Definition and Nature of Legal Person

In law, a 'Person' is an entity capable of having rights and duties. Legal rights and obligations attach to persons. Jurisprudence analyses the concept of legal personality and the different types of entities that law recognises as persons.

Definition:

A legal person is any being whom the law regards as capable of rights and duties. Any entity that has legal personality is capable of suing or being sued, owning property, entering into contracts, and having other legal rights and obligations.

Nature:

Legal personality is not necessarily based on biological existence. Law confers personality on entities that may or may not be human.

Natural Person vs Artificial Person (Legal Entity)

Legal persons are traditionally classified into two main types:

• Natural Persons: These are human beings. In general, all human beings are recognised as legal persons from birth until death. They possess the capacity for rights and duties simply by virtue of being human. However, even for natural persons, legal capacity may be limited in certain circumstances (e.g., minors, persons of unsound mind).

• Artificial Persons (or Juristic Persons, Legal Entities): These are entities that are not human beings but are recognised by law as having personality, distinct from the individuals who compose or control them. Law creates and confers personality on these entities to enable them to function as legal units. Examples include corporations, companies, registered societies, universities, the State, public authorities, and sometimes even deities or charitable funds.

The concept of artificial personality is crucial for modern commerce, administration, and social organisation, allowing entities to own property, enter contracts, and operate independently of their individual members.

Classification of Legal Persons

Legal persons can be classified further based on the nature of the entity and how legal personality is conferred.

Classification of Artificial Persons:

• Corporations: These are the most common type of artificial person. A corporation is an association of persons (or sometimes even a single person in a 'one-person company') that is treated as a distinct legal entity, separate from its members. They are created by or under a statute (e.g., Companies Act, 2013 in India, creating companies). Examples: Companies, Public Sector Undertakings (PSUs), Municipal Corporations, Universities (established by statute).

• Unincorporated Associations: These are groups of individuals associated for a common purpose that are not formally incorporated as a legal entity. Generally, unincorporated associations (like clubs, societies, partnerships) are not recognised as distinct legal persons under common law, although some statutes may confer limited legal capacity (e.g., capacity to sue or be sued in the name of the association). The members are typically liable for the association's obligations.

• The State as a Legal Person: The State (Union of India, State Governments) is recognised as a legal person capable of having rights (e.g., to acquire property, collect taxes) and duties (e.g., to honour contracts, protect citizens' rights). Constitutional provisions and statutes define the State's legal capacity and liabilities.

• Public Authorities: Various public authorities and government departments may be recognised as legal persons or entities capable of exercising specific legal powers and being subject to certain legal obligations, depending on the statute establishing them.

• Deities and Charitable Institutions as Legal Persons: In India, particularly under Hindu law, a consecrated idol or deity is often recognised as a legal person capable of owning property, which is managed by a shebait (manager). Similarly, registered charitable institutions or endowments may be treated as legal persons for specific purposes.

• Funds and Endowments: In some cases, a fund or an endowment created for a specific purpose (e.g., a public charitable fund) may be recognised as a legal entity.

The criteria for conferring legal personality on artificial entities vary across legal systems and depend on policy considerations.

Creation and Extinction of Legal Persons

Natural persons are created and cease to exist by biological processes (birth and death). Artificial persons are created and dissolved by law.

Creation:

• Natural Persons: Legal personality begins at birth (in some contexts, even a fetus may have limited legal rights). It is an inherent status for human beings.

• Artificial Persons: Created by law through:

  • Registration under Statute: Most companies and registered societies acquire legal personality upon registration under relevant Acts (e.g., Companies Act, Societies Registration Act).

  • Special Act of Legislature: Some corporations or public authorities are created by a specific Act of Parliament or State Legislature (e.g., statutory corporations like RBI, LIC, universities).

  • Constitutional Provisions: The State as a legal person is a result of the Constitution.

  • Recognition by Law: Deities or certain funds gain legal personality through recognition by customary law or judicial decisions.

Extinction:

• Natural Persons: Legal personality ceases upon death. The rights and duties of the deceased person are transferred according to laws of succession.

• Artificial Persons: Extinguished by law through:

  • Dissolution or Winding Up: Companies and corporations are dissolved according to the procedure laid down in the governing statute. Their assets are distributed, and liabilities settled.

  • Repeal of Statute: If an artificial person was created by a special Act, its existence may cease if the Act is repealed.

  • Judicial Order: Courts may order the dissolution or winding up of certain artificial persons in specific circumstances (e.g., insolvency).

The creation and extinction of legal persons demonstrate the law's power to define who or what can be a subject of rights and duties.

Theories of Legal Personality

Various theories have been proposed to explain the nature of legal personality, particularly concerning artificial persons.

Theories:

• Concession Theory: This theory, associated with jurists like Savigny and Dicey, posits that legal personality is a concession granted by the State. Artificial persons have personality only because the sovereign or the State chooses to confer it upon them. The State has the power to grant or withhold legal personality. This theory reflects a positivist view, seeing legal personality as purely a creation of positive law.

• Fiction Theory: Associated with jurists like Savigny and Salmond. This theory argues that artificial persons are mere fictions of the law. While law treats them as persons, they are not 'real' persons in the same sense as human beings. They exist only in contemplation of law. The rights and duties of a corporation are, in reality, the rights and duties of the individuals who act on its behalf, but the law creates a fiction for convenience and practical purposes.

• Realist Theory: Associated with jurists like Gierke (German jurist) and Maitland (English jurist). This theory argues that certain groups or associations (like corporations) are real social entities with a group will that is distinct from the wills of the individual members. Law does not create their personality but merely recognises the pre-existing social reality of the group. They are 'real' persons, not just fictions. This theory is associated with the sociological school, emphasizing the social existence of groups.

• Bracket Theory (or Symbolist Theory): Similar to the fiction theory, this theory views corporations as mere symbols or brackets used to simplify legal relations. The rights and duties are, in reality, those of the individual members, but the bracket or symbol is used for convenience to group them together.

• Purpose Theory (or Group Purpose Theory): This theory argues that legal personality is conferred on groups or funds to facilitate the achievement of a specific purpose. The entity is recognised as a person to serve the designated objective. Examples: Legal personality of deities (for managing property dedicated to a purpose), or a fund for a specific charity.

In practice, legal systems adopt a mix of these theories, often treating corporations as distinct realities (aligning with realist views for practical purposes like separate liability) while acknowledging that their personality is ultimately a construct of law (concession/fiction aspects).

Definition and Nature of Property

Property is another fundamental legal concept concerning ownership and rights over things. It is a complex term with different meanings depending on the context.

Definition:

In its broadest sense, 'property' refers to all the legal rights a person has, including not only material things but also intangible rights and claims. In a narrower sense, it refers to rights over material things (tangible property).

It is essentially a bundle of legally protected interests or claims related to things, which can be owned, transferred, or disposed of.

Nature:

Property is not the physical thing itself, but the rights a person has in relation to that thing. A person does not 'own' land itself, but owns rights over the land. These rights constitute the property.

Property as a bundle of rights

The widely accepted view is that property is a bundle of rights. This bundle typically includes:

• The right to possess the property.

• The right to use and enjoy it.

• The right to manage it.

• The right to the income or fruits derived from it.

• The right to the capital (the power to alienate, consume, or destroy).

• The right to security (immunity from expropriation).

• The right of transmissibility (passing on property after death).

• The right to residuary character (rights returning to the owner after lesser rights expire).

This bundle can be split, with different rights or parts of the bundle being held by different people (e.g., landlord and tenant, mortgagor and mortgagee, trustee and beneficiary). This 'bundle of rights' concept reflects the complexity and divisibility of property interests.

Property rights are generally rights in rem, enforceable against the world.

Classification of Property

Property can be classified in numerous ways, reflecting the different types of things and rights that can be subjects of ownership.

Classification:

• Corporeal and Incorporeal Property: (Based on tangibility of the object)

  • Corporeal Property: Rights over tangible things (e.g., land, goods).

  • Incorporeal Property: Rights over intangible things or merely rights themselves (e.g., copyrights, patents, easements, debts, shares). This is often distinguished from rights in re propria (proprietary rights over material things) and jura in re aliena (rights over the property of another).

• Movable and Immovable Property: (Based on mobility)

  • Immovable Property: Land, benefits arising out of land, and things attached to the earth or permanently fastened to anything attached to the earth. Governed by specific laws (e.g., Transfer of Property Act, 1882 in India).

  • Movable Property: All property other than immovable property. Governed by different laws (e.g., Sale of Goods Act, 1930 in India).

• Tangible and Intangible Property: (Based on physical existence - similar to corporeal/incorporeal but broader)

  • Tangible Property: Property that has a physical form (e.g., buildings, vehicles, goods).

  • Intangible Property: Property that does not have a physical form but represents value or rights (e.g., stocks, bonds, intellectual property, goodwill).

• Real Property and Personal Property: (Historical classification in English law)

  • Real Property: Primarily land and rights in land, which could be recovered by a 'real action'.

  • Personal Property: All other types of property, which were historically recoverable by a 'personal action' (claiming damages against the person). Includes movable property and certain intangible rights.

• Public and Private Property:

  • Private Property: Property owned by individuals or non-governmental entities.

  • Public Property: Property owned by the State or public authorities (e.g., public roads, parks, government buildings).

• Res Corporales and Res Incorporales: (Roman Law classification - things corporeal and things incorporeal)

• Choses in possession and Choses in action: (Classification of personal property in English law)

  • Choses in possession: Tangible movable goods that can be physically possessed.

  • Choses in action: Intangible rights that can only be claimed or enforced by legal action (e.g., debts, contractual rights, intellectual property).

These classifications help in understanding the different legal rules and implications that apply to various types of property.

Theories of Property

Philosophers and jurists have developed various theories to explain the origin, justification, and nature of property rights.

Theories:

• Occupancy Theory: This theory suggests that property originates from the mere fact of occupation. The first person to take possession of a thing (especially ownerless property) acquires ownership simply by taking control. This theory is often associated with early or primitive societies where resources were abundant and the act of taking possession was the primary way to establish a claim.

• Law Making Theory (or State Theory): This theory, associated with positivists like Bentham, argues that property is purely a creation of law. There is no natural right to property; property rights exist only because the State creates and recognises them through legislation and enforcement. The State defines what can be owned, who can own it, and the scope of ownership rights.

• Labour Theory: Prominently associated with John Locke. This theory posits that individuals acquire property rights in things by mixing their labour with them. When a person expends labour to cultivate land or create something, they acquire a right to that product of their labour. This theory justifies private property as a natural right derived from individual effort.

• Social Contract Theory: Building on thinkers like Locke, this approach views property rights as arising from a social contract, where individuals agree to respect each other's property claims in exchange for security and order provided by the State.

• Evolutionary Theory: Associated with historical school jurists like Henry Maine. This theory views property rights as having evolved over time from communal ownership in primitive societies (where the family or tribe owned property collectively) to individual ownership in modern societies. It emphasizes the historical development of property concepts.

• Socialist Theories: Socialist theories, particularly Marxism, are critical of private property, especially the private ownership of the means of production. They argue that private property is a source of inequality and exploitation. They advocate for communal or state ownership of major resources for the benefit of society as a whole. In India, the concept of socio-economic justice and principles in DPSPs (like Article 39(b) and (c) aiming at equitable distribution of resources and prevention of concentration of wealth) reflect socialist influences and justifications for limiting or regulating private property for the common good.

• Functional Theory: This theory views property rights not as absolute rights but as defined and limited by their social function. Property owners have a duty to use their property in a way that benefits society (as argued by Duguit). This justifies state regulation of property for public welfare.

These theories offer different perspectives on why property exists and what its purpose is, reflecting varying philosophical and political views on individual rights, the role of the state, and social organisation. The concept of property in a legal system is often shaped by the interplay and influence of these different theoretical justifications.