ASSIGNMENT – Law of Contract-II

SUBJECT CODE: LLB 102

TOPIC – PASSING OF PROPERTY IN SALE OF GOODS ACT

Department of Law Trinity Institute of

Professional Studies

Submitted to: Submitted by:

Assistant Prof. Ms. Rashi Makhija Bhumika Bisht
Roll No. 70327903823 BA LLB 2023-2028
Semester: II Subject: Law Of Contract - II

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 ACCKNOWLEDGEMENT

I would like to express my heartfelt gratitude to all those who have contributed to the completion
of this assignment.

First and foremost, I extend my deepest appreciation to my professor, Ms. Rashi Makhija, for her
invaluable guidance and unwavering support throughout the duration of this assignment.

I am also grateful for the support and resources provided by Trinity Institute of Professional
Studies. The conducive academic environment has played a crucial role in the successful
completion of this assignment.

Finally, I am grateful to my family members, classmates and friends for proofreading my work
and catching several errors.

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 CERTIFICATE
This is to certify that Bhumika Bisht of Course BA LLB has successfully completed her
assignment on topic Passing Of Property In Sale Of Goods Act as prescribed by Assistant Prof
Ms. Rashi Makhija during the academic year 2023-2028 as per the guidelines given by
Department of Law Trinity Institute of Professional Studies .

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 INDEX

S.NO TOPIC Pg NO.

1. Introduction 5

2. The Sales Good Act,1930 5-6

3. Kinds of Goods under the Sale of Goods Act, 1930 6-8

4. Rules Regarding Transfer of Property 9-10

5. Cases Pertaining To Transfer Of Property 10-11

6. Conclusion 11

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INTRODUCTION

The Sale of Goods Act, 1930 is a well-established law that governs the sale and purchase of
movable goods in India. One of the critical aspects covered by this act is the concept of "passing
of property," which determines the point at which ownership and risk associated with the goods
are transferred from the seller to the buyer.
In this assignment, we will delve into the complexities of the passing of property under the Sale
of Goods Act. We will explore the different scenarios and conditions that determine when and
how the property in goods passes from the seller to the buyer. Additionally, we will examine the
implications of the passing of property, including the transfer of risk, the seller's right to sue for
the price, and the buyer's right to take possession of the goods.

The Sale of Goods Act, 1930

The Sale of Goods Act, 1930 is a legal statute that governs the sale and purchase of movable
goods in India. It was enacted to codify the laws relating to the sale of goods, providing a
comprehensive framework for commercial transactions involving the transfer of ownership of
movable properties.
Key aspects of the Sale of Goods Act, 1930:
1. Definition and essentials of a contract of sale:
 The Act defines a contract of sale and outlines the essential elements required for a
valid contract.
2. Transfer of property:
 It provides rules and conditions for determining when the property in goods passes
from the seller to the buyer, including the transfer of risk.
3. Conditions and warranties:
 The Act distinguishes between conditions and warranties in a contract of sale and
outlines the remedies available for breach of conditions or warranties.
4. Unpaid seller's rights:
 It specifies the rights of an unpaid seller against the goods and the buyer, including
the right of lien, stoppage in transit, and resale.

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 5. Delivery of goods:
 The Act defines the rules and obligations related to the delivery of goods, including
the duties of the seller and buyer, and the consequences of non-delivery.
6. Implied conditions and warranties:
 It outlines the implied conditions and warranties applicable to contracts of sale, such
as the condition of merchantable quality and fitness for purpose.
7. Sale by non-owners:
 The Act addresses situations where goods are sold by non-owners and provides rules
for determining the validity of such sales.
8. Auction sales:
 It covers specific provisions related to auction sales, including the bidding process
and the rights and obligations of parties involved.
The Sale of Goods Act, 1930 is a fundamental piece of legislation that provides a legal
framework for commercial transactions involving the sale and purchase of movable goods. It
aims to promote clarity, certainty, and fairness in such transactions, while also protecting the
rights and interests of both buyers and sellers.

Kinds of Goods under the Sale of Goods Act, 1930

According to Section 2(7) of the Sale of Goods Act 1930, Goods means “Every kind of movable
property other than actionable claims and money; and includes stock and shares, growing crops,
grass, and things attached to or forming part of the land, which are agreed to be separated from
the land before a sale or under the contract of sale”.

The term Goods includes tangible and intangible goods like goodwill, copyrights, patents,
trademarks, etc. For goods even stock and shares, gas, steam, water, electricity, and decree of the
court are also included in the term goods.
To sum up, goods means:
 Every kind of immovable property.
 It excludes actionable claims and money in circulation.

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  It also includes stock and shares, gas, steam, water, electricity, and decree of the court.

1. Existing Goods
According to Section 6 of the Sales of Goods Act, 1930, “Existing goods are those goods that
exist at the time of making a contract of sale or in other words these goods are physically present
at the time of contract.” Existing goods are owned/acquired or have the seller at the time of
entering the contract of sale. There can be three distinctions in existing goods:
I. Specific Goods:
According to Section 2(14) of the Sales of Goods Act, the goods that are particularly identified
and which are agreed upon at the time of the formation of the contract of sale are known
as Specific Goods.
For example, Rohit went to Rahul’s mobile shop. Rahul’s shop has different types of
smartphones from different companies. Rohit specifically selects the Samsung S23 12+256GB
phantom black variant. Rahul agrees to sell the Samsung S23 12+256GB phantom black variant
to Rohit. In this case, the sale is for a specific mobile phone and hence is a specific good.
II. Ascertained Goods:
Ascertained Goods are those goods that are identified as per the agreement after the contract of
sale is initiated. However, the term Ascertained Goods is not defined in the act but has been
carved out of judicial judgments and interpretations. In a real scenario, ascertained goods are
used in the same sense as specific goods. When out of a big lot or out of a huge quantity of
unascertained goods, a particular number or particular quantity to be contracted for is identified,
such particularly identified goods are called Ascertained Goods. It is worth noting that before
the ascertainment of the goods, the contract was for the sale of unascertained goods.

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For example, Mukesh is a dealer of clay pots and has 2,000 clay pots, which he keeps in his
warehouse. Rahim contracts with Mukesh to purchase 500 clay pots. Rahim selected 500 clay
pots out of 2,000 and set them aside to purchase. As the clay pots that are to be sold are
identified and agreed upon after the formation of the contract, this is a contract for Ascertained
Goods.
III. Unascertained Goods:
Unascertained Goods are those goods that are not particularly identified or ascertained at the
time of the making of the contract. Unascertained Goods are indicated or defined only by
description or sample.
For example, Tim, a dealer of pulse agrees to sell 50kg of pulse to Jim out of a lot of 1,000kg.
Here, the goods that will be sold to Jim are not specific as they will be given out of the lot of
1,000kg, Tim may randomly select 50kg of pulse and sell it to Jim. This is a case of
Unascertained Goods.
2. Future Goods
According to Section 2(6), “Future goods are those goods that are to be manufactured,
produced or acquired by the seller after entering the contract of sale.” These are the goods that
do not exist at the time of the contract of sale and will be manufactured/acquired/produced as per
the description of the contract. It is to be noted that a contract for the sale of future goods is in all
cases an agreement to sell. It is never considered an actual sale because a person cannot transfer
goods that do not exist.
For example, GeeksforGeeks contracts with a clothing brand to supply them with 500 custom-
designed hoodies. This is an agreement of sale, as the sale will take place at a future date after
the clothing brand manufactures the hoodies as per the design. This is a sale of future goods.
3. Contingent Goods
According to Section 6(2) of the act, “When the acquisition of goods is dependent upon an
uncertain contingency or an uncertain event, it is called Contingent Goods.” Contingent goods
are deemed to be an agreement to sell and not a considered sale, as in the case of future goods
the property in goods is not transferred to the buyer at the time of making a contract.
For example, Kartik contracts with Murli that he will buy 100 units of umbrellas if it rains in
June. Here, the agreement is based on a contingency, and it is a case of Contingent Goods.

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Rules Regarding Transfer of Property

1) Where Goods Are Specific or Ascertained: Specific goods refer to those identified and
agreed upon at the time of a sale contract, while ascertained goods become known to a
certain extent after the contract. Section 19 of the Sale of Goods Act emphasizes that the
transfer of property in specific or ascertained goods occurs when intended by the parties.
The determination of intention involves considering the contract terms, parties’ conduct,
and circumstances. The flexibility of the law allows parties to mutually decide when
ownership is transferred, be it at the time of delivery, payment, or other agreed-upon
points.
2) Rules for Ascertaining the Intention of the Parties: When dealing with specific goods
in a deliverable state, not in a deliverable state, or requiring further action for price
ascertainment, the parties’ intention determines property transfer time. Section 20 states
that if specific goods are in a deliverable state and the sale is unconditional, ownership
transfers when the contract is made. Sections 21 and Section 22 outline scenarios where
goods are not in a deliverable state and the seller needs to act for price ascertainment. A
clear understanding of these rules is crucial to avoid disputes and ensure smooth
transactions. 3. Where Goods Are Unascertained, or Future Goods: For unascertained
or future goods, the Sale of Goods Act highlights that ownership transfers once the goods
are identified or ascertained and appropriately set apart for delivery. Ascertainment of
goods, as per Section 18, involves establishing the identity of goods, and Section
23 emphasizes unconditional appropriation for the transfer of ownership. These
provisions underline the importance of a clear understanding of when the goods are

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 deemed ascertained or appropriated. Parties must fulfill the conditions of ascertainment
and appropriation to transform an ‘agreement to sell’ into a ‘sale,’ ensuring legal clarity
in ownership transfer.
3) Where Goods Are Sent on Approval or ‘on Sale or Return: Section 24 of the Sale of
Goods Act outlines scenarios where ownership in goods delivered on approval or ‘on sale
or return’ terms passes to the buyer. The buyer’s actions, such as approval, adoption of
the transaction, or failure to return within a specified or reasonable time, determine
ownership transfer. Recognizing these conditions is crucial for both buyers and sellers
when engaging in transactions with such terms.
4) Risk Prima Facie Passes With Property: Section 26 establishes the general rule that
risk prima facie passes with property, emphasizing that risk follows ownership. This
means the owner bears the burden of loss, irrespective of possession or payment status.
While exceptions exist, understanding this fundamental principle is essential for both
sellers and buyers to navigate potential losses associated with goods. Parties should be
mindful of the general rule that ‘risk follows ownership’ as they engage in transactions,
considering exceptions to ensure comprehensive risk management.

CASES PERTAINING TO TRANSFER OF PROPERTY

Badri Prasad Vs. State of Madhya Pradesh1

In the case of Badri Prasad Vs. State of Madhya Pradesh, the appellant entered into a contract in
respect of certain forests in Madhya Pradesh. He was entitled to chop teak trees with girth over
12-inch. After the passing of the Abolition of Proprietary Rights (Estates, Mahals. Alienated
Lands) Act, the appellant was prohibited from cutting trees in the exercise of his rights under the
contract.
He filed a suit claiming specific performance of the contract on the grounds:
(1) The forest and trees did not vest in the State under the Act;
(2) Even if they vested, the standing timber, having been sold to the appellant, did not vest in the
State;
(3) In any event, a new contract was completed on 5 February 1955, and the appellant was
entitled to its specific performance.

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AIR 1970 SC 1083

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The court held: The forest and trees vested in the State under the Act. The plaintiff was entitled
to cut teak trees of more than 12-inch girth. However, it had to be ascertained which trees would
be falling in that Description. Till this was ascertained, they will not be ascertained goods as per
Section 9 of the Sale of Goods Act.

Multanuak Chempalal Vs. C.P Shah & Co. 2

In the case of Multanuak Chempalal Vs. C.P Shah & Co., Section 26 of the Sale of Goods Act
1930 was discussed and it was held that the risk passes only after the property in the agreement
has been passed. Thus, the parties can enter into a contract which provides for the passing of risk
before the passing of property.

Hoogly Chinsurah Municipality vs Spence Ltd3

In the case of Hoogly Chinsurah Municipality vs Spence Ltd, the Hoogly Chinsurah
Municipality contracted with Spence Ltd to buy a tractor on the condition that if the municipality
is not satisfied then it will reject the tractor. The municipality took possession of the tractor, used
it for a month and a half and then rejected it. The suit was filed upon the unwillingness of Spence
Ltd to accept it. The Court while dismissing the appeal held that, the municipality had not only
used the tractor but also extinguished a reasonable time. Hence the property in the tractor had
passed to the municipality and they could not reject it now.

CONCLUSION
The Sale of Goods Act, 1930 tells us about a few views regarding the transfer of property during
a contract pertaining to the sale of goods. Section 18 to 25 of the Sale of Goods Act, 1930
provides the contracting parties several principles, through which rights and liabilities of the
buyer and seller are determined. Passing of the goods from the seller to the buyer portrays the
transfer of ownership from one party to another, which is without an exception a different
concept from that of the possession of goods as possession only involves custody of goods.

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AIR 1970 MYSORE 106

3
AIR 1978 CALCUTTA 49

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 BIBILOGRAPGHY

 Dr. R.K Bangia, Contract-II 247(Allahabad law Agency,Allahabad,9th edn,2023)

 Manupatra
 blog.ipleaders
 geeksforgeeks

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