Transfer Of Property

Transfer of property Risk passes with the property, unless otherwise agreed by the contacting parties.  After passing of the property the buyer can exercise the proprietary rights.  The seller is entitled to recover the price of goods only after the property in goods is passed to the buyer.  In case of insolvency of any of the parties, the ownership of goods is the key issue and not the possession of goods. 

Rules for passing of property.  

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Goods must be ascertained. Sec.18 Intention of parties :- Sec.19(1). ‘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 the purpose of ascertain intentions of parties the terms of contract and the circumstances of the case are considered. Where intentions can not be ascertained Secs 20 to 24 apply.

Specific goods secs.20 to 22 

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Passing of property at the time of contract:-Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment of the price or time of delivery of goods, or both, is postponed. Where the goods are not in a deliverable state, the property does not pass until the seller puts them in to deliverable state. Where the price of goods is to be ascertained by weighing, etc. the property does not pass until such thing is done.

Unascertained goods. There can be no transfer of property of unascertained goods. Until goods are ascertained there is only an agreement to sell.  Sec 23(1) further provides that in case of a contract of unascertained or future goods by description and goods of that description in a deliverable state are unconditionally appropriated to the contract, the property in goods thereupon passes to the buyer. 

Essentials of valid appropriation 1. 2. 3. 4. 5.

The goods should confirm the description and the quality as per the contract. The goods must be in a deliverable state. The appropriation must be unconditional. The appropriation must be with the ascent of buyer and the seller. The ascent may be express or implied and may be given before or after the appropriation.

Goods sent on approval or ‘sale or return’ Sec.24 

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When Goods are delivered to the buyer on approval or ‘sale or return’ or other similar terms, the property therein passes to the buyer – When he signifies his approval or acceptance to the seller or does any other act adopting the transaction; If he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, when a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, after a reasonable time.

Sale by non owners. Sec.27 provides that where gods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had.  This rule has certain exceptions

Exceptions..  

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Transfer of title by estoppel. Sale by mercantile agent where a) he has the possession of the goods or the documents of the title, b) he is acting in ordinary course of business, and the buyer has acted in good faith, believing agents authority to sell. Sale by a joint owner. Sale by a person in possession under a voidable contract. Sale by seller in possession after the sale. Sale by a buyer in possession before the sale. Resale by an unpaid seller.