Chapter 2

TRANSFER OF OVNERSHIP
SELLER TO THE BUYER?
PROPERTy PASS FROM THE which
downthe rules determine
WHENDOES
Sections 18to
Goods Act lay
25 of the Sale of to the buyer. These rules may be summarisedwhena
Rules, from the seller
ownership of property passes
follows :
in the
1. Unascertained Goods
sale of unascertained goods, property goods is not
When there is a contract for
the ascertained.--Sec. 18.
untilthe goods are
transfered to the buyer unless and quantity of rice in a godown
does not make
maunds out of alarge quantitythet
An agreement to sell 50He can become owner of 50 maunds of rice only after this
buyer theowner of anvthing. rice in the godown. "The individuality of the thino to
the other
rice has been separated out frombefore property in it can pass from the selier to the
buyer. (I ord
delivered" must be established
Ellenborough in, Busk v. Davis.')
2. The Intention of the Parties
property passes at such time as
In a contract for the sale of specific or ascertained goods, theascertaining the intention of the
the parties to the contract intend it to pass. For the purpose of conduct of the parties and the
parties regard shall be had to the terms of the contract, the
circumstances of the case. If the intention of the parties cannot be otherwise determined, the rules
mentioned below are to be applied.-Sec. 19.

3. Specific goods
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 immatertal
whether the time of payment of the price or the time of delivery of the goods, or both, s
postponed.--Sec. 20.
Property passes at the time of entering into the contract of sale if the following conditions a
fuifilied:
(i) The goods are specific goods.
(ii) The goods can be immediately delivered.
(iii) The contract of sale is without any
(iv) The parties themselves have not fixedcondition.
a different time for the passing of
property.
Deliverable State
Goods are said to be in a'Deliverable state", when they are in such state that the buyer would
under the contract be bound to take delivery of
them.Sec. 2(3).
Example :
On the 4th January, a haystack lying on the seller's land was sold. It was agreedthatthe
price was to be paid on 4th February. The haystack will remain on the seller's landtill
1. (1814) 2. M & S 397

I60
 161
OF OWNERSHIP
destroyed by
May and no hay was to be cut till the price was paid. The haystack was and the
Ist
fire. Held, the property in the haystack had passed on the making of the contract
buyer must bear the loss. Tarling v. Baxter?
seller has something to do bound to do something
When gools and the seller is
4 Where there is a contract for the sale of specific does not passuntil
into a deliverable state, the property
goodsfor the purpose of putting them
othe
isdone andthe buyer has
notice thereof.-Sec. 21.
sUchthing
by the seller
Euample:
cistern of oil was sold, the oil was to be filled into casks of the
The contents of a
by the buyer. Some of the casks were filled in the presence
quantity of
and then taken away could be filled, a fire broke out and the entire
buyer but, before the remainderbuyer must bear the loss of the oil which was put into
casks
oil was destroyed. Held, the of the remainder. Rugg v.
Minner3
andthe seller must bear the loss
etc.
When goods are to be measured, tested, specific goods in a deliverable state, but the seller is
5. the sale of the
Where there is a contract for or thing with reference to the goods for
act
test or do some other act or thing is done and
the
bound to weigh, measure, does not pass until such
purpose of ascertaining
the price, the property
thereof.Sec. 22.
buyer has notice

fixed price per ton. It was agreed that for

Example : bark was sold at a weighed by the agents
A certain quantity of payable by the buyer, the bark would be away
determining the money was weighed taken away, the rest was carriedloss of
certain quantity part taken away by him
and the
of the parties. After a liable to pay for the
buyer is
byflood. Held, the borne by the seller. Simmons v.
Swift.
the remainder must be

6. Unconditional appropriation something which identifies and determines the

Unconditional appropriation means
doing
unconditional appropriation is made by one
passes when such
Property
actual goods tobe delivered. other. description and
party with the con sent of the unascertained or future goods by
for the sale of to the contract.
Where there is a contract deliverable state are unconditionally appropriated the seller, the
in a assent of
goods of that description and assent of the buyer or by the buyer with the
either, by the seller with the Such assent may be expressed or implied, and
passes to the buyer. made.-Sec. 23(L).
Property in the goods thereupon appropriation is
be given either before or after
Inay
After the
Example : out of his stock (sale of unascertained goods).
rice that the
Gsold to P. 140 bags ofdelivery order for T25 bags and wrote aletter saying after
price was paid Gsent a delivery at his warehouse. P sent for the I5 bags was
remaining 15 bags were ready for Held, there
when it was discovered that the bags were stolen.
about a month, consent of the
appropriation of the 15 bags by the seller, there was implied
unconditional
4. (1826) 5 B & C857
3. I1 East 210
2. (1827) 6 B & C 360
 THE LAW RELATING TO
162 SALE OF
therefore
buyer to the appropriation (because he did not objcct) andloss property in
GOODS
bags has passed to the buyer. He must therefore bear the and is not
entitledtheto getI5
back the price paid by him for them. Pignataro v. Gilory.
7. Delivery to the carrier
Where in pursuance of the contract, the seller deliversthe goods to the buyer or to a carrier
other bailee (whether named by the buyer or not) for the purpose of transmission to the
does not reserve the right of disposal, he is deemed to have unconditionally appropriated buyer,
the o and
to the contract.Sec. 23(2).
The general rule is that when the seller delivers the goods to a carrier for being taken tot
buyer, there is unconditional appropriation on his part and the property passes to the buyer. To h:
rule there is one exception : property does not pass if the seller reserves the right of
the goods. disposal" of
Reservation of the Right of Disposal
(Sec. 25) Reservation of the right of disposal means any action by the scller which expresse
an intention on his part not to part with control over the goods until certain conditions are fulfilled
Insuch cases, the property, passes when the conditions are fulfilled.
An intention to reserve the right of disposal may be presumed when a Billof Lading or a
Railway Receipt makes the goods deliverable to the order of the seller.
When the Bill of Lading or the Railway Receipt for the goods, and the Bill of Exchange for
the price are sent together and the Billof Lading or the Railway Receipt is deliverable to the buyer
only when the Bill of Exchange is accepted or paid, the buyer is bound to return the Bill of Lading
or the Railway Receipt if he does not honour the bill of exchange. If he wrongfully retains the Bil
of Lading or the Railway Receipt, the property in the goods does not pass to him.
Examples :
(i) X sends certain goods by lorry for delivery to W, without reservation of the right of
disposal. The property passes to Was soon as the goods are handed over to the carrier.
(ii) Xsends certain goods by lorry to Yand instructs the lorry driver not to deliver the goods
until the price is paid by Yto the lorry driver. The property passes only when the price is
paid.

8. Goods sent on Approval or "on Sale or Return?"

(Sec. 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 scller but retains the goods
without giving notice of rejection, then, ifatime has been fixed for the return of the goods, on the
expiration of such time, and if no time has been fixed, on the expiration of a reasonable time.
Examples:
(i) Kdelivered some jewellery to Xon sale or return. Xpawned the jewellery with A. Held.
X's act amounts to an acceptance of the sale transaction and hence A's rights a
protected. Kirkham v. Attenborough.6
5. (1919) I K.B 549 6. (1897) | Q.B. 201
 I63
OOF
OWNERSHIP
TRANSFER

Certain goods were delivered to A on sale or return. A delivered was the goods to B on
(ii) since A unable to return
similar terms, B to C, and Cto D. Dlost the goods. Held, Genn v. Winkel. 7
the seller, the sale was complete and must pay the price.
the goods to them or askthe seller to
take
sends certain books to Qon approval. Q does not return
(üi) P
for six months. He is deemed to have approved the sale and must pay the
them away,
price.

TRANSFER OF OWNERSHIP :TIME OF

transfer of ownership of property from the seller to the buyer. It iS
Sale of goods involves moment of time at which the ownership of the goods
passes
necessary to determine the precise
to the buyer, because of the following reasons :
from the seller
property: The general rule is that risk passes with the property. If the
Risk passes with exceptions. the loss
1.
damaged by accident or otherwise, then, subject to certain
anods are lost or or damaged.
the time when the goods are lost damaged by the action
person who is the owner as
falls on the there is danger of the goods being
2 Who can take action?: When
owner who can take action. seller it
of third parties it is the insolvency?: In case of insolvency of either the buyer or the answer
3. What is the effect of taken over by the official
Assignee. The
the goods will be
is necessary to know whether
goods is with the party who has become insolvent.
of the
depends upon whether the ownership
Passing of Risk
passing is that goods
of risk. The general ruleownership
rules regarding the has
Section 26 lays down the ownership is transferred to the buyer. After the
remain at the seller's risk until the "Risk
buyer's risk whether delivery has becn made or not.
at the
passed to the buyer, the goods are
follows ownership." (See examples given in pg 162).
rule stated adove. seller, the
There are two exceptions to the through the fault of either the buyer or the
been delayed
Where delivery has might not have occurred but for
fault as regards any loss which
goods are at the risk of the party in
such fault.
risk will pass at a time different from the time when
The parties may agree that the the
2
example, the seller may, in a particular case, agree to be responsible for
ownershipP passcd. For to the buyer.
goods even after the ownership has passed
Destruction of Part of Goods Sold
paragraphs 4, 5 and 6, p. I61.
See examples in p. 149, and

TRANSFER OF TITLEBY NON-OWNER

General Rule of goods can selI the goods. No one
can convey to a
The general rule is that only the owner
transfers articles not belonging him, the
Iransferee a better title than he himself has. If a person
ransferee gets no title. This principle is expressed by the Latin phrase, "Nemo quod gui non
himselt possess". This rule applies to both
aber", which means "none can give who does not

7.(1912) 107 LT. 434

 164 THE LAW RELATING TO
SALE OF
movable and immovable property. But as regards movable goods it is subject to
GOODS
noted below. In each of the following cases, a person who is not an owner, certain
can eXception
transferee a valid title to the goods: give to the
1. Estoppel
Under certain circumstances the true owner may be prevented, by his conduct,
the seller's authority to sell. Suppose that
Xis the owner of certain goods. Xacts in such a from denying
that Y is induced to believe that the goods belong to Z. On that belief Y
Under these circumstances, the court will not allow X to prove his
manner2
buys the good, from
title to the goods even though he has purchased them from Z who isownership. Thus Ygets a good
not their owner.
Example:
P, the owner of certain machinery, left them in the
possession of Q. A person named R
who had obtained a decree against 0. seized the goods in
no steps for several months to claim the goods. He alsoexecution the decree. P took
of
regarding the execution without mentioning his title to theconversed with R's solicitor
machinery. R then had the
machinery sold in execution. It was held that P was estopped from denying that the
machinery was Q's. Pickard v. Sears.8
2. Sale by a
mercantile agent
Sale of goods by a mercantile agent gives a
good title to the purchaser even in cases where the
agent acts beyond his authority, provided the
(i) The agent is in possession of the following conditions are satisfied.Sec. 27 :
(ii) Such possession in with the goods or of a document of title to the goods.
consent of the owner.
(iiü) The agent sells the goods in the
(iv) The purchaser acts in good faith ordinary course of business.
and has no notice that the agent had no
["Mercantile Agent"- Mercantile agent means an agent having in the authority to sel.
business as such agent authority either to sell goods, or to customary course o
to buy goods, or to raise money on the consign goods for the purpose of sale, of
security of goods.-Sec. 2(9)|
3. Sale by one of several joint owners
Ifone of several joint owners of
goods has the sole
co-owners, the propertyin the goods is transferred to anypossession of them by permission of uie
owner provided the buyer acts in good faith and person who buvs them from
sell.-Sec. 28. without notice that the seller had no such joi authority o
4. Sale of goods obtained under a
voidable agreement
When the seller of goods has
oblained
agreement has not been rescinded at the timepossession
ovided he buys them in good taith and without
thereof
of sale, the buyer
under a voidable
agreement
butthe
to the goods.
obtains good title
notice of the seller's
a
defect of title.Sec. 29.
Example :
X, buys a ring from Y at a low price by
innocent purchaser without notic of X's undue influence and sells it to Z whocannot is an
recover the ring from him even if the defective title. Z has a good title and Y
agreement with Xis subsequently rescinded.
E. 469
8. (1937) 6A. &
 RANSPER Or OWNERSHIP
165
be notcd that the above
Itisto not when the section applies when the goods have
oidableagreement, goods have been been obtaincd under a
originalagreement is of no legal effect (void ab obtained under avoid or illegal
rueOwnerand cannot be passed on to anybody else.
the agreement.
initio) the titleto the goods remain Ir
with the
Example:
In Cundy v. Lindsay (See p. S4) goods were
obtained by an agreement which was
to be void. It was held that no title
passed to the buyer though he was a bonafound
fide
nurchaser for value and without notice of any defect in the seller's title.

5.Sale by the scller

in possession of goods after sale
Where a person, having sold goods, continues to be in possession of the goods or of the
documents of title to the goods, a transfer of title by him or his agent by way of sale of pledge,
gives a good title to the transferee provided the transferee was acting in good faith and had no
inowledge of the seller's want of title.-Sec. 30(1). The originalbuyers in such cases can obtain
Aamages from the seller but cannot recover the goods from the second buyer.

Example :
M has 50 barrels of tobacco at a warehouse on the dock. The dock warrant was issued to
him,. M sells the tobacco to J who leaves the dock warrant to Mbut takes no step to have
the tobacco transferred to J's name. M subsequently pledges the tobacCo and delivers the
dock warrant to C. Held, C, acting in good faith, will acquire good title against
J. Johnson v. Credit Lyannals.9
warehousekeeper's
("Documnent of title to goods" includes a bill of lading, dockwarrant,
delivery of goods and
certificate, wharfingers' certificate, railway receipt, warrant or order for thepossession on control of
the
any other document used in the ordinary course of business as proof of
by endorsement or by delivery, the possessor
goods, or authorising or purporting to authorise, eitherprepresented.-Sec. 2(4)]]
of the document to transfer or receive goods thereby
the Seller bas Some Rights
0. Buyer in Possession of Goods Over which seller (for example for unpaid price)
When goods are sold subject to some lien or right of the
of the goods to a third party and give him a good
ue buyer may sell, pledge, or otherwise disposesatisfied. -Sec. 30(2)
uue, provided the following conditions are the goods or of the documents of title to the goods
) The first buyer is in possession of
with the consent of the seller.
by a mercantile agent acting for him.
(1) The transfer is by the buyer or acts in good faith, and without notice of any lien or other
same
() The person receiving the
right of the original seller.
Example : in twO
delivered to X under an agreement that lhe price was to be paid
Furniture was property of X on payment of the
second instalment of the
become the
instalments,the furniture to
price. Xsold the furniture before the second instalment was
paid. It was held that there was a
the goods and therefore a transfer by him to a bona fide purchaser
binding Tgreement by Xto buy
for value without notice conveyed a good title.
Lee v. Butler 10

B. 318
9.(1877)3 G.P.D. 32 10. (1893) 2 Q.
 THE LAW RELATING
I66 TO SALE OF
7. An Unpaid Seller
re-sell the goods.
GOODs
An unpaid seller of goods can under certain circumstances, The
such goods gets a valid title of the goods. 175)
Sec. 54. (Scc p.
purchaser of
8. Sale under the Contract Act
(a) A pawnee may sell the goods of pawnor if the latter makes a default of his
purchaser under such asale gets a good title.- Sec. 176. Contract Act (Sec p. 123) dues. The
(b) Afinder of goods can sell the good under certain circumstances. The
good title. Sec, 169, Contract Act. (See p. 121) purchaser gets a
Cases not coming within the Exceptions
It is to be noted that apart from the cases mentioned above, the general rule applies. and.
seller can give a better title that he himself has. Some examples are given below.

Examples:
(i) X found a ring. He made a reasonable search for the owner but did not find him He h
sold the ring to Y. It was held that the true owner can recover the ring from y
Farquaharson Bros. v. King & Co.11
(ii) A horse was sold at a public auction. The horse was stolen property but this was not
known to either the auctioneer or the buyer. Held, the true owner can recover the horse.
Lee v. Bayes.12
(iii) B let out a motor car on hire to M at £15 per month. It was agreed between the parties
that M could purchase the car by paying in all £424 at any time within 24 months. After
a few months M pledged the car with C. Bsued to recover the car from C. It was held
that as M had only an option to purchase, he cannot give good title to C and hence Bcan
recover the car. Belsize Motor Supply Co. V. Cox.13