TRANSFER OF OWNERSHIP:Transfer of property from seller to Buyer (Section 20-22)
- Unascertained
- Goods are Ascertained
- Appropriation of Goods Unconditionally
- Ascertained Goods i.e. Specific Goods
- Deliverable state Price determined at the time when contract is made
- Deliverable State Price not determined after determination of price
- Non – deliverable State after completion of process to make it deliverable.
- Sale on approval (24) Goods
- On approval.
- Adopting the transactions.
- Retains without notice of rejection for a long time.
- Ownership is transferred immediately at the time of making the contract if all the following conditions are satisfied:
- Contract is for specific goods.
- Goods are in deliverable state.
- Goods are not required to be weighed or measured for determining price.
Example : A sold to B, 100 bales of cotton lying in his godown. Before the bales could be identified and separated, all bales were destroyed in fire. Here, seller is liable for damage because ownership is not transferred.
Contents of Article
Section 21
If the goods are not ready in deliverable state at the time of making contract of sale, ownership of goods is transferred after formation of contract of sale when following conditions are satisfied;
- Contract is for specific goods.
- Goods are put in deliverable state by seller.
- Fact that the goods are put into deliverable state has come to knowledge to the buyer.
Example: Certain quantity of oil was purchased by A. The oil was to be filled in tins. B filled up some of the tins and informed A to take the delivery. In the meantime, a fire destroyed the entire quantity of oil. Held, A will bear the loss of the oil which was filed in the tins and the seller must bear the loss of the balances.
Section 22
If the goods are not weight or measured at the time of making contract of sale, ownership of goods is transferred after the formation of contract of sale when the following conditions are satisfied.
- Contract is for specific goods
- At the time of formation, price is not determined. It is determined later by weighed or measurement.
- Goods are put in deliverable state by the seller.
- Fact that the goods have been weighed or measured in order to determine price has come to knowledge of buyer.
Example: A sold 10 kg wheat. The wheat was to be weighed. Before the wheat was weighed, it was carried away by the flood. Held, the ownership of the wheat left with the seller and it did not pass to the buyer.
Transfer of ownership in the case of unascertained goods – Sec 18 and 23
- In the case of un-ascertained goods, when both parties come to know which particular goods shall be delivered, ownership is transferred.
- The following conditions must be satisfied to transfer the ownership:
- Ascertainment is first step in transfer of ownership. It means process of identification and setting aside goods from a huge mass of goods.
- Generally, it is made by seller, (unilateral act).
Appropriation :
For property to pass u/s 23, the following conditions must be satisfied –
- Goods of the description mentioned in the contract must be produced or obtained.
- The must be in a deliverable state, i.e. the Goods are in such state that the Buyer would, under the contract, be bound to take delivery of them.
- They must be unconditionally appropriated to the contract, Unconditional appropriation is where, in pursuance of the contract, Seller –
- Delivers the Goods to Buyer or a carrier or other bailee for their transmission to Buyer and
- does not reserve the right of disposal. [Sec. 23(2)]
- The assent of the parties may be given expressly or impliedly and can be given either before or after the appropriation.
- Example: A having a quantity of sugar in bulk, more than sufficient to fill 20 bags, contracts to sell to B 20 bags of it. After the contract A fills 20 bags with the sugar, given notice to B that the bags are ready and requires him to take them away. B says he will take them as soon as he can. By this appropriation by A, and assent by B, property in the sugar passes to B.
Contract to sell unascertained goods is not complete sell, it is agreement to sell.
Example: 20 bags of sugar out of a bulk were agreed to be sold. 4 bags of sugar were filled up and taken away by the buyer. Subsequently, the seller filled up 16 bags and informed the buyer. The buyer replied that he will take delivery as soon as possible. However, before the buyer could take their delivery. Goods were lost. Held, the buyer was responsible as the ownership had passed to the buyer.
Transfer of ownership in Case of Goods Sent on Approval or on sale or Return Basis – Sec. 24
It means buyer has the option either to return goods. Here, property in goods doesn’t pass from seller to buyer:
| Case | When ownership transferred |
| When the buyer given his approval or acceptance. When the buyer does some act of adopting the transaction When the buyer fails to return the goods. If time is fixed for return of goods.If no time is fixed | Approval or acceptance is communicated to seller When act of adoption is done. On expiry of the fixed time On expiry of the reasonable time. |
Example: Certain jewellery was delivered to a buyer on sale or return basis. The buyer pledged the jewellery. Held, the buyer had adopted the transaction and as such property had passed and the seller could not recover the jewellery from the Pawnee.
Right to disposal of Goods Sec. 25
Where the railway receipt or the bill of landing is in the name of the buyer, but is sent through the bank with the instructions that the same is to be delivered against the acceptance of the bill or payment of the price, the property in the goods shall not pass.
Deemed right of reservation Sec. 25
The seller may reserve the right of disposal under the following modes –
Reservation of right of disposal
- Shipment or Railway delivery: By making the Goods deliverable to the order of the Seller or his agent
- Drawing of B/E on buyer: By Seller drawing a bill for the price and making it acceptable by the Buyer.
Passing of Risk Sec. 26
- The general rule is that risk passes with ownership. We can say that risk and ownership and ownership to together. However, express agreement between parties may provide otherwise.
- Possession of goods is immaterial for risk.
- When delivery is delayed because of fault of any party, he is liable for risk.
- Sometime, risk is based upon custom or usage of trade.
- Where the delivery of goods has been delayed due to the fault of buyer/seller, goods are at the risk of the party in fault.
Sale by Non – Owners or Transfer of Title by Non – Owners – Sec 27 – 30
- The general rule is expressed by maxim ‘Namodat quod non habet’ which means no one can give what he does not himself posses. If seller’s title is defective, then buyer’s title will be defective.
- Alternatively, we can say that the seller can’t give a better title to the buyer than be himself has.
The following are the exceptions to the above general rule:
- Sale of Estoppel [Sec. 27]:
Where the owner by his conduct or by his act leads the buyer to believe that the seller has the authority to sell and induces the buyer to buy the goods, he shall be estopped from denying the fact that seller had no right to sell the goods.
- Sale by mercantile agent Sec. 27
Agent of seller can transfer the title if following conditions are satisfied :- Agent must be in possession of goods or documents of title.
- Agent has sold goods in ordinary course of business.
- Buyer has acted in good faith.
- Buyer has no knowledge that seller had no authority to sell.
Example: A entrusted his car to a mercantile agent to receive offers and not to sell. A also delivered signed documents to the agent. On the basis of these documents, the agent pretended to the buyer that he had authority to sell the car and thus, the car was sold. Held, the owner was estopped from denying buyers title.
A mercantile agent means an agent having in the customary course of business as such agent authority either to sell goods, or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods [Section 2(9)].
- Sale by one of the joint owners – Sec 28
One of the joint owners can sale goods if following condition are satisfied.
- Goods are in sole possession of one of the joint owner.
- Buyer has acted in good faith.
- Buyer has no knowledge that seller had no authority to sell.
Example: A and B Jointly purchased a car. The car was in the possession of A with the consent of B. Later on A sold the car to an innocent purchaser. The purchaser will get a good title.
- Sale by person in possession under voidable contract
- Seller must be in possession of goods under contract voidable.
- Goods must have been sold before contract is rescinded.
- Buyer has no knowledge that seller had no authority to sell.
Example: A purchased a watch from B under fraud. A sold the watch to C, who bought it in good faith. C gets goods title.
- Sale by seller in possession after sale – Sec 30
- Ownership of goods has been passed to buyer.
- Seller continuous to be in possession of goods even after sale.
- Seller resells goods to new buyer.
- New buyer buys without notice to prior sell.
Example: A sells certain goods to B and promises to deliver the goods the next day. Before the delivery, A sells and delivers the goods to C, who buys them in good faith and without notice of the prior sale to B, C gets a good title to the goods, not with standing that the property had, before he purchased, passed to B.
- Sale by unpaid seller Sec. 54
After exercise of his right of lien or right of stoppage goods in transit.- If the owner of goods has declared insolvent and his goods, is sold by official receiver or assignee or liquidator.
- Sale by finder of goods (Sec.169 of IC Act 1872).
- The owner can’t be found or found but refuse to pay lawful charges to finder.
- The Goods are perishable in nature or in danger. To save goods from loss, finder can sale it.
- Lawful charges of finder amount as 2/3 of its original value.
Sale by pawnee or pledge(Sec.176 of IC Act 1872).
- If there is default on part of payment of price or performance within time. Reasonable notice is given by pawnee or pledge