EFFECTS OF CONTRACT OF SALE-
Transfer of property between seller and buyer
Sec. 18-26, SOGA
Transfer of Property in Goods
• It is the most important step in the process of sale of
goods. It serves the main purpose of the contract of
sale.
• Meaning- Passing of property in goods means passing
of absolute legal ownership of the goods under a
contract of sale from the seller to the buyer for a price.
On passing the property, the goods cease to be the
property of the seller and vest in the buyer.
• Ownership of property in goods may pass with o
without transfer of possession.
• Also called transfer of ownership of goods from seller
to the buyer.
Importance of Transfer of Property in
Goods
1. Risk follows ownership-
Risk prima facie passes with property.
Sec. 26 - the goods remain at the seller’s risk until the property therein is
transferred to the buyer, but when the property therein is transferred to
the buyer, the goods are at the buyer’s risk whether delivery has been
made or not.
Except when-
• By express agreement, parties stipulate that risk in goods will pass some
time after or before the ownership has passed.
• Default by the party- When delivery of goods is delayed due to fault of
either seller or buyer, defaulting party will bear the risk of loss.
• Customs of trade- Goods shall be at the risk of the party on whom
custom of the trade imposes the risk.
• When seller is bailee-Goods shall be at the risk of the bailor.
2. Action against third parties-General rule is
owner alone can exercise proprietary rights.
3. Suit for price- A seller is entitled to sue for the
price of goods sold against the buyer only when
property in the goods has passed to the buyer.
4. Insolvency of seller or buyer- Time of transfer of
property decides the right of Official Assignee/
Receiver to claim the possession of the goods.
RULES RELATING TO TRANSFER
OF PROPERTY
I. Transfer of property in the
specific or ascertained
goods
Property in the goods is transferred to the buyer only when
goods are ascertained.
(Sec. 18)
The general rule is that property in the specific or ascertained
goods is transferred to the buyer at such time as the parties
intend it to be transferred. (Sec. 19(1))
For the purpose of ascertaining intention of parties regard
shall be had to the-
(i) Terms of the contract
(ii) Conduct of the parties
(iii) Circumstances of the case
(Sec. 19(2))
Rules for Ascertaining Intention
Unless different intention appears, the following rules
determine the intention of parties as to the time at which
the property in the goods s to pass to the buyer.
1. Where specific goods are in deliverable state-
• Where there is an unconditional contract for sale of specific
goods in a deliverable state, the property in the goods
passes to the buyer when the contract is made. It is
immaterial whether the time of payment of the price or the
time of delivery of the goods or both, is postponed (Sec.
20)
• Goods are said to be in deliverable state when they are in
such state that the buyer would under the contract of sale
be bound to take delivery of them. (Sec. 2(3))
Ganganagar Sugar Mills v. Rameshwar
Das Tarachand AIR (1992) Raj 14
• A sold by auction certain bags of sugar to B.
Held, the property in the sugar was passed to
B immediately after the acceptance of the bid.
2. Where specific goods are to be put
into deliverable state
• Where there is a contract for sale of specific
goods, but the goods are not in deliverable
state at the time of contract of sale, the
property in such goods passes when the goods
are brought to a deliverable state and buyer
has a notice of it.
• Eg. A sells a dining set to B. As per the terms
of contract, it is to be polished by A before
delivery. Thus, the set is not a deliverable
state but A is to put in in a deliverable state.
When the set has been polished, it comes into
deliverable state. But transfer of property is
the dining set takes place only when B
receives a notice of it.
3. When something is to be done for
ascertaining the price-
Sec. 22- When there is a contract for sale of
specific goods in a deliverable state, but the
seller is bound to weigh, measure, test or do
some other act or thing with reference to the
goods for the purpose of ascertaining the
price. In such a case, the property does not
pass until such act or thing is done and the
buyer has notice thereof.
• Eg. A sold B whole of his wheat lying in
godown at a certain price . The property in the
wheat will pass when the wheat is weighed by
A and notice of it is given to B.
II. Transfer of Property in Sale of
Unascertained Goods or
Future Goods
Sec. 23. Sale of unascertained goods and
appropriation.—
(1) Where there is a contract for the sale of unascertained
or future goods by description and goods of that
description and in a deliverable state are
unconditionally appropriated to the contract, either by
the seller with the assent of the buyer or by the buyer
with the assent of the seller, the property in the goods
thereupon passes to the buyer. Such assent may be
express or implied, and may be given either before or
after the appropriation is made.
Eg. Seller has agreed to sell 500 bales of Fair Bengal Cotton
out of 5,000 bale of cotton of different descriptions lying in
his godown. When seller selects 500 bales of Fair Bengal
Cotton, it is not sufficient for passing the property in the
bales. Seller gives notice to the buyer that bales are ready
for delivery and the buyer assents that he will take delivery
thereof. At this point of time, the goods are ascertained
and unconditionally appropriated by the seller to the
contract with the assent of the buyer. At this point of time,
property in goods is transferred to the buyer and buyer
becomes the owner. Now, the seller cannot deliver the
same goods to another person because he is no longer the
owner of goods.
Deemed appropriation of goods
Sec. 23(2)- Where the seller delivers the goods to
any of the following for the purpose of
transmission to the buyer without reserving the
right of disposal he is deemed to have
unconditionally appropriated the goods to the
contract:
1) To the buyer
2) To a carrier
3) To a bailee
It is immaterial whether the carrier or bailee is
named by the buyer or not.
III. Transfer of Property in the
Goods sent on approval
When the goods are sent on approval or on sale or return or on other similar
terms, the property in the goods passes to the buyer if any of the following
situations emerges:
1) When buyer signifies approval- Sec. 24 (a)
When buyer signifies his approval or acceptance to the seller, the property in the
goods passes to the buyer at the time of approval. [Sec. 24(a)]
Eg. A takes a CD player from B on approval for 3 days. The property in the CD
player passes to A if he conveys his approval within 3 days.
2) When buyer adopts the goods- When a buyer having goods on approval,
adopts the goods by his acts, the property in the goods passes to the buyer
when he adopts.
Kirkhams v. Attenborough (1897) 1 QB
A takes some jewellery from B on sale or return basis for a period of 7 days. A
pledges the jewellery with S without paying price or informing his intention
to B. Held, A had adopted the goods by his action and passed the goods title
to S. Therefore, B was entitled to claim the price from A.
3) When buyer retains the goods without signifying approval-
Sometimes the buyer does not signify his approval to the seller but retains
the goods without having notice of rejection. In such a case, if a time has
been fixed for return of goods, the property in the goods passes to the
buyer on expiration of such time. If no time has been fixed, on the
expiration of reasonable time.
Municipal Corporation of Hoogly V. Spencer Ltd. AIR (1987) Cal 49
A bought a tractor from B with an option to reject it if not found to be new. A
used the tractor for an unreasonable period and wanted to reject the
tractor. Held, the property in the tractor had already passed to A.
4. When the buyer makes the return of goods impossible-
When the buyer makes the return of goods impossible by
his act or default, the property in the goods passes
when he does the act or makes the default.
Genn v. Winkel (1912) 17 Comp 323 CA
A gave some diamonds to B on sale or return basis. B
passed on the diamonds to C on sale or return basis. C
gave them to D, who lost them. Held, property in the
diamonds had passed to B by his act which made the
return of goods impossible.
IV. Transfer of Property when Right
of Disposal is reserved
If the seller reserves a right of disposal of the
goods appropriated, the property in the goods
does not pass to the buyer until the conditions
imposed by the seller are fulfilled. The seller’s
right will not be adversely affected even if the
goods have been delivered to the buyer, or to
a carrier or to other bailee for the purpose of
transmission to the buyer. [Sec. 25(1)]