Effects of Goods

Transfer of Property as between Seller and Buyer

• On the transfer of property in sale of goods, the transferor ceases to be the owner of
the property and the transferee becomes the owner thereof.
Sale of unascertained goods
• Section 18 provides, "where there is a contract for the sale of unascertained goods,
no property in the goods is transferred to the buyer unless and until the goods are
ascertained."
Note:- The ascertained goods means the goods which are identified at the time the
contract of sale is made.
• ‘Ascertained’ goods does not always mean 'specific' or 'specified' goods.
• Example:- In a contract for the sale of all the pearls of a certain description
recovered on a particular haul of oysters from the sea, the haul and oysters may
be specific but there may be no yield of pearls as of contracted specification.
• The ascertained goods are only those goods which are in existence and made
definite but unascertained goods may relate to future goods or the goods made
known in the future.
• The unascertained goods means the goods in generic sense not identified at the time
of contract of sale.
• Unascertained goods are goods not defined by sample or description.
• The property in unascertained goods passes to the buyer when the goods are
unconditionally appropriated to the contract.
• Example:- If a farmer agrees to sell all the 10 quintals of wheat stored in the gunny
bags in his house, this is a sale of goods in which property in the goods passes to the
buyer.
• However, if A agrees to sell 10 quintals of wheat out of the wheat stored in gunny
bags in his house, the property in the goods does not pass to the buyer till 10
quintals of wheat is taken out of the wheat stored and delivered to the buyer.
Thus, under sub-section (1) of Section 23 for the property in unascertained or
future goods to pass to the buyer, the following requirements are necessary:-
(1) The goods must be appropriated to the contract either by the seller or by the
buyer.
(2) The goods are unconditionally appropriated.
(3) The goods appropriated are of the same description as given in contract and the
goods are in a deliverable state.
(4) In appropriating the goods by the seller or the buyer, there must be the assent of
the other and the assent may be express or implied and may be given either before
or after the appropriation.
Appropriation of goods
• 'Appropriation' means doing any act which gives the impression that the goods are
subject-matter of contract.
• When the goods which are marked by some act of the seller or buyer for the
performance of contract of sale of goods, there is appropriation of goods.
• Example:- Out of 1000 bags of wheat, with the seller, the seller or buyer marks or
indicates, 100 bags for sale, this is appropriation of goods to the contract.
Case:- Healey v. Howlett and Sons, (1917) 1 KB 337.
On the order of defendants to the plaintiff for twenty boxes of fish as per practice, the
plaintiff consigned 190 boxes to the Railway Co. to be earmarked by the railway
company to deliver 20 boxes to the defendants and the rest to the other consignees. Due
to delay en-route the fish deteriorated and did not remain merchantable and the
defendants refused to accept the boxes. On an action by the plaintiff for the price, it was
held that the goods had not been appropriated because out of a large number of boxes
only a portion belonged to the defendants and none had been marked off. The court said
suppose the boxes had lost who could have said that the boxes lost were of the
defendants or other purchaser. If the names of the consignee should have been written
on the boxes, there would have been appropriation of goods.
Case:- United India Insurance Co. v. Jameela Beev, A.I.R. 1991 Ker. 380
In a sale of jeep, the buyer paid Rs. 2000/-. The terms provided that on payment of the
balance amount of Rs. 8000/-, the registration would be done in the name of the buyer
and the seller would execute the requisite documents. Before the payment of amount
and execution of documents etc., the jeep met with an accident. On the question of
liability of insurance company, the seller was held to be the owner of the vehicle.
(1)The goods to be appropriated by the seller or buyer
• The contract may provide that either the buyer or the seller shall have the
authority to the goods and appropriate to the contract.
• When the buyer having the right to select the goods out of bulk, selects, the goods
become ascertained and property passes to him.
(2) Unconditional appropriation of goods
• The goods' appropriation must be unconditional.
• If goods are appropriated with certain condition, there is no passing of property
to the buyer.
• Under Section 25(1), when the goods are delivered to a buyer or to a carrier or
other bailee for transmission to the buyer and the seller reserves the right of
disposal until certain conditions are fulfilled, the property does not pass to the
buyer until those conditions are fulfilled.
• For example, the goods may be sent to the buyer to be delivered on payment, the
property in the goods does not pass to the buyer till the payment is made.
(3) The goods to be appropriated of the same description and in a deliverable
state
• The goods which are appropriated must be of the description when the contract is
for the sale of unascertained or future goods, the goods must also be in a
deliverable state.
• In Vigers v. Sanderson, the two parcels of swan laths of specified length were
shipped by the seller to the buyer, the property under the contract was to pass on
shipment. The buyer refused to pay when he found that the goods were not of the
description and he was held not liable because the goods being not of description,
property in goods did not pass to him on shipment.
(4) The express or implied assent of the other
• The goods can be appropriated by the seller or by the buyer.
• The contract may itself provide as to who will appropriate the goods.
• Like every contract, Generally, the goods are appropriated by the seller. The
buyer may also appropriate the goods. In either case, there must be assent of the
other party and the assent may be express or implied.
Specific or Ascertained Goods
Property to pass when intended to pass (Section 19)
(1) Where there is contract for the sale of specific or ascertained goods, the property
in them is transferred to the buyer at such time as the parties to the contract intend it
to be transferred.
(2) For the purpose of ascertaining the intention of the parties, regard shall be had to
the terms of the contract, the conduct of the parties and circumstances of the case.
(3) Unless a different intention appears, the rules contained in Sections 20 to 24 are
rules for ascertaining the intention of the parties as to the time at which the property
in the goods is to pass to the buyer.
Specific Goods in deliverable state (Section 20)
"Where there is an unconditional contract for the sale of specific goods in a
deliverable state, the property in the goods passes to the buyer when the contract is
made, and it is immaterial whether the time of payment of the price or the time of
delivery of the goods, or both, is postponed."
Under this section, the property in goods passes to the buyer at the time the contract
is made if the following conditions are satisfied:-
(1) There is contract for the sale of specific goods.
(2) The contract is unconditional.
(3) The goods are in a deliverable state i.e., the buyer under the contract is bound to
take delivery of goods.
On the satisfaction of these conditions, it is immaterial whether the time of payment
of price or the time of delivery of goods both are postponed i.e., the payment of
price or delivery of goods or both can be made immediately or afterwards.
Case:- Underwood v. Burgh Castle Cement Syndicate, (1922) 1 KB 343
A fixed AC condensing engine was sold to be separated and delivered f.o.r.
London. Before reaching the railway station, the engine was damaged in transit.
It was held that the property did not pass to the buyer because the engine being
not in a deliverable state at the time of its arrival at railway station.
In Ganga Nagar Sugar Mills Ltd. v. Rameshwar Das Tarachand, AIR 1992, Raj. 14,the
sugar-bags were sold in an auction-sale, the bags were specific and in a deliverable state.
After the completion of the contract, the Sugar (Price Control) Order, 1979 came into
force which did not permit it. It was held that the contract had become complete on the
completion of papers on knocking down and the property in goods had passed to the
buyer. The Sugar (Price Control) Order, 1979 was held not to apply apply to the contract
and the contract also did not frustrate due to the order. The buyer was held liable to pay
interest @ 12% on unpaid price.
Goods to be put in deliverable state (Section 21)
When there is a contract for the sale of specific goods and the seller is bound to do
something to the goods for the purpose of putting them into a deliverable state, the
property does not pass until such thing is done and the buyer has notice thereof."
According to Section 2(3), the goods are in deliverable state when the buyer under
the contract would be bound to take delivery thereof.
Case:- Rugg v. Minett, (1809) 11 East 210
The buyer had purchased turpentine oil. The oil was to be filled in casks from the
cistern by the seller for delivery. Before all casks could be filled and they could
be removed the whole oil was destroyed in the fire. The buyer was held liable to
bear the loss for the oil filled in the casks as the oil had been put in deliverable
state by the seller and the property has passed in those casks to the buyer.
Case:- Underwood Ltd. v. Burgh Castle Brick and Cement Syndicate, (1849) 8 CB
449,
When a condensed engine was sold f.o.r. London and the engine had to be detached
from the earth and taken to railway station and in the process of placing it on the
railway track, it was badly damaged, and the buyers refused to accept them, the
buyers were held not liable to pay the price as the goods in the property could not
pass till its placing on the rail.
Specific goods in deliverable state on anything to be done by the seller for
ascertaining price (Section 22)
Where there is a contract for the 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, the property does not pass
until such act or thing is done and the buyer has notice thereof.
Case:- Zaguri v. Furnell, (1809) 2 Camp 240
A contract of sale of goat skins, the seller was required to count the skins so that each
bale could have five dozen skins. The buyer had agreed to purchase 289 bales.
Before, the skins could be counted, the fire destroyed the skins. The property in the
goods was held not to pass to the buyer and the buyer was not liable to bear the loss.
Sale of unascertained goods and appropriation (Section 23)
(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 expressed or implied, and may be
given either before or after the appropriation is made.
(2) Delivery to carrier- Where, in pursuance of the contract, the seller delivers the
goods to the buyer or to a carrier or other bailee (whether named by the buyer or
not) for the purpose of transmission to the buyer, and does not reserve the right of
disposal, he is deemed to have unconditionally appropriated the goods to the
contract.
Goods sent on approval or "on sale or return" (Section 24)
When goods are delivered to the buyer on approval or "on sale or return" or other
similar terms, the property therein passes to the buyer:-
(a) when he signifies his approval or acceptance to the seller or does any other act
adopting the transaction;
(b) if he does not signify his approval or acceptance to the seller but retains the
goods, on the expiration of such time, and if no time has been fixed, on the
expiration of a reasonable time,
Case:- Genn v. Winkel, (1911) 28 TLR, 483
The buyer purchased a parcel of diamonds on "sale or return". No time was
prescribed to return the same. The buyer on the same terms delivered them to
another person who also on the same terms delivered to one another person and the
diamonds in the custody of that person were lost. It was held that the buyer by his
act had adopted the transaction and, therefore, the property in the goods had passed
to the buyer.
Case:- Nirmalabai v. The State, AIR, 1953 Nag. 301
A lady purchased some ornaments on approval basis and promised to return the
ornaments in the evening but she did not return and retained the same without
giving notice of rejection. It was held that the property in goods passed to her.
Reservation of right of disposal (Section 25)
(1) When there is a contract for the sale of specific goods or where goods are
subsequently appropriated to the contract, the seller may, by the terms of the
contract or appropriation, reserve the right of disposal of the goods until certain
conditions are fulfilled. In such cases, notwithstanding the delivery of the goods to a
buyer, or to a carrier or other bailee for the purpose of transmission to the buyer, the
property in goods does net pass to the buyer until the conditions imposed by the
seller are fulfilled.
(2) Where goods are shipped or delivered to a railway administration for carriage
by railway and by the bill of lading or railway receipts, as the case may be, the
goods are deliverable to the order of the seller or his agent, the seller is prima
facie deemed to reserve the right of disposal.
(3) Where the seller of goods draws on the buyer for the price and transmits to the
buyer, the bill of exchange together with bill of lading or, as the case may be, the
railway receipt, to secure acceptance or payment of the bill of exchange, the buyer
is bound to return the bill of lading or the railway receipt if he does not honour the
bill of exchange; and, if he wrongfully retains the bill of lading or the railway
receipt, the property in the goods does not pass to him.
Case:- Income Tax Commissioner v. PM Rathod and Company, AIR 1959, SC
1935
The right of disposal is reserved by the seller for securing the payment of the
price of goods. For example, the goods if sent by V.P.P. (Value Payable-Post), the
property in the goods does not pass to the buyer till the payment of price by him.
Case:- Balkrishna v. N.D. Ouseph, AIR 1959, SC 1394
The goods were sent by the seller and railway receipt were obtained by him in his
own name. He endorsed railway receipt and a hundi was delivered by him to a bank
with the instruction that the railway receipt should be delivered to the buyer on the
honour of hundi by the buyer. Held, the property in the goods could not pass to the
buyer until the payment of hundi.
Risk prima facie passes with property (Section 26)
Section 26 provides : "Unless otherwise agreed, 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.
Provided that, where delivery has been delayed through the fault of either buyer or
seller, the goods are at the risk of the party in fault as regards any loss which might
not have occurred but for such fault:
Provided also that nothing in this section shall affect the duties or liabilities of either
seller or buyer as bailee of the goods of the other party.”
Case:- Bevington v. Dale, (1902), 7 Comp. Cas. 112
The furs were bought subject to approval. The seller gave furs with invoice. As
per the custom of the fur trade, the goods were at the risk of person ordering on
approval. Before the furs could be approved, the burglars stole away. The seller
was held entitled to recover the invoice price.