- Why: Ownership passed before full payment. The charge arises by law, without any clause in the deed, and binds Bala and anyone taking from him without consideration or with notice.
4. Buyer's duty to disclose
- Facts: Govind, who works in the Collector's office, knows that a highway is about to be announced through Hari's area, which will multiply land values. Hari does not know. Govind agrees to buy Hari's plot for Rs.10 lakhs without telling him.
- Result: Govind breaches S.55(5)(a). His omission is fraudulent (S.55, last paragraph), so Hari can avoid the contract (S.19, Contract Act).
- Why: The buyer must disclose facts he knows, which the seller does not, that materially increase the value of the seller's interest.
5. Loss after ownership passes
- Facts: Meena buys a godown from Ravi by a registered deed. A week later, before she moves in, it burns down in an accidental fire.
- Result: The loss falls on Meena (S.55(5)(c)). She must still pay any unpaid price.
- Why: Once ownership passes, risk passes with it, unless the loss was caused by the seller.
Key Cases
S.55 is mostly applied on its own words, and exam answers rest on the clauses above. The case cited in the earlier version of this note could not be verified and has been removed (see the review report).
Distinctions
| Basis | Seller's disclosure (S.55(1)(a)) | Buyer's disclosure (S.55(5)(a)) |
|---|---|---|
| What must be disclosed | Defects in property or title | Facts that materially increase the value of the seller's interest |
| Who usually knows more | Seller, about the property | Buyer, about outside events |
| How often it arises | Very common | Rare |
| Example | Hidden structural defect; pending suit | Coming highway announcement |
| Effect of omission | Fraudulent (S.55, last paragraph): buyer may avoid or claim damages | Fraudulent (S.55, last paragraph): seller may avoid or claim damages |
| Basis | Implied terms (S.55) | Express covenants (in the sale deed) |
|---|---|---|
| Source | Statute | Agreement of the parties |
| Apply when | Always, unless there is a contract to the contrary | Only as agreed |
| Can be excluded | Yes, by contrary contract (but not to cover fraud) | Not applicable |
| Examples | Disclose defects; execute conveyance; give possession | "Seller warrants no encumbrance for 12 years" |
| Standard | Minimum default terms | Parties may set higher or different terms |
Exam Scenario
A agrees to sell his flat to B for Rs.60 lakhs. Before completion, the municipal corporation serves A with a demolition notice for unauthorised construction on the top floor. A does not tell B, and the sale is completed. B later receives the notice. Advise B.
Approach
- Met: A material defect. A demolition notice for unauthorised construction affects the property's value and use.
- Met: A knew of it, because the notice was served on him.
- Met: B did not know of it.
- Met: B could not discover it with ordinary care. The notice was served only on the owner and is not visible on inspection.
- Issue: Effect. A breached S.55(1)(a), and his omission is fraudulent (S.55, last paragraph). Active concealment is also fraud under S.17, Contract Act.
Conclusion: A is liable for breach of S.55(1)(a). The sale was induced by fraud.
Remedy: B may avoid the sale and recover the price, returning the flat (S.19, Contract Act). Or B may keep the flat and claim damages, such as the fall in value or the cost of regularisation or of the demolished portion.
Recall Check
- Under S.55(1)(a), what types of defects must a seller disclose?
- What charge does an unpaid seller have under S.55(4)(b), and against whom?
- Does the buyer have any disclosure obligations under S.55?
- When does the risk of loss pass to the buyer?
Flashcards
What is the seller's duty under S.55(1)(a)?
Disclose material defects in the property or title that are (a) known to seller, (b) not known to buyer, and (c) not discoverable by buyer with ordinary care. Omission is fraudulent (S.55, last paragraph).
What is the implied lien of an unpaid seller?
Under S.55(4)(b), where ownership has passed before the whole price is paid, the seller has a charge on the property for the unpaid amount and interest, even without express agreement. It binds the buyer, a transferee without consideration and a transferee with notice of non-payment.
Must a seller disclose patent defects?
No. Patent defects (visible on inspection) need not be disclosed. The buyer is expected to discover them through ordinary inspection.
When does the buyer become liable for outgoings (taxes, maintenance)?
From the time ownership passes to him (S.55(5)(d)), as between himself and the seller. This is usually on registration of the sale deed.
Does the buyer have any disclosure duty?
Yes (rare). Under S.55(5)(a), the buyer must disclose facts about the nature or extent of the seller's interest that he knows, believes the seller does not know, and that materially increase its value.
What is the difference between latent and patent defects?
Latent: hidden, not discoverable by ordinary inspection (must disclose). Patent: visible, apparent on inspection (no duty to disclose).