Transfer of Property

Lesson: Transfer of Property Course Developer : Reena Marwah College, Department: University of Delhi

Institute of Lifelong, University of Delhi

Transfer of Property

This lesson discusses the following aspects of the Transfer of Property that are comprised in the Sale of Goods Act: 17.1 An Introduction 17.2 Importance of Transfer of Ownership 17.3 Rules regarding Transfer of Property 17.4 Transfer of Title AN INTRODUCTION An essential part of the Sale of Goods Act is the Transfer of Property, which passes from the seller to the buyer. Possession is different from ownership, and these must be distinguished. Whereas a person may be the righteous owner of goods, he may not have the goods in his/her possession. An agent, for example, is not the owner of the goods, he is in possession of, on behalf of the seller. When there is a passing or transfer of property in the form of goods, the element of risk also passes. The essential aspect is the ownership of the goods. This is because several rights and liabilities of the transacting parties are directly connected with the issue of ownership. Usually, a contract of Sale takes place over a period of a few hours, a few days, or even a few months. During such time, there can be events which result in the entire contract of sale being affected. The goods may be damaged, or destroyed, or lost in transit, or confiscated etc. It is in such circumstances, that the questions relating to the passing of property arises. These questions are discussed below:

Importance Of Transfer Of Ownership The questions of what is the exact time when the property is stated to have passed from the seller to the buyer; when the risk in the goods is stated to be passed; and who is capable of transferring property in goods, will be answered in this lesson. The following factors make it necessary to decide the actual time when the property in the goods passes from the seller to the buyer. These factors are: A. Risk passes with property B. Action against third parties C. Sellers right for price D. Effect of insolvency of the seller or the buyer Risk passes with the property The usual rule is that in the absence of specialized terms, the risk follows the property. Till goods are the property of the seller, the risk remains with him. When goods become property of the buyer, he must bear any loss arising from their destruction or injury.

Institute of Lifelong, University of Delhi

Transfer of Property
Section 26 of the Act provides that, Unless otherwise agreed, the goods remain at the sellers 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 buyers risk whether delivery has been made or not. Illustration 1: Amar bids Rs.4000 for a wall clock at a sale by auction. After the bid, the wall clock is broken by an accident. If the accident happens before the hammer falls, the loss falls on the seller. If afterwards, it falls on Amar. Here, property in the picture passes to Amar when the sale is complete, i.e., when Amars offer is accepted, the acceptance being communicated by the fall of hammer. Illustration 2: Bhanu offers, and Anil accepts Rs.50,000 for 10 sheds of wood standing on Anils premises. The wood is allowed to remain at Anils place till a certain date and not to be taken away till paid for. Before payment, and while the firewood is at Anils premises, it is accidentally destroyed by fire. Here, Bhanu must bear the loss because the property in the goods has already been passed to him with the acceptance of Bhanus offer by Anil. It does not make any difference that the payment and delivery have been both postponed. Illustration 3: Sunil contracts with Bindu to sell a van for Rs.2,00,000. Bindu is to collect the van from Sunils premises within a month, on making full payment for the same. They also agree that any loss arising to the van, till it is in possession of Sunil will be borne by Sunil. After 5 days of the contract, van gets burnt. Here, irrespective of the fact that the property in the goods has already passed to Bindu, Sunil shall bear the loss. Case Law 1: Demby Hamilton & Co. Ltd. V. Barden1: S contracts to sell 30 tins of apple juice to B. S accordingly crushes the apples, and put their juice in casks pending delivery. B was late in taking delivery and some juice went bad. The Court held that B bore the risk of deterioration, which was due to his delay in taking the delivery. Action against third parties It is only after the passing of property to the buyer that he can exercise proprietary rights over the goods. For example, if after the sale, the seller refuses to deliver the goods, the buyer can bring an action against him for forcing the delivery, and if the seller has already resold those goods to a third person, he can also recover them from such third person in certain circumstances. Moreover, if the goods are damaged or destroyed due to act of a third person, the owner of the goods can take an action against him. Thus, ownership of the goods fixes the rights of a person to have the goods as against the whole world. Sellers right for price The seller becomes entitled to recover the price of the goods from the buyer only after the property of the goods has been transferred to the buyer.

Effect of insolvency of the seller or the buyer On insolvency of a person, the Receiver or the Official Assignee takes the possession of the property belonging to the insolvent. Here, the decision as to the

[1949] 1 All. E.R. 435

Institute of Lifelong, University of Delhi

Transfer of Property
ownership of the goods is very important. If the seller becomes insolvent, and the property, in the goods has already been passed to the buyer, buyer becomes insolvent and the property in the goods is yet to pass to him, his Official Assignee cannot take over the possession of the goods. Rules Regarding Transfer Of Property Sections 18 to 24 of the Sale of Goods Act explain the rules regarding transfer of ownership in goods. These rules are as follows: Goods must be ascertained. Section 18 provides that, where there is a contract for the sale of unascertained goods, no property in goods is transferred to the buyer unless and until the goods are ascertained (Section 18). Intention of the parties. Section 19 provides that, where there is a contract for the sale of specific or ascertained goods, the property in them passes to the buyer at the time when the parties, intend it to pass. For determining intention of the parties, regard shall be had to the terms of the contract, conduct of the parties and the circumstances of the case. Case Law 2: Appleby vs. Myers2: S offered to sell to B a certain machine for Rs.5,000. B refused to buy it unless certain work was done on it. S asked B to get the work done himself and deduct the expenses from the cost of the machine. To this B agreed, and took the machine to a repair shop. While being repaired, the machine was destroyed without any fault of the repairman. The property in the machine did not pass to B from S. The time when the ownership passes from the seller to the buyer will depend upon the category of goods that are being dealt with. In this context, the goods can be classified as follows: 1. Specific or Ascertained goods. 2. Goods that are not ascertained. 3. Goods sent on approval or on return basis. In each of these cases the rules will be different. Discussion on specific goods which means goods that are identified and agreed upon at the time when a contract of sale is entered into are the following:

Transfer of ownership in the sale of specific goods When the contract for sale of specific goods is entered into there are three main conditions that will apply: (a) The sale must be of specific goods, i.e., the identified goods at the time of sale. (b) The goods must be in a state that they can be delivered; and (c) The contract of sale must be unconditional and not be restricted by any conditions. Illustration 1: Hardeep sold his old Scooter to Vivek and agreed to deliver the Scooter after getting it painted. Here, the ownership of the Scooter is not transferred to Vivek at the time of contract because the subject matter of the contract is not in deliverable state.

[1867] L.R.2 C.P. 65

Institute of Lifelong, University of Delhi

Transfer of Property
Illustration 2: Sanjay sold his old Tempo to Amit for Rs.10,000 on the condition that he can take the delivery of the Tempo on making full payment. In this case, the property in the car will not pass to the buyer until he makes the full payment. Passing of property delayed beyond the date of the contract (i) When goods are not in a deliverable state If the goods are not in a deliverable state, and contract is for the sale of specific goods, the property does not pass, until the seller brings them in a deliverable state and the buyer has notice thereof. Two conditions are to be fulfilled, if the goods are not in a deliverable state: (1) the seller has done his act of putting the goods that are not in a deliverable state; and (2) the buyer has knowledge thereof (Section 21). The seller might be required to do certain acts to put the goods into a deliverable state like packing, filling in containers etc. No property in goods passes unless such an act is done and the buyer knows about it. Case Law 3: Rugg Vs. Minett3: A sold the entire quantity of oil in a cistern to B. As per the terms of the contract, the oil was to be filled in the casks by A, and then the buyer was to take them away. Some of the casks were filled by A in Bs presence, but before they were removed by B and the remainder could be filled up, the entire quantity of oil was destroyed in a fire. It was held that the buyer was to bear the loss of oil, which was filled in casks and the seller was to bear the loss of the remainder. (ii) When the price of goods is to be ascertained by weighing of measuring. 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 act or thing with reference to goods for the purpose of ascertaining the price, the property in goods does not pass to the buyer until that act or thing is done and the buyer has notice thereof(Section 22). Case Law 4: Turley vs. Bates4: T sold to B a heap of fireclay at a certain price per ton. B was to load the clay on his carts and take it away at his own expense. The clay was to be weighed at a certain weighing machine, which the carts were to pass on their way from Ts ground to Bs place. It was held that ownership of clay passed to B on completion of the bargain and nothing remained to be done by T. 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. According to this provision, it is only when the parties so decide that the property will actually pass. In this context, the intention of the parties can be known taking into consideration the following: The term of the contract The conduct of the parties The circumstances

3 4

[1809] 11 East 210 [1863] 2 H. C.174

Institute of Lifelong, University of Delhi

Transfer of Property
Illustration: Seema sells a television set to Rama. It is decided that the property in terms of the television set will pass after the payment of the last installment. In this case, the ownership will pass to Rama only after the last installment has been paid by her and not at the time of signing of contract. When transfer of Ownership takes place at the time of contract. Section 20 of the Act in this context states the following: 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. This implies that at the time of contract of sale the goods will be transferred, if the sale is of specific goods, the contract is unconditional and the goods are in such a state that the buyer can take delivery of them. Illustration 1: Amar sold his old car to Biswajit and agreed to deliver the car after getting it painted. Here, the ownership of the car is not transferred to Biswajit at the time of contract because the subject matter of the contract is not in deliverable state. Illustration 2: Anthony sold his old car to Bhasker 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 he makes full payment. Case Law 5: Provincial Automobile Co. Ltd. v The State 5 - A, a car dealer, had many cars in his showroom. Out of these cars, he sold 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. 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. (a) Specific goods to be put into a deliverable state [Section 21]. 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 that thing is 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 has knowledge thereof, i.e., comes to know of it somehow. Case Law 6: Rugg v Mineet6: The entire content of a cistern of turpentine oil was sold. It was agreed that the oil was to be filled into casks by the seller, and then the buyer was to take them away. Some of the casks were filled in the presence of the buyer, but before the remainder could be filled, a fire broke out and the entire quantity of oil was put
5 6

[1952] STC 147 [1809] East Privy Council 210

Institute of Lifelong, University of Delhi

Transfer of Property
into casks because in all these casks the property had passed to him, and the seller must bear loss of the remainder. (b) Goods to be weighed or measured for ascertainment of their 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 Law 7: Zagury v Furnell7: In this contract 289 bales of goatskin, containing 60 pieces in each bale were sold. It 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. However, when nothing is left to be done on the part of the seller to ascertain the price, but the buyer does not pick up the goods from the sellers 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. Illustration: Somesh sells to Bhawna a bag containing 10 Kg. Rice. After taking the bag in her hand, Bhawna feels that the weight of the bag is less than 10 Kg. She requests Somesh to weigh the rice again. In the meantime, a truck hits Someshs shop, and the rice falls in a nearby drain. Here, Bhawna will suffer the loss because the property in the goods had passed to her when Somesh had given her the rice bag. (c) When goods are delivered on approval [Section 24]. When goods are delivered to the buyer on approval on sale or return or other similar terms, the property therein passes to the buyer 1. When he signifies his approval or acceptance to the seller, or does any other act adopting the transaction. The buyer may accept the goods, and let the seller know of his decision. 2. 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 good, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time. This will be known as implied acceptance. The essence of the rule is that in the event where the sale is on approval, the ownership passes to the buyer, either, by acceptance or failure to return the goods. Illustration: Ameta delivered a bag to Tanu on sale or approval basis. Later, Tanu informed Ameta that she had kept the bag. Here, there is an express approval of the bag and the ownership is passed to Tanu on her approval. Case Law 8: Elphic v Barnes8

7 8

[1809] Camp 240, 11 Royal Reports 704 [1880] 5 C.P.D. 321

Institute of Lifelong, University of Delhi

Transfer of Property
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. In the above case, if B informs his acceptance of the horse on the 2 nd day, and the horse dies on the 3rd day of the transaction, B will be liable for the loss because the property in the horse will transfer to him, as soon as he will intimate his acceptance to the seller. However, 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 the 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. Case Law 9: Kirkham v Attenborough9 - K delivered some jewellery to X, in return, X pawned the jewellery with A, a pawnbroker. The Court held that the Xs action amounts to an acceptance of the transaction of sale. Thus K could not proceed against A for the price and he has to recover the price from X only. 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 unascertained goods, no property in the goods is transferred to the buyer unless 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? The goods can be ascertained in various ways. These relate to the valid appropriation of the goods, and are discussed below. 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 aside 100 bales of the cotton in his own warehouse, it does not amount to ascertainment of goods because he is at liberty to change his mind and send these bales to some other purchase. What is required, for the transfer of property to the buyer is unconditional appropriation of the bales to the contract. 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 delivery thereof, usually does this. In the context of appropriation, 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. Such assent may be expressed or implied, and may be given either before or after the appropriation is made. Case Law 10: Weiner vs Smith10 - A delivered some jewellery to B on sale for sale only or return basis. It was stated in the contract that the jewellery would remain As property until the price was paid. Before the payment of the price, B pledged the jewellery with C. It was held that at the time of the pledge, the ownership was not transferred to B. Thus, the pledge was not valid, and A could recover the jewellery from C.

10

[1897] 1 Q.B. 201 C.A. [1905] 2 K.B. 172

Institute of Lifelong, University of Delhi

Transfer of Property
Essentials of a valid appropriation An analysis of the above provision reveals the following essentials of a valid appropriation: 1 The goods should confirm to the description and quality stated in the contract.

Case Law 10: Vigers Brothers v Sanderson Brothers11: There was a contract for two parcels of Swan Laths of spec ified 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. 2 3 The goods must be in a deliverable state. 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. Case Law 11: Loeschman v Williams12 - 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. 4. The appropriation must be: 1. by seller with the assent of the buyer, or 2. 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. 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; 1. By separating the contracted goods from the other with the consent of the buyer. 2. By putting the contracted quantity in suitable containers, i.e., by putting the goods into boxes, gunny bags, in case of liquids, by putting them into bottles, etc., with the consent of the buyer. 3. 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)]. Case Law 12: Emp. v Kuverji Kavasji13 - A contracts to sell B 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.
11 12

[1901] 1 K.B. 608 [1815] 5 Camp. 181 13 [1941] 43 Bombay L.R. 95

Institute of Lifelong, University of Delhi

Transfer of Property

Transfer Of Title No one can transfer better title than he himself possess. As a general rule, no man can sell goods and give a good title to them unless he is the owner, or someone having the authority or consent of the owner. If a person other than the true owner sells the goods, he cannot transfer to the buyer a title better than that of his. The maxim nemo dat quod non habet applies here which means that no one can transfer a better title than that he himself possess. Illustration: Anand sells goods acquired by theft to Bhanu. Chetan, that real owner of the goods, finds them in Bhanus possession. Since Anand was not the real owner and had no title to the goods, Bhanu would also not acquire any title to the goods. Hence Bhanu would be liable to return the goods to Chetan, the real owner. A person, however innocent, who buys goods from one who is not the owner, obtains no property in them whatever. Illustration: Amar finds a ring belonging to another and thereafter sells it to Keshav who purchases it for value and without notice that Amar is not the owner. The true ownere can recover it from Keshav, for Amar having no title could pass none to the latter. The above rules protects the owners property so that the owner alone can pass the title. However, this rule is very harsh against the innocent transferee of the goods in case of sale by the persons having defective title. Sections 27 to 30 of the Act enumerate certain exceptions where this rule does not apply. Exceptions to the rule Unauthorized sale by a mercantile agent [Section 27] Mercantile agent means an agent who has the aut hority either to sell the goods, or to consign the goods for the purpose of sale, or to buy the goods or to raise money on the security of the goods. A mercantile agent can transfer a valid title if the following conditions are satisfied: (1) He is in possession of the goods or documents of title of the goods (i.e., proof of possession), with the consent of the owner, (2) The sale is made by him while acting in the ordinary course of his business, and (3)The buyer acts in good faith believing that he has authority to make the sale. Such a rule is valid even if the agent has no actual authority to sell. Case Law 13: Folkes v King14: F gave his car to a mercantile agent for sale at a given price and not below that. The agent sold it to S, a bona fide purchase, below the reserve price and misappropriated the proceeds. S resold the car to K. Subsequently, F sued K to recover the car back from him. The Court held that S obtained a good title to the car from the mercantile agent because he was possessing the car with the Fs consent for the purpose of sale. Thus he conveyed a good title to K, and therefore F was not entitled to recover the car from K. Transfer of title by Estoppel [Section 27] Estoppel is the prevention of a claim of law. Thus, when a person makes another believe that a particular thing or fact is true, and afterwards then, he cannot be allowed to deny the truth of that thing or fact.

14

[1923] 1 K.B. 282 (CA)

Institute of Lifelong, University of Delhi

Transfer of Property
Thus, a buyer will get a good title to the goods sold by a non-owner if ..the owner of the goods is by his conduct precluded from denying the sellers authority to sell.. Thus where a true owner by his conduct, or act, or omission makes the buyer believe that the seller has authority to sell the goods and convinces the buyer to buy them, he cannot afterwards set up t he sellers want of title or authority to sell. The buyer in such a case gets a title that is better than that of the seller. Illustration: Om comes to Sureshs house where Badal is already sitting. Suresh has a golden fountain pen belonging to Om in his pocket. Om does not want Badal to know that pen belongs to him. On enquiry from Badal, he says that pen belongs to Suresh, and leaves from there. Later on Suresh sells that pen to Badal. Here Badal will get good title because Om, by his conduct, is stopped from denying Sureshs authority to sell. Sale by a joint owner [Section 28] Ordinarily a co-owner can transfer his share only, but a sale by one of the several joint owners can pass a good title to the buyer, if the following conditions are met: (a) The co-owner is in sole possession of the goods by permission of his coowners. (b)The purchaser acts in good faith, i.e. with honesty. (c) The purchaser had no notice at the time of the contract of sale that the seller had no authority to sell. Illustration Anu and Bani were the joint owners of a truck. Anu had the possession of the truck with the consent of Bani. A sold the truck to Chunu, who bought it in good faith. In this case Chunu will get the title of the truck. This is because as stated above, the co-owner has the permission to possess the truck, and the purchaser acts in good faith. Sale by a person in possession under a voidable contract [Section 29] A person possessing the goods under a voidable contract can transfer a valid title if the following conditions are satisfied: 1. The possession must have been obtained under a voidable contract and not under a void contract. 2. The voidable contract must not have been rescinded (i.e., put to an edn) by the time of sale. 3. The buyer must have acted in good faith, and without the notice of the sellers defective title. Illustration: Bindu threatens Shekar to kill him if he does not sell his car to Bindu for Rs.1,000. Se sells his car to Bindu. This is a contract made by coercion, which is voidable at the option of Shekar. But before Shekar avoids the contract. Bindu sells this car to Tarun for Rs.15,000. Tarun is ignorant of the fact that this car is bought by using coercion by Bindu. Tarun would get a good title to the car. Sale by a seller in possession of goods after sale [Section 30(1)] At times, the seller continues to be in possession of goods even after sale. In such a case if he sells these goods again to another person, the second buyer gets a goods title, provided: 1. the seller is in possession of goods as a seller and not as a bailee, and 2. the second buyer acts in good faith and without any notice of the previous sale. Illustration 1: Amar sold a radio to Batla for Rs.1,000, where delivery was to be made after a week. In the meantime, Amar sold the radio to Chaman who acted in good faith. Chaman has got a good title to the radio set.

Institute of Lifelong, University of Delhi

Transfer of Property
Illustration 2: Abhishek sold a radio to Bittoo for Rs.1,000. He packed and gave it to Bittoo. Bittoo requested him to keep it in his shop for two hours, since he had to do some shopping. In the meantime, another buyer came who was ready to buy it for Rs.1,200. Abhishek sold the radio to him. In this case, the second buyer would not acquire a better title because Abhishek possessed the radio not as a seller, but as a bailee of Bittoos goods. Sale by a buyer in possession of goods before sale [Section 30(2)] At times, a buyer obtains possession of goods where the seller still has some rights over the goods. In such a situation, if the buyer sells these goods to another person (i.e. second buyer), he can pass a good title to him provided: the first buyer must have obtained possession of the goods under an agreement to sell, and not under an option to buy as is done under a hire purchase agreement, and the second buyer acts in good faith, and without notice of any lien, or other right of the original seller in respect of those goods. Case Law 15: Marten v Whale15: A agrees to buy a car from B if his solicitor approves. In the meantime, he takes possession of the car, and sells it to C, where C acts in good faith and does not know about the pending finalization of the sale of car. The Court held that C, the bona fide buyer, got a good title in this case. Illustration: Dinesh gives a sewing machine to Subodh on hire purchase, with the condition that the property in the machine would pass to Subodh after paying the price in five installments. After having paid two installments. Subodh sells it to Preeti, who acts in good faith. Here, Preeti would not get a good title because Subodh has, neither bought, nor agreed to buy the machine. He is having the machine under an option to buy it. Resale by an unpaid seller [Section 54(3)] Where an unpaid seller who has exercised his right of lien or s toppage in transit, resells the goods, the buyer acquires a good title thereto as against the original buyer, notwithstanding that no notice of the resale has been given to the original buyer. Illustration: Medha sells a car to Priya. Priya pays Rs.10,000 in advance. The rest of the Rs.90,000 is to be paid within two days, and delivery is to be made after receiving full payment by Medha. For a month Priya does not turn up to pay the balance money to Medha. Medha resells the car to Tara. Tara would get a good title to the car. This is because Priya did not fulfill her duty of making the full payment for the car and Medha remained unpaid for a month, when she was supposed to receive the payment in two days.

Exceptions provided under other Acts In addition to above exceptions in the Sale of Goods Act, under the provision Subject to the provisions of any other law for the time being in force (in Section 27), the following exceptions may be mentioned: Sale by a finder of goods (Section 169 of the Indian Contract Act). If a finder cannot trace the owner, or if owner refuses to pay the lawful charges of the finder, the finder can resell when the thing is perishable or
15

[1917] 2 K.B. 480

Institute of Lifelong, University of Delhi

Transfer of Property
when his lawful charges for finding the owner amount to two-thirds of value of goods. Illustration: Amar finds a ring and after making reasonable efforts to discover the owner, sells it to Govind, who buys without knowledge that Amar was merely a finder. The true owner may recover the ring from Govind. Pawnee (Section 176 of the Indian Contract Act). The pawnee may under certain circumstances, sell the thing pledged to him on giving the pawnor reasonable notice of the sale. Sale by Official receiver or assignee. In case of insolvency of an individual, his official receiver, or any liquidator of a company can confer a good title on the buyer.

Execution sales. Under order 21 of Civil Procedure Code, officers of Court can sell goods, and convey title to the buyer inspite of the fact that they are not the owners. Illustration 1: Delivery by Anand of goods on sale or return to Balakrishna, upon the condition that they are to remain the property of Aanand until paid for. Balakrishna sells them to Chakradhar, without paying Aanand for them. Chakradhar buys in good faith and without notice of Aa nands title. Aanand can recover the goods or their value from Chakradhar. Illustration 2: Sale of a horse at a public auction. Unknown to the auctioneer and the buyer, the horse had been stolen. The buyer obtains no title against the true owner.

Points To Remember Introduction The term property in goods, means the ownership of goods. Possession implies the custody of goods. The issue of ownership is important because many rights and liabilities of the parties are related to the transfer of ownership. Importance of Transfer of Ownership It is important to know the exact time when the transfer of ownership of goods takes place from the seller to the buyer. 1. The risk passes with the ownership. 2. The ownership of goods fixes the rights of the person. 3. The seller is entitled to recover the price of goods from buyer, only after the property has been transferred to buyer. 4. If there is insolvency of either the seller or the buyer, than whether the official receiver can take over the goods or not depends on whether the ownership has been transferred or not. Rules regarding Transfer of Property Sections 18 to 24 of the Sale of Goods Act deals with the rules regarding the transfer of ownership. The rules are applicable depending on whether there is sale of specific goods or sale of unascertained goods or of sale of goods on approval. Transfer of Title As a general rule no individual can sell goods and provide a good title to the buyer, unless that individual is the owner or has the authority or permission of the owner. This implies that the owner alone can pass the title.

Institute of Lifelong, University of Delhi

Transfer of Property
Sections 27 to 30 of the Act give the exceptions to the Rule. These are: Unauthorized sale by an agent, transfer of title by estoppel, sale by a joint owner, or by a person in possession under a voidable contract. The exceptions are: when a sale is made by a buyer or seller in possession of goods, before or after the sale and the case when there is a resale by a unpaid seller.

Questions Short answer type questions: 1 Comment and explain: a) A seller of goods cannot transfer a better title of goods than he possess himself. b) Delivery amounts to acceptance by the buyer. c) The seller of goods is not under compulsion to disclose defects of the goods that he is selling. d) Sale on approval is different from sale of specific goods. Distinguish between: a) Ascertained and Unascertained goods. b) Specific and Unascertained. c) Part delivery and installment delivery. Explain the term: Risk Prima facie passes with ownership. Explain the exceptions to the above given rule.

3 4

Long answer questions: 1 2 3 4 5 Explain the importance of the determination of the time of transfer of ownership of property. What are the conditions and when does the property pass from the seller to the buyer? What are the circumstances which the property passess after the signing of the contract? Explain the exception to the rule that no one can transfer a title better than he himself possesses. Explain in details with the help of an example transfer of title by estoppel.

Practical Problems 1. Seema sends a saree parcel by courier to Rama. The parcel is lost in transit. Can Rama recover the price? Rama can recover the price of the saree as the delivery to the courier company is delivery to the buyer.

Answer:

Institute of Lifelong, University of Delhi

Transfer of Property
2. Mr. Chary from Hyderabad places an order with Mr. Singh of Delhi for the supply of books. The train sends the carton of books and its arrival in Hyderabad is informed to Mr. Chary. However, before Mr. Chary could take the delivery of the books, they are destroyed. Can Mr. Singh recover the money? Mr. Singh can recover the money for the books, as the same have been dispatched and the property had transferred to Mr. Chary. Ravi agreed to sell 100 bags of rice to Ram, out of the 300 bags that were with him. However, the entire stock of 300 bags was destroyed in the fire. Ravi had separated 100 bags for Ram and kept them ready for delivery. Who will bear the loss? In this case, Ram will bear the loss as the goods had been ascertained. Sheela sells Seemas cycle in her presence. Seema does not object at that time. Can she object later? Seema cannot object later and sale is valid (title by estoppel). Shyam takes a vacuum cleaner from a shopkeeper and promises to return it after 3 days or pay for it. However, he fails to return it after 3 days. Can the Shopkeer recover the price of the vacuum cleaner? Yes, Shopkeeperr can recover the price from Shyam as the vacuum cleaner had not been returned in 3 days time to the shopkeeper.

Answer: 3

Answer: 4. Answer: 5.

Answer:

References Chadha P.R. and Bagrial A.K. (2005): Business Law, Pragati Publications, New Delhi, 2005. Tulsian P.C. (2007): Business Law, Tata McGraw Hill, New Delhi. Websites: www.dolr.nic.in www.commonlii.org www.indiavisitinformation.com www.netlasman.co.in

Institute of Lifelong, University of Delhi