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This article is written by Shruti Somya, from Symbiosis Law School, Noida. This is an article dealing with the topic Passing of property under Sale of Goods Act, 1930. 

Introduction

Sale of Goods Act, 1930 (hereinafter referred to as SOGA, 1930) is the act that governs the laws pertaining to sales of goods. This came in force on 1st July 1930 and is applicable to the whole of India except Jammu and Kashmir. It deals only with the moveable property.

There are numerous concepts dealt under SOGA, 1930, most important of which is passing or transfer of the property. The literal meaning of passing of property is the transfer of the ownership on an agreed price. The ownership is transferred only when the proprietary of the property rights are transferred from the seller to the buyer. Point to be noted is that the transfer of ownership is distinct from that of possession of goods where the latter means that the goods are subject only to custody or physical control. Under SOGA, 1930 the term property is not a special property but a general property in goods.

Not to deny this, it is a key step in the sale process. Transfer of ownership is the essence of the contract of sale. Therefore, it is important to understand important aspects pertaining to the passing of property and its legalities. 

Statutory explanation

Goods under transfer of property

There are usually 2 types of goods dealt under transfer of property in SOGA-  

Specific goods: specific goods are goods that are identified at the time of making a contract and one can easily identify the exact piece to be delivered. For example- A contracts with B for the sale of a jacket bearing a distinct number.

Unascertained goods: unascertained goods are goods that are not identified at the time of making the contract. it is difficult to separate the exact goods for which the sale of the contract was made. For example- A contracts with B for the sale of a sack of grains out of many sacks lying in the storage. With no uniqueness of the sacks, one cannot identify the exact sack which was to be delivered.

Essentials of transfer of property

First and the most important essential for the transfer of property under SOGA is that the ownership of the property which is to be transferred must be of ascertained goods.

It is not possible to transfer unascertained goods. For the transfer of such good, they have to be converted to ascertained good.

The second essential is that property is transferred only when it is intended to transfer.

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Significance of transfer of ownership of property

During the contract of sales, the precise time at which the ownership gets transferred from seller to buyer is of great importance and cannot be ignored.

Significance of transfer of ownership can be discussed under following heads-

Risk prima-facie passes with the property- the risk with the property remains with the seller only till the time the property is with him. As soon as the ownership is transferred, the risk also gets transferred from the seller to the buyer.

One special case with this is the delay in the transfer of goods. If the delivery is delayed due to the fault of the seller or buyer, the party responsible for the delay is responsible for any loss which is incurred due to delay.

In a very famous case of Demby Hamilton &Co. Ltd. Vs Barden, the defendant and plaintiff entered into a contract to sell 30 tons of fruit juice which was to be delivered the next day.

Barden did not turn on time due to which half of the juice was spoiled. It was held that the defendant was liable. The light was thrown on the fact that delivery was to be given as per the sample chosen by the defendant and now it was impossible to select the exact fruits. Moreover, it was not possible for the seller to dispose of the goods. Thus, to fulfill the requirement of the contract he had to keep the 30 tons of juice till the delivery. 

Action against the third party- if the property which is to be transferred gets destroyed due to any act of the third party then the buyer has the right to sue the third party.

If the ownership is still with the seller, the buyer has no right to sue. 

Suit for the price- whosoever holds the ownership of the good would be held responsible in case of any mishappening. If the buyer becomes the owner of the good, the seller can file a suit for price in case of default.

Insolvency of buyer or seller- taking a case where either the buyer or the seller becomes insolvent. In this scenario, whether or not the property will be passed to the official assignee and right to decide goes to the party becoming insolvent. 

Rules determining the passing of the ownership from the buyer to the seller under SOGA, 1930

Ascertained good-  Section 20 to 22 of SOGA, 1930, lays down a certain set of rules which are to be followed while passing of the ascertained property.

Passing of the property at the time of the contract- if the goods are in the deliverable state then the property of goods passes to the buyer irrespective of payment or the time of the delivery is postponed. 

In the case of the Agricultural Market Committee Vs Shalimar chemical works Ltd., the appellant, and the respondent entered into the contract for the delivery of the goods from Kerala to Hyderabad. According to one of the clauses of the contract, the seller would not be liable for any mishappening after the goods are dispatched. On the other hand, even, the buyer has insured the goods. It was included that the goods will be delivered in Hyderabad and the payment of the goods will be done through the bank of Hyderabad.

The court held that it was immaterial the location of delivery or the mode and time of payment. The transfer of ownership is done the moment goods are dispatched from Kerala.

 Passing of the property after the date of the contract

  • Goods not in deliverable state-it is mentioned in section 21 of SOGA, when there are cases that property of the goods to be transferred is not in the deliverable state, then, in that case, it is important to make the goods in the deliverable state first and by that time a notice must be served to the buyer.
  • When the price of the good is to be determined by the weight of the goods- this provision is contained under section 22 of SOGA, 1930, that if the goods are in the deliverable state but by any chance, the seller has to weigh the goods to calculate the amount, the transfer will not be done till the calculation is complete and buyer has the notice regarding this.

Unascertained goods- under section 23 of SOGA, 1930, we can see the rules for the transfer of property for ascertained goods.

For the transfer of unascertained good there are two prerequisites need to be fulfilled:

1)  The goods must be converted to ascertained property- the seller needs to identify the goods and keep them aside so as to avoid ambiguity. The exactly selected goods are to be transferred to the buyer. This is a unilateral act where the seller makes the decision. 

2)  Goods must be appropriated to the contract- appropriation is where the goods are set aside with the consent of both buyer and seller. This is a bilateral act where both take a mutual decision.

In the case of Rhodes Vs Thwaites, A had a log of wood and contracted with B for the sales of wood at a specified place. B consented for the offer and said he would collect the goods after measuring the same. Hereby appropriation by A and assent by B, the property passes to B.

Goods sent on approval or sale or return- goods can be transferred from buyer to the seller on ‘approval’ or ‘sale or return’ basis. Section 24 of SOGA, 1930, defines the transfer of property of goods on approval provided following conditions are fulfilled.

The buyer must accept the good or any act of approval must take place.

The buyer shall hold the good beyond the specified period of time, without making any note, if the time is not mentioned.

In Kirkham Vs. Attenborough, a jeweler delivered some jewelry to W on sale or return basis.  W pledged the jewelry with A. When W failed to pay the price, the jeweler wanted to recover the goods from A.  It was held that the jeweler cannot recover the goods from A because by pledging the goods W has accepted the goods, the ownership gets transferred. 

Some reflection on “property” and “title” in the Sale of Goods Act; The Cambridge law journal, Vol. 56, No. 3, pp. 571-598

I started with a journal article titled- some reflection on “property” and “title” in the sale of good Act written by H.L. HO. He has made an effort to do a comparative study on the topic of property and title and transfer of ownership. He started with defining some of the basic terminologies like ownership (which is an important aspect related to property and title), property, goods, types of goods, etc. Further, he goes on to explain the other aspects of ownership, its acquisition, and strength. The author explains the concept of the acquisition of title, the relativity of title and the defeasibility of title. Reference was given to the famous landmark case of Rowland V. Divall and explained an important theory of “there can be no sale of goods which the seller has no right to sell.   

In totality, I found article average and not must extensive information be provided on property and title. Information was much of a basic level which is usually found in any books containing sales of goods. But the article can definitely be referred for foundation understanding. 

What does the transfer of property mean with regard to chattels? A study in comparative law; The American journal of comparative law, Vol. 7, No. 4 pp. 500-515

My second journal article was titled – what does the transfer of property mean with regard to chattel which is an American journal written by FR. Vinding Kruse. The author started by a beautiful story of Mr. X selling his chattel to Mr. Y and with the help of the story throwing light on the English Sale of Good Act and talks about section 18, rule 1, which highlights about the contract for the sale of specified goods. He gives a comparative analysis of how ownership of chattel gets transferred in English as well as French law and German code. Then he goes on to explain the legal effect of the contract with respect to the third party. The author gives a beautiful diagrammatic explanation on the relationship of the creditor, buyer, seller which was an excellent topic to read about. The author’s style of explaining the concept with various case laws and illustrations was something that would draw the reader’s attention.

Personally, the article was an excellent source for research and conceptual clarity on the topic. Reading the article, I felt that he focuses mostly on the tripartite relationship between creditor, seller, and buyer. Discussing in depth each and every legal element related to the contract. 

Conclusion

After doing extensive research on the topic “transfer of property under the Sale of Goods Act, 1930, it is a wide concept and contains many aspects divided into smaller topics. I found SOGA, 1930, especially the concept of passing the ownership of property is something that needs a day and night research and analysis.  The concept of transfer of property is very comprehensive and complicated. By analyzing the topic from different sources, I can conclude that section 18 to section 24 of SOGA, 1930 has done a fair job in protecting the interest of the parties. Almost everything required to know the legality of this subject has been included, but it was a complex and complicated one to grasp in this section of the act for an ordinary man.

References


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