UNIT-II (C) Passing of Property

Rules regarding transfer of property

17.3 For the purpose of studying the rules for transfer of property, the goods can be divided
into two classes, namely, specific or ascertained, and generic or unascertained.
17.3-1 Transfer of ownership in the sale of specific goods
17.3-1a OWNERSHIP IS TRANSFERRED WHEN THE PARTIES INTEND TO PASS IT-Section 19 of
the Act reads as - "Where there is a 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."
This provision shows that the intention of the parties is supreme. When the parties decide
that the property in the goods will pass at a particular point of time, the property will
deemed to be passed at that time only, irrespective of every other thing. For ascertaining
the intention of the parties, regard shall be had to(i) the terms of the contract, (ii) the
conduct of the parties, and in the circumstances of the case.
Example- In a sale on instalments, the parties decided that the property in the goods will
pass on the payment of the last instalment. Here ownership will not be transferred at the
time of contract. It will pass on the payment of last instalment only - Amies v. Jal AIR 1924
Bombay 41.
However, if the intention of the parties cannot be gathered from the contract, legal
provisions as to the transfer of property would apply. These legal provisions are dealt with
in the following paras.
17.3-1b OWNERSHIP IS TRANSFERRED AT THE TIME OF CONTRACT Section 20 of the Act
reads as - "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 post poned."
The analysis of this section reveals that the property is transferred at the time of contract of
sale only if the following conditions are fulfilled:
(a) The sale must be of specific goods.
(b) The goods must be in a deliverable state.
(c) The contract of sale must be unconditional.
Specific goods are the goods whose identity and individuality has already been established
at the time of sale.
Deliverable state means that the goods are in such a state that the buyer is bound to take
delivery of them. [Section 2(3)].
Unconditional contract means the contract in which no condition is implied regarding the
transfer of ownership of the goods
Examples:
1. A a car dealer had many cars in his showroom Out of these cars held one car to B.
But the car sold to B was not identified and separated from the other cars at the
time of contract of sale. Here The ownership of the car is not transferred at the time
of sale, because it is not specified by that time Provincial Automobile Co. Ltd v. The
State [1952] STC 147.
In the above case, had the car dealer have identified that car to be sold to the buyer,
its ownership would have been transferred at the time of contract.
 2. Sold his old car to Band agreed to deliver the car alter getting it painted. Here the
ownership of the car is not transferred to Bat the time of contract because the
subject matter of the contract is not in deliverable state.
3. A sold his old car to B for Rs. 10,000 on the condition that he can take the delivery of
the car on making full payment. In this case, the property in the car will not pass to
the buyer until full payment is made him.
17.3-1c CASES WHERE PROPERTY IN SPECIFIC GOODS DOES NOT PASS AT THE TIME OF SALE
- The general rule that ownership of specific goods transfers at the time of contract is
subject to the above conditions. But in the following cases, the property in the specific
goods does not pass at the time of contract, but at a later time.
17.3-1c1 SPECIFIC GOODS TO BE PUT INTO A DELIVERABLE STATISTICS – Where 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 things done and the buyer has notice thereof.
Here the word ‘something’ signifies anything necessary to put the goods in deliverable state.
It may be packing polishing, or filling them into containers, etc.
The words ‘buyer has notice thereof’ do not cast an obligation on the seller to inform the
buyer they mean that the buyer have knowledge thereoft.com to know of it somehow.
Example - The entire contents of a cistern of turpentine oil were sold. It was agreed that the
oil was to be filled to ask by the seller and then the buyer was to take them away. Some of
the casks were killed in the presence of the buyer, but belute the remainder could be filled a
fire broke out and the entire quantity of oil was destroyed. The court held that the buyer
must bear the loss of oil which was put into casks because in all these casks the property
had passed to him, and the seller must bear loss of the remainder – Ruggs v. Minett [18091]
East210.
17.3-1e2 GOODSTOBE WEIGHED OR MEASURED FOR USER AGENT 69 THEIR SECTION 23-
Where there contract for the sale of specie gods 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.
Example - 289 bales of goatskin containing 60 pieces in each bale were sold. I was the duty
of the seller to count them before sale. Before the counting was completed, they were
destroyed by fire. The court held that the loss fell on the seller as the property in the goods
had not passed to the buyer Zagury v. Furnell 11R.R. 704.
However, when nothing is left to be done on the part of the seller to ascertain the price, but
buyer does not pick up the goods from the seller's place because he wants to do some act
for his satisfaction, Section 22 does not apply. The property in the goods passes to the buyer
as soon as the seller completes his part of the job.
Example-S sells to B a bag containing 10 Kg rice after taking the bag in his hand, B feels that
the weight of the bag is less than 10 Kg. He requests the seller to weigh the rice again. In the
meantime, a truck hits S's shop, and the rice falls in a nearby drain. Here B will suffer the
loss because the property in the goods had passed to him when the seller had given him the
rice bag.
17.3-1c3 WHEN GOODS ARE DELIVERED ON APPROVAL SECTION 24] When goods are
delivered to the buyer on approval or "on sale or return" or other similar Terms, the
property therein passes lo 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
without giving notice of rejection, then, if a time 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.
Example - S delivered a horse to B on the terms of sale or return within 8 days'. The horse
died on the third day without any fault on the part of B. The court held that the S was to
bear the loss as the horse was still the property of S- Elphick v. Barnes [1880] 5 C.P.D 321.
In Elphick v. Barnes, the seller could not recover the price from the defendant, the horse
being still his property when it perished. This may have been to the disadvantage of the
seller, buy the rule often operates to protect his interest as well and this is amply shown by
Re Tersier. These certain articles of furniture having been delivered for sale on cash or
return within a week, ever seized within two days in execution proceedings against the
buyer.
The seller was allowed to recover them as they were in property at the time of
seizure and not that of the buyer.
In the above case, if B intimates his acceptance of the horse on the 2nd day and the horse
dies on the 3rd day of the transaction, B will be liable for the Moss, because the property in
the horse will transfer to him as soon as he will intimate his acceptance to the seller.
Alternatively, if B does not intimate anything to S, and keeps the horse even after the expiry
of 8 days, the property shall be deemed to be passed to him.
The words ‘any other act adopting transaction’ means an act in the nature of an exercise of
right of ownership of the goods such as a sale to a third person, or pledging the goods with a
pledgee, or using the goods for his own purpose, etc.
Example - K delivered some jewellery to X on sale or return, X pawned the jewellery with A,
a pawn broker. The court held that the X's action amounts to an acceptance of the
transaction of sale. Thus K could not proceed against for the price, he has to recover the
price from X Only-Kurkhantv.A. Attenborough [1897] 1 Q.B. 201 C.A.
17.3-2 Transfer of ownership in the sale of unascertained or future goods -
Section 18 of the Act reads as - "Where there is a contract for the sale of ascertained goods,
no property in the goods is transferred to the buyer un less and until the goods are
ascertained."
Thus until the goods are ascertained, there are no goods on which the contract can operate
How then are the goods to be ascertained?
Appropriation:
For e.g.: A seller, agrees to supply me a wrist watch which he has yet to manufacture, and
after manufacturing some watches he despatches one of them to me, that particular watch
has been appropriated to the contract, by the seller.
When the goods are destroyed before the appropriation could be made the loss has to be
borne by the seller as no property in them is deemed to have been passed.
Thus for ex, out of a big heap of coal only 10tons are to be supplied to a buyer, the
seller having a duty to separate and despatch the coal, if before the seller could separate
and despatched the 10tons, the whole of the lot is destroyed by fire, the seller will have to
bear the loss form the same as the property in the goods has passed to the buyer.
17.3-2a A VALID APPROPRIATION OF GOODS IS REQUIRED - When the contract is for the
sale of unascertained goods, the goods can be defined by the description only, e.g., Fair
Bengal Cotton, Calcutta Silk, Java Sugar, etc. Suppose that the contract is for the sale of 100
bales of Fair Bengal Cotton out of 10000 such bales lying with the seller. If the seller set
asides 100 bales of the cotton in his own warehouse, it does not amount to ascertainment
of goods because he at liberty to change his mind and send these bales to some other
purchaser. What is required for the transfer of property to the buyer is unconditional
appropriation of the bales to the contract. This is usually done by the seller giving notice to
the buyer that the bales are ready for delivery and the buyer assenting to appropriation by
saying that he will take thereof. An In the context of appropriation, the act of taking things
which belongs to same else. Section 23 of the Act provides that, "Where there is a contract
for the sale of unascertained or future goods by description and goods of that description in
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.”
17.3-2b ESSENTIALS OF A VALID APPROPRIATION - An analysis of above provision reveals
following essentials of a valid appropriation:
1. The goods should confirm to the description and quality stated in the contract
Example-There was a contract for two parcels of 'Swan laths of specified length, and
it was provided that the property should pass on shipment, and that if any dispute
arose, the buyer was not to reject the goods but the dispute was to be referred to
arbitration. However, the goods supplied by the seller were not of the contract
description. The court held that no question of passing the property arose. The buyer
could reject the goods in spite of the given clause - Vigers v. Sanderson[1901) 1 K.B.
608.
2. The goods must be in a deliverable state.
3. The goods must be unconditionally appropriated. The goods are said to be
unconditionally appropriated when the seller does not reserve the right of disposal
of the goods until certain conditions (like payment of the price) are fulfilled.
Example - A agreed to sell certain goods to B on the condition that the buyer must
pay the price before the delivery of goods. In this case the seller has reserved the
right of disposal of goods until the condition of payment of the prices is fulfilled -
Loeschman v. Williams [1815]4 Camp. 181.
4. The appropriation must be
(i) By seller with the assent of the buyer, or
(ii) By buyer with the assent of the seller.
5. The assent may be express or implied.
6. The assent may be given either before or after the appropriation.
17.3-2e WAYS OF MAKING APPROPRIATION. It may be inferred from the above that the
property in unascertained goods passes only when they are ascertained, and the goods are
considered to be ascertained when they are properly appropriated. The goods may be
appropriated in any of the following ways:
(i) By separating the contracted goods from the other goods with the consent of the
buyer
(ii) By putting the contracted quantity in suitable receptacles, i.e., by putting the
goods into boxes, gunny bags, in case of liquids, by putting them into boules, etc.
with the consent of the buyer
 (iii) By delivering the contracted goods to the carrier or other bailee for the purpose
of transmission to the buyer and without reserving the right of disposal. [Section
23(2)].
Examples:
1. A contract to sell certain quantity of liquor out of a big cask containing a much larger
quantity. The required quantity is not separated or bottled. The property in the
liquor does not pass to the purchaser Emp, v. Kuvert Kavasji AIR 1941 Bom. 106.
2. A having a quantity of sugar in bulk, more than sufficient to fill 20 hogsheads,
contracts to sell to B 20 hogsheads of it. After the contract, A fills 20 hogsheads with
the sugar and gives notice to B that hogsheads 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, the property in the sugar passes to B
Rhodes v. Thwaites [1827) 6 B & C 388.
3. There was a contract for the sale of machines made by the seller. The seller packed
the machines and, before sending them asked the buyer to suggest the conveyed by
which they should be sent. There was no reply from the buyer. The court held that
there was no valid appropriation in this case because the buyer had not assented.
Atkinson v. Bell (1828] 108 E.R 1046.
4. A, agreed to sell B the oil to be produced by him. The Oil was filled by Aini the bottles
supplied by B. It is an effective appropriation and the ownership passes to the buyer
when the oil is filled into bottles. In this case su bottles by the buyer signifies his
assent to appropriation Langton v. Higgins 1858] 4H & N 402.
5. On May 6th S sold certain quantity of oil to the buyer and he paid the price thereof.
The goods were not in possession of the seller at the date of contract but had
already been dispatched to him on 25th April subsequently the seller received
'Railway receipt and endorsed it and sent it to the buyer. Afterwards on May 12th
the goods were destroyed by fire while in transit. The court held that the property
has already passed to the buyer because transfer of railway receipt amounts to
passing the goods of the buyer. Thus the buyer has to bear the loss Shanker Dus v.
Bhana RamAIR 1926 Lah. 606.
17.3.2d RESERVING THE RIGHT OF DISPOSAL BY THE SELLER - There is a need to study the
term 'reserving the right of disposal by the seller' in detail. Following para elaborates on the
point.
Where 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 case,
notwithstanding the delivery of goods To a buyer, or to a carrier or other bailee for the
purpose of transmission to the buyer, the property in the goods does not pass to the buyer
until the conditions imposed by the seller are fulfilled. [Section 25(1)] The seller may reserve
his right of disposal by imposing any condition he likes, cg, the goods will not be delivered
till the price is paid. However, in the following circumstances, the seller is presumed to have
reserved this right:
 By taking the documents of title in his own name or his agent's name Section 252) -
Where the goods are shipped or delivered to railways by the seller, and the bill of
lading, or railway receipt, as the case may be, obtained by the seller in his own
behalf, and nol on behalf of the buyer, the seller reserves an absolute right of
 disposal thereby. In such cases, transfer of ownership does not take place at the time
of delivery of goods to carrier.
It is only when the documents of title are endorsed and send in the name of buyer,
the transfer of property takes place.
Example - A sold certain bales of paper to B which was to be sent to him by railway.
A took the railway receipt in his own name. While on the way, the bales got
destroyed. It was A who had to bear the loss because the property in the bales was
not transferred to B.
When a seller takes the documents of title in the name of the buyer, but keeps them
under his control till fulfilment of some condition, the seller is presumed to have
reserved the right to disposal.
Example- A sold certain bales of paper to B which was to be sent to him by railway. A
took the railway receipt in the name of B, and sent them to his own banker to be
delivered to B on the payment of the price. Before B paid the price, and received
railway receipts, the goods were destroyed by fire. The court held that the seller
should suffer the loss as he has reserved the right of disposal and at the time of
destruction of bales, their ownership had not been transferred to the buyer -
General Papers Ltd. v.V.P. Mohideen & Bros. AIR 1958 Madras 482.
 By sending the bill of exchange for the price to the buyer, along with the documents
of title [Section 25(3)]- When documents of title are obtained in the name of the
buyer, but they are sent to the buyer subject to the acceptance of the bill of
exchange (a mode of ensuring payment), or payment of price, the property in the
goods is not transferred until an acceptance to such bill of exchange is made, or the
price is paid otherwise. If, however, the buyer wrongfully retains the documents of
title to the goods without making an acceptance to the bill of exchange or payment
of the price, the property in the goods does not pass to him.
Example - A sold certain quantity of timber to B, and shipped the same for the Transmission
to the buyer. A look the bill of lading in B's name and drew a bill of exchange' on B for the
price of the timber. A delivered the 'bill of lading and the "bill of exchange to his banker. The
banker was to hand over the bill of lading to B on his accepting and paying the amount
mentioned in the bill of exchange. The buyer refused to accept the bill of exchange. Here
the banker can refuse to deliver the timber to B as the disposal of timber was subject to
acceptance of Bill of Exchange by B.