The Rule of Perpetuities and the Need for - Manupatra

THE RULE AGAINST PERPETUITIES AND THE NEED FOR REFORM
INTRODUCTION
The rules of law affecting perpetuities are based upon considerations of public policy.
Although the principle of private ownership requires that an owner of property is to have
power to dispose as he thinks fit, either during life or on death, of his whole interest in the
property he owns, public policy requires that the power should not be abused.
Accordingly from early times, the law has discouraged dispositions of property, which
either impose restrictions on future alienations of that property, or fetter to an
unreasonable extent its future devolution or enjoyment. 1
The rule against perpetuity has been dealt with in the Section 14 2 of the Transfer of
Property Act, 1882 (henceforth referred to as ―the Act‖). Sections 10 to 17 of the
Transfer of Property Act have been enacted to encourage free alienation and circulation
of property. 3 The object of the rule against perpetuity as embodied in the Section 14 is to
restrain the creation of future conditional interest in the property. It concerns rights of
property only and does not concern the making of contracts which do not create the rights
of property. It does not therefore apply to personal contracts which in effect do not create
interest in any property. 4 An ordinary contract for purchase entered into after the Transfer
of Property does not by itself create any interest in land but the obligation can be
enforced against a subsequent gratuitous transferee from the vendor of a transferee of
value but with notice. The rule against perpetuity has no application to contracts which
create no interest in land. 5 The provision of Section 14 shall not apply to any case
This Article has been written by Punarva Gera, Semester V of Hidayatullah National Law University,
Raipur, C.G.(INDIA).
1 th
Refer Halsbury‘s Laws of England, 4 Edition(Reissue), vol. 35, p. 605.
2
Section 14 of the Act states: ―No transfer of Property can operate to create an interest which is to take
effect after the life time of one or more persons 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
created is to belong.‖
3
Vencatachellum v. Kabalamurthy AIR 1955 Mad 350(358); K. Muniswamy v. K. Venkataswamy AIR
2001 Kant 246 (248).
4
South Eastern Railway Co. v. Associated Portland Cement Manufactures Ltd., (1910) I Ch. 12.
5
Jagar nath v. Chhedi Dhobi AIR 1973 All 307(309).

wherein there is no transfer of property as is very clear from the language of the section
itself. The rule against perpetuity would come into operation where the transfer of
property creates an interest, which is to take effect after the lifetime of one or more
persons living at the date of the transfer. 6
From times immemorial, the owner of the property has a vested right in him to deal with
it in accordance with his discretion. The right of disposition or alienation, which is
coexistent with a right of ownership, is so absolute that it is easy to comprehend the
potential force of that right. But equally salient and time honoured is the well-known rule
against perpetuity which is based on public policy which necessarily had to make certain
dents on the exercise of such absolute power in case it is sought to be abused. 7
GENESIS OF THE RULE AND ITS GROWTH
The Rule against Perpetuity has its roots in early English common law, in a 1682 opinion
crafted by Lord Nottingham—The Duke of Norfolk’s Case. 8 Most empires, as history
readers know, have a way of putting up a strong front for a considerable time after decay
has set in. This observation conveniently fits the empire called the Rule against
Perpetuities. The Rule began three centuries ago by laying claim to a vague, undefined
territory. "Where will you stop?" asked Lord Nottingham of himself in the Duke of
Norfolk's Case. "I will tell you where I will stop: I will stop where-ever any visible
Inconvenience doth appear..," he replied. The Rule then grew in a manner typical of the
common law, by judges finding inconvenience here and no inconvenience there, invoking
for support, often imprecisely, a host of policies, taboos, and doctrines. 9 In this case,
Henry Frederick Howard, a member of one of the most prominent families in England
and Earl of Arundel and Surrey, was faced with trying to figure out how to provide for
his youngest son. 10 The problem stemmed from the fact that Mr. Howard‘s eldest son,
6 Kannamal v. Rajeswar AIR 2004 NOC 8.
7 M. Kesava Grounder v. D.C. Rajan AIR 1976 Mad 102(109).
8 The Duke of Norfolk’s Case, 3 Ch. Cas. 1, 22 Eng. Rep. 931 (1682); see also Haskins, supra note 1, at 20
(noting that The Duke of Norfolk’s Case is famous for first announcing the elements of the Rule Against
Perpetuity). Note, however, that an attempt had been made earlier to restrict the creation of certain
executory interests in Child v. Baylie.
9 Lynn, Robert J., ―PERPETUITIES: THE NEW EMPIRE‖, the Modern Rule Against Perpetuities.77 Yale L.J.
159.
10 Haskins, supra note 1, at 19.

Thomas, was insane. 11 Under English law, however, his eldest son was entitled to
succeed to his wealth, which consisted basically of real property. Mr. Howard, through
his attorney, Sir Orlando Bridgman, attempted to devise a way in which he could provide
for his youngest son at the expense of his eldest son. The two chose to accomplish this
through the use of a trust instrument, which ―became the basis for the celebrated legal
battle between‖ the two sons. The issue in The Duke of Norfolk’s Case was deceivingly
simple: Which of the two brothers was entitled to the property in question? The case,
however, became infamous as the first to provide a foundation for the common law Rule
against Perpetuity. 12
The origin and the growth of the rule of law against perpetuities based as it is upon public
policy, is described in Cadell v. Palmer 13 and Thelluson v. Woodford 14 . According to the
rule every estate or interest must vest, if at all, not later than 21 years after the
determination of some life in being at the time of the creation of such estate or interest
and not only must the person to take be ascertained but the amount of his interest must be
ascertained within the prescribed period. 15
―Perpetuity‖, in the primary sense of the word, is a disposition which makes the property
inalienable for an indefinite period. 16 In this sense it is concerned with certain interests
created in proesenti which are sought to be made inalienable for an indefinite period. In
its modern sense it is concerned with interest created in futuro and not with interest
created in presenti. This legal word or term of an art, is limiting an estate either of
inheritance or for years, in such manner as would render it inalienable longer than for a
life or lives in being at the same time and some short or reasonable time thereafter. The
21 years are allowed because the law considers that time reasonable.
11 See id.
12 See id.
13 (1883)1 Cl. & Fin. 372: 6 ER 956.
14 (1805) 11 Ves. 112:32 ER 1030.
15 Re Thompson, Thompson v. Thompson, (1906) 2 Ch 199.
16 Jarman on Wills, 8 th Edition, Vol. I, p.284;Bharuka, G.C., “MULLA THE TRANSFER OF PROPERTY ACT
1882”, (10 th edition, LexisNexis Butterworths), p.167.

After property in future estates begun to be recognized, and the limitations of estates in
remainder to the unborn children, as well as the creation of future estates by way of
shifting use and executory devise began to be permitted, it was felt that, unless some
rules restraining the creation of such estates were devised, property may, by a single
transfer be tied up in perpetuity. 17
Basically, the law does not recognize dispositions which would practically make the
property inalienable forever. 18
This is the rule against perpetuities. It started with limiting alienations to a life or lives in
being, and later stretched to include the period of gestation. Further, in
Stephens v. Stephens 19 , the court extended it still further to 21 years, saying that this
would not create ―perpetuity‖.
The traditional common law Rule against Perpetuities limiting the time period within
which contingent interests must vest is currently in effect either by statute or by judicial
adoption in only a few states. Some of those states have a general constitutional
prohibition against perpetuities. 20 The large majority of states, however, have either
abolished the rule, thus permitting perpetual trusts, or modified it, for example, by
adopting a wait-and-see rule, or by giving the courts a cy pres power to reform the
offending language, or by imposing an absolute limit on the number of years by which
time an interest must vest, or by excepting trusts where the trustee has the power of
sale. 21
Rule against perpetuity in its primary sense:
Examples of such rules interest in proesenti which have been held void under the name of
perpetuity or as tending to perpetuity are classified as follows 22 :
17 Dr. Gour, Hari Singh, ―DR. H.S. GOUR‘S COMMENTARY ON THE TRANSFER OF PROPERTY ACT‖,(11 th
Edition,2008, Vol. I, Delhi Law House), p.237.
18 Sorabjee, Soli J, ―DARASHAW J. VAKIL‘S COMMENTARIES ON THE TRANSFER OF PROPERTY ACT‖ (2 nd
Edition, 2004, Wadhwa Nagpur),p. 242.
19 (1736)Cas. Temp. Talb. 228: 25 ER 751.
20 Dukeminier Jesse, ―A MODERN GUIDE TO PERPETUITIES‖, 74 Cal. L. Rev. 1867 (1968).
21 Leach, W. Barton, ―PERPETUITIES IN A NUTSHELL‖, 51 Harv. L. Rev. 638 (1938).
22 Bharuka, G.C.,“MULLA THE TRANSFER OF PROPERTY ACT 1882”, (10 th edition, LexisNexis
Butterworths), p.168.

1. Estates and interests limited in proesenti with an unauthorized mode of
devolution, for example an estate of inheritance, not known to the common law;
an unbarrable entail; an estate in which successive heirs take life estates only; the
attempted entail of a chattel made prior to 1926.
2. Interest held on perpetual non-charitable trust, where no person or persons, can
take any benefit, example trusts to keep in repair a tom not part of the fabric of a
church.
3. Gifts to trustees for non charitable indefinite objects or for non charitable
unincorporated institutions or societies which may last for an indefinite time.
As regards the first class, it will suffice to say that even under the Hindu Law no estate
can be created which is unknown to Hindu Law. The principle on which the second class
is put has been applied in India in Administrator General v. Hushes 23 . The cases from the
third class require consideration. An Indian Case on the point is found in MAE Halfhyde
v. CA Saldanha 24 .The life estate so created in favour of the wife does not offend the rule
of perpetuity as incorporated in Section 14.
Modern Rule against perpetuity:
The modern rue against perpetuities is thus enunciated by Jarman: 25
“Subject to the exceptions to be presently mentioned, no contingent or executory
interest in property can be validly created, unless it must necessarily vest within
the maximum period of one or more lives in being and 21 years afterwards.”* 26
So long as the transferees are living persons, any number of successive estates can be
created. However, if the ultimate beneficiary is someone not in existence at the date of
the transfer, section 13 requires that the whole residue of the estate shall be transferred to
him. If he is born before the termination of the last prior estate, he takes a vested interest
at birth and possession immediately on the last prior interest.
23 (1913) ILR 40 Cal. 192, 21 IC 183.
24 (1944)49 Cal WN 145.
25 Jarman on Wills, 8 th Edition,vol.I., p.304, Supra note 11.
26 * The exceptions shall be dealt in detail later.

The rule against perpetuities however does not require that the vesting shall take place at
the birth of the ultimate beneficiary. What it does require is that the vesting cannot be
delayed in any case beyond his minority.
The result of the rule against perpetuity is that the minority of the ultimate beneficiary is
the latest period at which an estate can be made to vest.
Justification of the rule:
The most convincing modern explanation of the functions of the Rule against perpetuities
is the so-called Dead Hand Rationale. 27 According to this doctrine, the Rule is necessary
in order to strike a balance between on the one hand the freedom of the present
generation and, on the other, that of future generations to deal as they wish with the
property in which they have interests. If a settler or testator had total liberty to dispose of
his property among future beneficiaries, the recipients, being fettered by his wishes,
would never enjoy that same freedom in their turn. The liberty to make fresh
rearrangements of assets is necessary not only in order to be rid of irksome conditions
attached by earlier donors to the enjoyment of income but also in order to be able to
maneuver in the light of new tax laws, changes in the nature of the property and in the
personal circumstances of the beneficiaries, unforeseeable by the best intentioned and
most perspicacious of donors. 28
SCOPE AND APPLICABILITY OF THE RULE
The Section is a branch of law of property and not of the law of contract. The opening
words of section 14 of the Act prohibit the creation of an interest which is to take effect
after the lifetime of one or more persons living at the date of such transfer. If a contract
27
Refer The law commission (Item 7 of the sixth programme of law reform: the law of trusts),The rules
against perpetuities and excessive accumulations.
28
Ruth Deech, ―Lives in Being Revived‖ (1981) 97 LQR 593, 594 (footnote in the original text omitted).
The great advocate of the ―dead hand‖ rationale for the rule against perpetuities was Lewis M Simes: see
his Public Policy and the Dead Hand (1955), pp 58 - 63. He went further than the view, expressed above,
that the function of the rule was to maintain a balance between the living and the dead. He considered that
it was desirable per se that wealth should be controlled by the living and not the dead. The thinking behind
this was, of course, that the dead could not respond to changes in circumstances as they arose.This view has
not escaped criticism, however.

does not create any interest in favour of an individual or any party, such a contract does
not come within the purview of Section 14.
Ordinarily a contract for sale does not create any interest in favour of the prospective
purchaser. Any contract thereof which embodies a right of pre-emption, is nothing more
than a contingent contract for sale which becomes enforceable when the party to the
contract intends to dispose of certain property.
It does not create any estate in favour of the party to whom the property is to be offered
for sale in future. Such a contract thus does not come within the purview of Section 14 of
the Act. 29 Like mentioned earlier, section 14 comes into play only when Section 14 can
come into play only if there has been a transfer of interest in the property. The creation of
a charge is not a transfer of interest in the property. 30
In Raja Rajeswara Dorai v. Sundara Pondiyasami Tevar 31 , it was held that the creation
of an annuity in perpetuity with a charge on property would not offend Section 14 of the
Transfer of Property Act. There the suit was to enforce a covenant to pay an annuity in
perpetuity as the charge on property. Their lordships held that since there was no transfer
of interest in any immovable property Section 14 of the act would not be applicable.
In Bhupati Bhusha Trivedi v. Birendra Moahn Singh Chauthari 32 it was held:
―The test to determine whether the rule against perpetuity as embodied in the Section 14
applies or not is whether the covenant creates or seeks to transfer an interest in land.
That the rule applies to his right to property or any future limitation of such right and
where, as in the present case, the covenant does not seek to create or limit any such right,
the rule has no application”.
To the same effect is the decision in Matlub Hasan v. Mst. Kalawati 33 .In the case of an
agreement for sale entered into prior to the passing of the Act, it was the accepted
doctrine in India that the agreement created an interest in the land itself in the favour of
29 Mahmud Ali Majumdar v. Brikodar Nath, AIR 1960 Assam 178.
30 Kurunjilikattil Appu alias Raman v. Mary, AIR 1965 Ker 27.
31 49 I.C. 704
32 ILR (1948) 1 Cal 492
33 AIR 1958 MP 246

the purchaser, and following this doctrine the view was that a covenant for pre-emption,
contained in a deed of partition which was unlimited in point of time, was not enforceable
in law. 34 But there has been a change in this proposition and the current proposition is: 35
1. A contract for sale does not create any interest in the land but is annexed to the
ownership of the land.
2. The obligation can be enforced against a gratuitous transferee from the vendor aor
a transferee from value with notice.
An agreement to sell immovable property does not itself create any interest in or charge
on such property. Therefore a bare agreement to sell immovable property in future on
demand by a party to the agreement would not infringe the rule against perpetuities. 36
In Ram Newaz v. Nankoo 37 it was held by the Court that the transfer of two bighas of land
to a person was void under Section 14.
EXCEPTIONS TO THE RULE
This rule has no application:
i. To personal contracts 38 , although there is some connection with a reference to the
land. 39
ii. To a revocable license to enter and build up windows in default of the owner of
the building doing so, 40 for it does not give the adjoining owner any interest in
land. If it did, such an interest would be void for perpetuity.
iii. To covenants which run with the land because they are so annexed to the land as
to create something in the nature of an interest in the land. 41
34
Allibhai Mahomed v. Dada Alli, AIR 1931 Bom 578.
35
Ram Baran v. Ram Mohit, AIR 1967 SC 744.
36
R.S.Ghadge v. L.S. Ghadge, AIR 1960 Bom 105.
37
AIR 1986 All 283.
38
Mackenzie v. Himalaya Assurance Co. Ltd. AIR 1926 Cal 745.
39
South Eastern Rly. Co. v. Associated Portland Cement Manufacturers. (1990)I Ch 12.
40
Smith v. Colbourne (1914) 2 Ch. 533.

iv. To transfer for benefit for public. 42
v. To a covenant giving a mortgage a right of pre-emption. 43
vi. To equity of redemption which is a present interest in a property in exercise of
which the property is sought to be redeemed. 44
vii. To a restrictive covenant or contract not being a limitation of property. 45
viii. To general powers. 46
ix. To an agreement to sell or to recover a land. 47
x. To an easement acquired by the virtue of a local custom known as customary
easement. 48
ENGLISH LAW AND INDIAN LAW COMPARED
The following points of distinction may be noted between the Indian and the English
rules of perpetuity 49 :
a) The perpetuity period is different. Under the English law, the perpetuity period is
a life or any number of lives when the instrument under which the interest arises
takes effect, plus a term of 21years. Under the Indian law it is the life or lives in
being at the time of the grant plus the period of minority of the beneficiary taking
under the grant
41 Muller v. Trafford. (1901)1 Ch 54.
42 Section 18 of the Act states: ―Transfer in perpetuity for benefit of public: The restrictions in sections 14,
16 and 17 shall not apply in the case of a transfer of property for the benefit of the public in the
advancement of religion, knowledge, commerce, health, safety or any other object beneficial to mankind.‖
43 Haris Paik v. Jahuruddi Gazi (1897)2 CWN 575.
44 Padmanappa v. Sitarama Ayyar, AIR 1928 Mad 28.
45 Mackenzie v. Childers. (1889) 43 Ch. D. 265
46 In Re Fane, Fane v. Fane (1913)I Ch. 54.
47 Supra Note 30.
48 Section 18 of the Easements Act states : An easement may be acquired in virtue of a local custom. Such
easements are called customary easements.
49 See, Sarathi, Vepa P., ―G.C.V. SUBBARAO‘S LAW OF TRANSFER OF PROPERTY‖, (4 th Edition, 2004, Alt
Publication), p.457.

) Under the English rule the additional period of 21 years allowed after lives in
being is a term in gross without reference to the infancy of the person. Under the
Indian statutes the term is the period of the minority of the person to whom if he
attains full age the interest created is so to belong.
c) The period of gestation, where it actually exists may be added to the perpetuity
period as above defined. In English law it admits of addition at both ends of the
perpetuity period. But Indian law it may be added only at its commencement.
d) The Law of Property Act, 1925, by Section 163 has validated certain remote gifts
by allowing the substitution of the age of 21 years when the gift is to fail for
remoteness on the ground that the ascertainment of the beneficiary or the class of
the beneficiary is made to depend on the attainment by the beneficiary or
members of the class of an age exceeding 21 years. There is no corresponding
provision under the Indian law.
THE NEED FOR REFORM AND RECOMMENDED SUGGESTIONS
During the last forty years or so, the rule against perpetuity has come under fire in many
parts of the world. While the Rule expresses a perfectly reasonable policy – a fair balance
between the desire of members of the present generation, and a similar desires of
succeeding generations to do what they wish with the property which they enjoy 50 - yet it
has inevitably become ‗encrusted with barnacles‘. The causes of dissatisfaction with the
rule are mainly two: The requirement of absolute certainty that the interest will vest
within the perpetuity period, and its consequent invalidity if any possible combination of
events, however, improbable or fantastic, could it to vest outside the perpetuity period.
And Secondly, The harsh consequences of violating the rule, whereby, the interest fails to
vest completely instead of being cut down to size.
There is widespread agreement that some form of reform is required. To illustrate the
point, a look at the case of Soundarjan v. Natarajan 51 would be useful. This case
illustrates the anomaly resulting from the fact that a slight excess over the legally
50 Simos, PUBLIC POLICY AND THE DEAD HANDS, 1955, p. 58
51 AIR 1925 PC 244.

permissible age may defeat the transfer. That case was no doubt a case relating to
succession of death, but the position would be the same in respect of transfer during a
person's lifetime. In this case, an estate was given to the testator's daughters for their lives
with the remainder for the children on attaining the age of 21 years. The age of majority
in India is 18 years, unless guardians are appointed or a Court of Wards takes charge. It
was held that, as at the testator's death, it could not be certain that in the case of every
child a guardian would necessarily be appointed so as to postpone the minority of the
child to 21 years, there was a possibility that the bequest would be held beyond the
lifetime of the daughters and the minority of some of the children of the daughters.
Hence, by virtue of the operation of Section 102, Indian Succession Act, closely
corresponding to its Section 114 and also by Section 14 Transfer of Property Act, 1882
the transfer was illegal and void.
The Law Commission of India in its Seventieth Report has advocated that the reforms in
India should be mainly spearheading in two directions:
(i) Regard be had to actual events
(ii) Mischief arising from conditions as to age should be remedied.
In Applying Section 14, to an interest in property-limited to take effect at or after the
termination of one or more life interests of persons in being when the period mentioned
in Section 14 commences to run or on or after the termination of lives of persons inbeing
when such period commences to run the validity of the interest shall be determined on the
basis of the facts existing at the termination of such one or more life estates or lives. It
may be added that for the purposes of this proposition, an interest which must not
terminate later than the death of one or more persons is a life interest, even though it may
terminate at an earlier time. If such a provision is enacted, the Court will determine the
validity of the gift by examining the actual facts as they appear at the end of the life
interest. 52 If an interest in property is void under S.14, because it is contingent upon any
person attaining or failing to attain the age in excess of majority, the contingency shall be
reduced to the age of majority as regards all persons subject to the same age contingency.
The above two propositions shall not be constructed as invalidating or modifying the
52 P.B.Gajendrakar. Law Commission of India. 70thReport, August 1977 at 170.

term of any limitation which would have been under S.14 apart from these provisions.
The above three propositions shall apply to transfer taking effect on or after the date on
which those propositions become operative and to appointments made after that date in
exercise of a power of appointment, including appointments made by an instrument under
a power created before that date. 53
It seems apt to conclude that the rule against perpetuities were formulated in certain
socio-economic conditions, which are valid today as well as and as relevant as they were
at the beginning of the laissez faire economy, yet the era of the welfare economy had
dawned and the rule against perpetuities needs to be for reform to be re-examined and
mould afresh to suit newer and changed conditions. There is a need for reform to be built
on the modern rule itself, but equipped to overcome its deficiencies.
53 Id.