Donation agreement between parent and child

Donation agreement between parent and child

by George Coucounis

“The donation agreement should be simple, clear and without reservations”

A parent who wishes to dispose of and transfer property to a child acting because of natural love and affection between them should not leave pending matters which may create disputes between his children leading them to Court. The completion of a donation without any reservation, other than the parent reserving the right of enjoyment and to reside in the property during his lifetime, is preferable. Any other reference in the donation agreement, especially in a vague manner for an intended right to another child who is not a party to the agreement must be avoided. The acceptance of the donation must be unconditional, except the reservation of the right of residence or enjoyment, so that to avoid unnecessary disputes between the children. The content of the donation agreement must be simple, clear and without reservations. In fact, donations made between persons who are not closely related are valid when completed, despite the absence of consideration.

The privity of contract in a donation agreement between the donor and the beneficiary and any reference to a third person, even another child, does not create a contractual relationship. The Supreme Court in a unanimous judgment dated 8.7.2022 examined the issue and intervened, setting aside the first instance judgment which ordered the appellant to take all necessary steps for the registration or transfer of the disputed pieces of land in the name of the respondent. In particular, the Court of first instance wrongly found that the mother of the appellant transferred the pieces of land by donation to his sister under the condition that she would transfer them to him after five years. Also wrong was the finding that the mother’s wish when she transferred the properties to his sister, who then transferred them to the appellant company, was that they should ultimately be transferred to the respondent.

The Supreme Court quoted the contents of the donation agreement between the mother and the sister of the respondent, which did not justify the findings of the Court of first instance. There was a provision in the donation agreement that the beneficiary – daughter accepts the donation from the donor – mother and that after the lapse of five years and when the circumstances would permit it, she will build a bungalow house or a shop or a restaurant in the donated properties and to register and/or donate it to her brother. The Court emphasized that at no time did the beneficiary, sister of the respondent, undertake, under the donation agreement, the obligation to transfer the two properties donated to her by her mother to her respondent brother. What she agreed with her mother was to build, 5 years after the signing of the agreement and when the circumstances permit it, “a bungalow house or a shop or a restaurant” within the two properties, which she would be obliged to register and/or donate to her brother.

The Supreme Court notes in its judgment that the Statement of Claim did not reflect the exact content of the donation agreement and it was drawn up in a misleading manner, something which unfortunately the defence lawyer and the Court of first instance did not realise. In paragraph 6 of the Statement of Claim, there was special reference to the content of the donation agreement, which however was not supported at all by the donation agreement itself. Not only there was no obligation on the part of the beneficiary to transfer the two properties to the respondent, with or without any buildings, but neither there was an obligation to build a bungalow house or a shop or a restaurant within 5 years from the signing of the agreement. The agreement stated that after the lapse of five years and after the circumstances permit it, the beneficiary would be obliged to build and transfer a bungalow house or shop or restaurant to her brother – respondent.

Finally, the Supreme Court noted that the respondent was never a contracting party to the donation agreement. According to its content, whoever violated its terms, would be subject to the payment of damages to the other contracting party and not to the respondent brother of the beneficiary. In light of its conclusion, the Supreme Court held that there was no need to examine whether the doctrine of privity of contract should not be taken into consideration here and accepted the appeal.