Implied Contracts by Mortgager

1. Introduction

As far as making of mortgage is concerned, parties to mortgage are considered free to enter into any terms, which they like. However, implied contracts by mortgagor provide implied terms when mortgage-contract does not contain all the terms.

2. Implied Contracts by Mortgagor

Under transfer of property act, following contracts can be described as far as implied contracts by mortgagor are concerned:

i. Subsistance and Transfer of interest

Mortgagor is deemed to contract with mortgagee that interest, which mortgagor professes to transfer to mortgagee, subsists, and that mortgagor has power to transfer such interest.

ii. Defense of Mortgagor’s title to mortgaged-property

Mortgagor is deemed to contract with mortgagee that mortgagor will defend mortgagor’s title to mortgaged-property or mortgagor is deemed to contract with mortgagee if mortgagee is in possession of mortgaged-property, such possession will enable mortgagor to defend mortgagor’s title to mortgaged-property.

iii. Payment of Public Charges

Mortgagor is deemed to contract with mortgagee that the mortgagor will pay all public charges till that time during which mortgagee is not in possession of mortgaged property when such charges accrue due in respect of mortgaged-property.

iv. In case of Lease

In case of lease, mortgagor is deemed to contract with mortgagee in following three situations:

a. Where mortgaged-property is a Lease

Where mortgaged-property is a lease, mortgagor is deemed to contract with mortgagee that rent, which is payable under lease, has been paid down to commencement of mortgage, and that conditions, which are present in lease, have been performed down to commencement of mortgage, and that contracts, which are binding on leases, have been observed down to commencement of mortgage.

b. Payment of rent reserved by Lease

Mortgagor is deemed to contract with mortgagee that mortgagor will pay that rent till security exists and mortgagee is not in possession of mortgaged-property especially in that case where such rent is reserved by lease.

c. In case of renewed Lease

When lease is renewed, mortgagor is deemed to contract with mortgagee that mortgagor will perform those conditions, which are present in the lease, and observe those contracts, which are binding on lessee, and indemnify mortgagee against all those claims, which are sustained due to non-payment of rent under lease or due to non-performance or non-observance of conditions under lease, and non-performance or non-observance of those contracts, which are binding on lessee.

v. In case of Second or subsequent Encumbrance on Mortgaged-property

Where mortgage is a second or subsequent encumbrance on mortgaged-property, mortgagor is deemed to contract with mortgagee that mortgagor will pay from time to time that interest, which accuse due on prior encumbrance and when it becomes due, and will at the proper time discharge that principal money, which is due on prior encumbrance.

Conclusion

To conclude, it can be stated that implied contracts by mortgagor are possible only in absence of a contract to the contrary. 

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