Rules regarding Transfer of Property in Goods

Transfer of Property in Unascertained and future goods

In section 18 and 23 the rules relating to transfer of property in unascertained and future goods’ are laid down. These sections provide that where goods contracted to be sold are not ascertained or where they are future goods, the property in goods does not pass to the buyer unless and until the goods are ascertained or unconditionally appropriated to the contract so as to bring them in a deliverable state, either by the seller with the assent of the buyer or by the buyer with the assent of the seller. Such assent may be expressed or implied, and may be given either before or after the appropriation is made.

The above rule is fundamental rule and it applies irrespective of what the parties intended until goods are ascertained or appropriated there is merely as certained “agreement to sell”. example: Sale of ten tons of wheat from a granary, has not the effect of transferring property to buyer (It is an agreement to sell only) until ten tons are appropriated to the contract by the seller and the buyer knows it.

The process of ascertainment or appropriation consists in earmarking or setting apart goods as subject-matter of the contract. It involves separating, weighing, measuring, counting or similar acts done in relation to goods with an intention to identify and determine the specific goods to be delivered under the contract. The distinction between ‘ascertainment’ and ‘appropriation’ is that whereas ‘ascertainment’ can be a unilateral act of the seller, that is, he alone may set apart the goods, ‘appropriation’ involves the element of mutual consent of the seller and the buyer.

Essentials of valid appropriation: As regard a valid or proper appropriation of goods, the following point should be noted:

(i)    The appropriation must be of goods answering the contract description, both as to quality and quantity.

(ii)   The appropriation must be intentional, i.e., it must be made with intention to appropriate goods to specific contract, and it must not be due to mere accident or mistake.

(iii) The appropriation must be made either by the seller with the assent of the buyer or by the buyer with the assent of the seller. Assent of the other future party is thus necessary; whether before of after the appropriation is made for a valid appropriation.

(iv) The appropriation must be unconditional, i.e. the seller should not reserve to himself the right of disposal of the goods until and unless certain conditions are fulfilled.

Delivery to Carrier: When a seller delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer and does not reserve the right of disposal, the property passes on to the buyer at once. As soon as goods are loaded and railway receipt obtained and the same is sent to buyer direct the ownership is passed on delivery of goods to railway company. If the railway receipt is sent to banker with instructions to deliver the same on payment, the right of disposal is said to be reserved and the property will not pass to buyer at the time of delivery of goods to railway co.

 The delivery to the carrier may be:

(i)    Absolutely for the buyer. Where the bill of lading or railway receipt is made out in the name of the buyer and is sent to him, the presumption is that no right of disposal has been reserved by the seller in respect of those goods. The ownership in such a case passes from the seller to the buyer.

(ii)   Absolutely for the seller. Where the bill of lading or railway receipt is taken in the seller’s or his agent’s name and is sent to the agent of the seller to be delivered to the buyer on the fulfillment of certain conditions, the seller is deemed to have reserved the right of disposal of the goods. In such a case the ownership does not pass to the buyer until the necessary conditions are fulfilled and the documents of title are delivered to the buyer.

Reservation of right of disposal: (Sec. 25) Reservation of the right of disposal means reserving a right to dispose of the goods until certain conditions (like payment of the price) are fulfilled. When the seller reserves such a right the property in the goods does not pass until those conditions are fulfilled. The seller may reserve such a right expressly while making a contract or while making appropriation of unascertained goods. He may also reserve this right by implication, for example, when the seller while transporting goods takes the railway receipt or the bill of lading in his own name or where the seller has taken the R/R or B/L in the name of the buyer but has delivered the same to his bank with the instructions that the document is to be delivered to the buyer only when he makes payment of the price or accepts the bill of exchange, the right of disposal is said to be reserved impliedly.

What is Goods? Types of Goods

Rights of an Unpaid Seller against the goods

Essential Features of Right of Stoppage of Goods in Transit

Who is an Unpaid Seller? Characteristics of an Unpaid Seller  Buyers wrong is unforgivable in purchase  Rules regarding transfer of title on sale  What are the benefits of a Bonded Warehouse?  Effect of Pershing of Goods  Documents to Title To Goods  Who are the Common Carriers?  Difference between Common Carriers and Private Carriers ============================================================================== This site is mainly dedicated for Students of Law Schools, Law Universities, Students of Higher Education in Law, Admission in Law Schools, Scholars in Law, Students of Bar-at-Law, Law admission information, College of Law, Law Notes, Law Training, Law Tuition,  Law Study Guidelines, Business Law, Students of ACCA, CIMA, CFA,CA,ICWA,CPA