A vested interest is created in favour of a person – without specifying the time when it is to take effect, or specifying that it is to take effect forthwith, or on the happening of a certain event. It is ownership. It does not depend upon the fulfilment of any condition. It creates an immediate right, though the enjoyment may be postponed to a future date. Thus, owner’s title is already perfect. It is not defeated by death of transferee before he obtains possession. It is both transferable as well as heritable. If the transferee of a vested interest dies before actual enjoyment, it passes on to his heirs.
Example: A makes a gift to B of Rs. 100 to be paid to him on the death of C. B gets a vested interest, as the event, namely, C’s death is certain
A contingent interest is created in favour of a person – to take effect only on the happening or not happening of a specified uncertain event, which may or may not happen. It is only a chance of becoming an owner. However, it is different from spies successions. It is solely dependant upon the fulfilment of the condition (after which it becomes vested interest), so that if the condition is not fulfiled, the interest may fall through. Thus, the owner’s title is as yet imperfect, but is capable of becoming perfect.
Whether it passes on the death of the transferee or not depends on the nature of the contingency. It is transferable. Whether it is heritable or not depends on the nature of the contingency. If the transferee dies before obtaining possession, the contingent interest fails, and does not pass on to his heirs.
Example: An estate is transferred to A if he shall pay Rs. 500 to B. A’s interest is contingent until he paid Rs. 500 to B.