Sale of Goods - Chapter 5 - Effects of The Contract

Chapter III of the Sale of Goods Act, 1930 speaks about the effects of the contract, i.e. Transfer of property as between seller and buyer. Section 18 says-

Goods must be ascertained.-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."

The Supreme Court in the case Badri Prasad v. State of Madhya Pradesh, MANU/SC/0079/1969 : (1971) 3 SCC 23, defined the term 'ascertained goods' as follows-

"It is true that trees which are agreed to be severed before sale or under the contract of sale are "goods" for the purposes of the Sale of Goods Act. But before they cease to be "proprietary" rights or interest in proprietary rights within the meaning of sections 3 and 4(a) of the Act they must be felled under the contract. It will be noticed that under clause 1 of the contract the plaintiff was entitled to cut teak trees of more than 12 inches girth. It has to be ascertained which trees fell within that description. Till this was ascertained, they were not "ascertained goods" within section 19 of the Sale of Goods Act. Clause 5 of the contract contemplated that stumps of trees after cutting had to be 2 inches high. In other words, the contract was not to sell the whole of the trees. In these circumstances property in the cut timber would only pass to the plaintiff under the contract at the earliest when trees are felled. But before that happened the trees had vested in the State."

Unascertained goods are distinct from specific or ascertained goods in the sense that future goods include those goods which are not in existence yet or goods which have not been acquired so far by the seller. It may also be said that future goods for purposes of passing of property can never be distinct.

Unascertained goods are not defined by the Sale of Goods Act but they fall under following categories-

Ist- Goods which are to be manufactured or grown by the seller which are necessarily future goods,

2nd-Generic goods, e.g., 20 tonnes of sugarcane or similar goods which must also be future goods where the seller does not own sufficient goods of the description in question to appropriate to the contract, and

3rd-An unidentified part of a specific whole, e.g. 1000 tonnes of sugarcane out of a particular lot of 5000 tons of sugarcane.

2. Importance of transfer of property

In a sale, the transfer of ownership of goods/property makes an essential part of that sale. It always becomes necessary to determine the time at which the seller ceases to be the owner and the buyer acquires ownership. There are rights as well as obligations of the parties which are linked with passing of property from seller to buyer.

One of the most important effects is that 'risk' prima facie' passes with property. Secondly, when the property exchanges hands from seller to buyer then he can i.e. buyer can exercise proprietary rights over the goods. That means a buyer can sue the seller for delivery and if the seller has resold the goods to a mala fide buyer, the original buyer may recover from him also, as it was observed in the case; Kirkhum v. Altenborough, (1897) 1 QB 201.

3. Property passes when intended to pass

Q. What are the circumstances in which it can be said that the goods have been passed?

Section 19 deals with the passing of properties when there is intention to pass it on-

"(1) 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.

(2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case.

(3) Unless a different intention appears, the rules contained in sections 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer."

Lord Watson in the case of; McEntire v. Crossley Bros. Ltd., (1895) AC 457 (467), described passing of property as-

"It does not in the least follow that, because there is an agreement of sale and purchase, the property in the thing which is the subject-matter of the contract has passed to the purchaser. That is a question which entirely depends upon the intention of the parties. The law permits them to settle the point for themselves by an expression of their intention upon the point."

In the case; Agricultural Market Committee v. Shalimar Chemical Works, MANU/SC/0644/1997 : AIR 1997 SC 2502, Supreme Court applied the principle of McEntire case. Certain goods were sent from Kerala to Hyderabad. The terms and conditions of the contract showed that the parties intended that the sale would be complete in all its aspects in Kerala itself. In consequence all legal implications, including those of taxation, arose in Kerala itself. Here, the State of Andhra Pradesh was not justified in changing levy on the purchase of copra.

The Supreme Court further observed-

"Section 19 of the Sale of Goods Act attempts to give effect to the elementary principle of the law of contract that the parties may fix the time when the property in the goods shall be treated to have passed. It may be time of delivery, or the time of payment of price or even the time of making of the contract. It all depends upon the intention of the parties. It is, therefore, the duty of the court to ascertain the intention of the parties and in so doing they have to be guided by the principles laid down in section 19(2) which provides that for ascertaining the intention of the parties, regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case".

In one another case; Bhagwat Narain Tendulkar v. Goa Coop. Marketing and Supply Federation Ltd., (1998) 2 Mah LJ 703 (Bom), where it was said that the intention has to be gathered from the substance of the agreement and not merely from the words used by the parties. Here, there was a sale of second hand vehicle where price was payable in monthly instalments. Two advance instalments were paid and possession of vehicles were taken. One of the vehicles met an accident till then, the insurance was in the name of vendor therefore he collected the insurance money. The question arose then that who was the owner of the vehicle at the time of accident. One of the clauses in the agreement was that only on full payment, the possession of vehicles would be transferred to the buyer by registering the change with the Regional Transport Officer. Due to this declared intention, ownership remained with the seller. Here, the buyer has defaulted with the instalments. The seller had the right to collect the insurance money. He was accordingly right in seizing the vehicles and was not liable for causing any loss of business to the buyer.

In another case; Aluminum Industries v. Romalpa, (1976) 2 ALL ER 552, a contract provided that the property would not pass to the buyers until they paid for it and even if they resold the goods without paying the price, the claim to the price would be assigned to the sellers, it was held that the property had not passed to the buyers and they resold the goods only as agents of the original sellers and the latter were entitled to the retail price in preference to the other creditors of the insolvent buyer.

In another case; Agricultural Market Committee v. Shalimar Chemical Works Ltd., MANU/SC/0644/1997 : (1997) 5 SCC 516: MANU/SC/0644/1997 : AIR 1997 SC 2502, the Supreme Court discussed the factors which influenced the decision. The goods, the subject-matter of sale were ascertained goods and in deliverable state. The buyer placed the order and on his order the seller in the State of Kerala loaded the goods on the lorry and dispatched it to Hyderabad. One of the terms of contract was that the seller would not be liable for any future loss of goods and that the goods were being dispatched at the risk of the respondents. The respondents got the goods insured and paid the premium. He thus treated the goods as his own and ensured himself that he could claim the insurance money for the loss of goods if occurs any in course of transit of goods. Here, the weightment of the goods at Hyderabad or the collection of documents from the bank for payment of price through the bank at Hyderabad were immaterial since the property in the goods had already passed at Kerala and it was not dependent upon the payment of price or the delivery of goods. So, the sale took place in the State of Kerala and not in Hyderabad. Hence, the place where the sale did not take place, to levy the market fee on purchase of copra which was an agricultural produce under the AP (Agricultural Produce and Livestock) Act, 1966 was invalid.

Here, it would be pertinent to mention some excerpts from Benjamin's Sale of Goods¹ where he has quoted the observation from the case McEntire v. Crossley Bros. Ltd., 1895 AC 457 (467)-"Where the intention of the parties is not apparent from their contract, their intention will be ascertained in accordance with the rules laid down in sections 18 and 20 to 24. These rules are presumptions only. The law permits the parties to settle 'the point for themselves by any intelligible expression of their intention".

These sections relate with following situation-

(i)sale of specific goods;

(ii)sale of goods on approval; and

(iii)sale of unascertained goods.

In another case; Dwarka Das Ajodhya Prasad v. Ram Ratan, MANU/UP/0634/1922 : AIR 1922 All 458-"where the defendants agreed to take certain goods as ascertained but requested the plaintiffs to postpone delivery until some more convenient time and under these circumstances, the provisions of section 78 of Contract Act come into operation, the property in the goods passed to the defendants as soon as the proposal for sale was accepted and they were liable for the price".

4. Sale of Specific Goods

Sections related to the sale of specific goods are 20, 21 and 22. The provision of section 20 is as below:

Specific goods in a deliverable state-'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 goods, or both, is postponed.

To understand the provision as given in the section 20, we will be discussing here following cases-

(a) Tarling v. Baxter, 6 Barn & Cress 360: 5 LJKB 164: (1827) 30 RR 355, the facts of the case was that A on the 4th of January, agreed to sell to B, a stack of hay to be paid on the 4th of February; and the stack was allowed to remain on A's land till 1st of May. A also stipulated that the hay should not be cut until it was paid for.

It was held that "this was a contract for an immediate sale and not a future sale, and that the property in the hay passed immediately by it to the buyer, and that the same having been accidentally destroyed by fire, the loss fell upon him."

(b) Badri Prasad v. State of Madhya Pradesh, MANU/SC/0030/1965 : AIR 1966 SC 58, A forest contractor purchased the cut timber on an auction and also some forest's land

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1. 4th Edn., 1992, p. 186.

area. As per condition of payment, the money was to be paid in four instalments. After the first payment, contractor took the possession of land as well as cut timber and he started carrying his work i.e. felling of trees and transportation of timber. One day fire broke out in the forest and it engulfed the timber which was the subject-matter of the contract. The contractor did not pay the remaining instalments. The contractor was accordingly prevented from collecting the timber. Here, it was held that the contract was unconditional, the goods sold were specific and they were in deliverable state and, therefore, the property in the goods passed at the time when the contract was made hence the contractor was bound to pay the remaining instalments.

So, the basic conditions for this rule for its application are-

(i)the sale must be that of specific goods,

(ii)the goods must be in a deliverable state; and

(iii)the contract must be without any precondition.

The Supreme Court, in the case; Agricultural Market Committee v. Shalimar Chemical Works, MANU/SC/0644/1997 : (1997) 5 SCC 516: MANU/SC/0644/1997 : AIR 1997 SC 2502, has stated about the abovementioned requirements.

If, we look into the provision of section 20, it says that there is an unconditional contract for the sale of 'specific goods' in a 'deliverable state', the goods passes to the buyer as soon as the contract is made. It gives a clear indication that as soon as a contract is made in respect of specific goods which are in a deliverable state, the titles in the goods passes to the purchaser. The passing or transfer of goods is not dependent upon the payment of price or time of delivery. When section 20 comes into picture, it has to be seen whether there is anything either in terms of the contract or in the conduct of the parties or in the circumstances of the case which indicates an intention which does not commensurate with the provision of this section. Intention of the parties as per section 19(1) is the decisive factor as to when the property in the goods passes to the purchaser. But, when the contract doesn't say anything about intention of the parties then it has to gathered from the conduct of the parties and the circumstances of the case, under the provisions of the Act relating to passing of property.

5. Meanings of terms

5.1 Specific Goods

According to section 2(14), 'specific goods' means goods identified and agreed upon at the time a contract of sale is made.

It means, identity of goods has already been established at the time of the sale and individuality of goods has been found.

5.1(i) Shankar Das v. Bhanna Ram, AIR 1926 Lah 606

In the case, there was a sale of five buses and the price of these buses was to be paid in instalments and it was agreed upon by the parties that the ownership and route permit would be transferred within a week after the last instalment is paid. It was held that this was a sale of specific goods and the property passed when the contract was made.

5.1(ii) Kursell v. Timber Operators and Contractors Ltd., (1926) 135 LT 223

There was a sale of all the "merchantable timber" growing in the forest of Latvia. It was a sale on a particular date. The contract defined "merchantable timber" in contract as-"all trunks and branches of trees but no seedlings and young trees of less than six inches in diameter at a height of four feet from the ground." The buyer had a time-period of 15 years in which they had to cut the trees. But, after cutting the trees for few days only, the private rights were annulled as the forest was nationalized. Then, the sellers sued for the price.

Here, the buyers were held not liable. It was not a sale of specific goods and the property had not passed to the buyer at the time of the contract.

Scrutton LJ. observed as-

"It appears to me that the goods were neither identified nor agreed upon. Not every tree in the forest passed, but only those complying with a certain measurement not then made. How much of each tree passed depended on where it was cut, how far from the ground. Nor does the timber seem to be in a deliverable state until the buyer has severed it."

5.1(iii) Aluminum Industries Ltd. v. Minerals and Metals Trading Corporation of India Ltd., MANU/TN/0836/1997 : AIR 1998 Mad 239

A Government undertaking decided to sale aluminium metal to allottees and for this purpose entered into a contract. It was the condition of allotment of quota that the price ruling on the day of delivery would apply. As per the provisions of sale notes, the allottees opened letters of credit accounts in favour of the undertaking. After that, the allottees repeatedly approached the Government godowns for delivery but the same was postponed every time without giving any valid reason. During this period, price structure was revised upwards. The Government attempted to deliver the metal at increased prices. But, the Court did not allow it. The Court allowed the writ petition of the allottee and held that judicial review in contractual matters was not absolutely excluded.

5.2 Deliverable State

Q. What do you mean by `deliverable state' of goods? Discuss it in the light of provision of section 2(3).

According to section 2(3) of the Act, 'Deliverable State' means-

'Goods are said to be in a deliverable state when they are in such state that the buyer would under the contract be bound to take delivery of them.'

We may cite here the example of the case; Underwood Ltd. v. Burgh Castle & Cement Syndicate., (1922) 1 KB 343: (1921) All ER Rep 551. Where it was said that where the article sold is complete in itself and nothing remains to be done to it, it may not be regarded to be in a deliverable state if the seller has to dismantle before forwarding it.

Bankes L.J. gave the judgment as-

"The subject-matter of the sale was a horizontal condensing machine. The sellers agreed to sell it for London. The engine weighed 30 tons. It was bolted to a concrete emplacement in which it had become embedded by its weight so that it had first to be unfastened, and then to be dismantled.......The engine was damaged on its way to the rails. The sellers contended that where a specific article is complete in itself, for example, a complete engine or a complete cart-that is to say, where nothing more has to be done to make it an engine or a cart-it is then in a deliverable state.....I do not accept that test. A 'deliverable state' does not depend upon the mere completeness of the subject-matter in all its parts, but on the actual state of the goods at the date of the contract and the State in which they are to be delivered by the terms of the contract. Where the vendors have to expend as much trouble and as much money as the buyers had to expend before this engine could be placed on the rail, I cannot think that the subject-matter can be said to be in a deliverable state."

5.3 Unconditional Contract

A contract should be made without any condition. But, if both the parties are agreed to make the contract conditional with mutual consent then property should not pass unless certain conditions are fulfilled.

In the case; Abdul Aziz v. Jogendra Krishna Roy, (1917) ILR 44 Cal 98, the goods in question were in a deliverable state, but the property could not be passed since there was a custom of trade that the sale should not be completed until the goods were selected, tested and weighed by the buyer.

If the condition has been put into contract that prior to passing of property, the goods remain the property of the seller until the payment is realized by the seller. If the condition is not fulfilled the seller cannot sue for the price but he can only ask for damages for breach. But, if payment is not a condition precedent, the property may pass enabling the seller to sue for the price even if he is withholding delivery of the goods for recovering his price.

In the case; Tarling v. Baxter, 30 RR 355 (356) (1827), it was observed that if the requirements of section 20 are fulfilled, the property passes as soon as the contract is made and it is immaterial that the payment of the price or delivery of the goods or both is postponed.

Here, the vendor sold a kotha of barley, these goods were ascertained, specific and also in a deliverable state. There was a condition in the contract that the seller should keep the goods in his possession until the buyer has paid the price and if, the buyer fails to pay the price within the prescribed time then the seller is free to re-sale the goods. The seller successfully sued the buyer for the price because the time has passed from the stipulated time of contract.

Bayley J. said-"the right of property and the right of possession are distinct from each other; the right of possession may be in one person, the right of property in another. A vendor may have a qualified right to retain the goods unless the payment is duly made and yet property in the goods may be in the vendee."

6. Goods to be put in Deliverable State

Q. What do you mean by "to put the goods in deliverable state". Discuss it with the help of relevant cases.

Section 21 of the Act says, as-

"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 deliverable state, the property does not pass until such thing is done and the buyer has notice thereof".

So, section 21 commands over the sellers by putting duty on them to do something to the goods for the purpose of putting them into a deliverable state.

If, anything remains to be done on the part of seller then it can't be said that the goods are in deliverable state. In the case; Rugg v. Minett, (1809) 11 East 210: 10 RR 475, there was a sale of turpentine oil which was lying in a cistern. The oil had to be filled up in the casks from the cistern. Some of the filling work was done by the seller in presence of the buyer. But, before the casks could be removed, the whole oil was consumed by fire. The buyer had to bear the loss for the casks since everything was done by the seller which lay upon them to perform in order to put the goods in deliverable state.

Goverdhanlal v. Bakhtawarlal, AIR 1955 NUC (Raj) 4063, explains the meaning of section 21 in beautiful manner. In this case, there was a contract for sale of a specific item of machinery. In the contract, it was mentioned that a person from seller's organization/shop will go to the buyer's place and will install the engine and put into working order and whatever parts except shaft, if lacking would be supplied by him at his own cost and on the seller having done all these would get remaining payment from the buyer. It was held that under section 21, the property would not be in a deliverable state and therefore the property in the goods would not pass to the buyer unless the seller did all he had to do under the contract before the buyer committed a breach of contract by non-payment of price within the period specified and therefore the seller would not be entitled to remedy under section 55(1)¹ which applied to cases where the property in goods has passed to the buyer. This case was also not covered under sub-section (2) also because under the contract the balance of price was not payable on the due date irrespective of delivery but the delivery and payment were to go together. Hence, the seller was not entitled to recover the balance of price.

7. Goods to be Weighed or Measured

Section 22 of the Act speaks about the weight, measure and test of the saleable goods for which contract has been made-

Specific goods in a deliverable state, when the seller has to do anything thereto in order to ascertain price.-Where there is a contract for the sale

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1. Section 55(1) where under a contract of sale the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may sue him for the price of the goods.

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.

So, where the seller has to weigh or take measurement of the goods to be sold under the contract for ascertaining the price of goods, such property does not pass until it is done by the seller and witnessed by the buyer.

Some cases to this section-

(a) Zagury v. Furnell, (1809) 2 Camp 240: 11 RR 704

In this case, there was a sale of goat skin, it was the duty of the seller to count the goatskins in each bale, and the price was for certain sum per dozen skins, it was held the seller had to bear the loss, which was caused by fire before he counted the goods.

(b) Sanwick v. Sothern, (1839) 48 RR 740

In this case, Lord Denman C.J. observed that, "if a part of a bulk is sold, so that weighing or separation is necessary to determine the identity or individuality of the article, or if the whole of the commodity be sold, but weighing is necessary to ascertain the price, because the quantity is unknown, the weighing and measuring must precede delivery, and symbolic delivery without such weighing will not be sufficient." It was further observed that, "on a contract for the sale of goods lying in a warehouse, the handing over of delivery order to the buyer, and the transfer of the goods to him in the warehouseman's books, will not vest the property in him, if something remaining to be done for the purpose of ascertaining the identity or quantity of the goods".

(c) Shoshi Mohun Pal Chowdhry v. Nobo Kristo Poddar, (1878) 4 ILR Cal 801

Here, there was a contract between A and B, where A had to sell B 975 mounds of rice i.e. the whole content of certain golah. B paid certain amount as earnest money and agreed to remove the whole of the rice after weighing. B transferred this contract to C who after taking the delivery of some bags refused to accept the remaining on account of their inferior quality. There was a fire in golah which burnt the remaining rice. It was held that it was a sale of specific goods and the property passed as soon as the contract was made. The buyer could have known the quality of rice with ordinary diligence before accepting the rice.

8. Sale of Unascertained Goods and Appropriation (Section 23)

"(1) Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied and may be given either before or after the appropriation is made.

(2) Delivery to a carrier-Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract."

Loon Karan Sohan Lal v. Firm John & Co., MANU/UP/0102/1967 : AIR 1967 All 308

(a) If a sale takes place and the goods are not specifically defined, then it becomes necessary that both the parties should agree upon what is to be delivered in course of honouring the contract. Until this is done there are no goods to which the contract can attach. When, however, the goods to be delivered under the contract have been identified, in a manner binding on the parties, as the goods to which the contract is to attach and the property wherein is to be transferred to the buyer and nothing further remains to be done to pass the property, the property may, and, in the absence of a contrary intention, will pass.

In the case; Laidler v. Burlinson, (1837) 2 M&W 602, 610, 46 RR 717, it was observed-

(b) "the term 'appropriation', may also be used in the sense that the goods have been identified by the agreement of the parties as the goods about which they are contracting, so that the contract can never apply to any other goods, and the seller would be guilty of a breach of contract if he did not deliver them and yet the property may not pass, so that if the seller sold them to someone else the buyer could not claim the goods from that person."

On appropriation, Sir Mackenzie Chalmers has written his commentary as follows¹-

'It is often a nice question of law whether the acts done by the seller merely express a revocable intention to appropriate certain goods to the contract'-i.e. specify them as the goods contracted for- 'or whether they show an irrevocable determination of a right of election.' That learned author maintains that in every case where it has been held that there was an irrevocable election there was delivery, actual or constructive, to the buyer.'

8.1 Some more points on Appropriation

Q. Why it is mandatory on part of seller to sort out the goods for appropriation of goods.

Property does not pass till Appropriation-The seller usually does the act of appropriation. If, the seller has done nothing to sort out the goods, the question of the property in them passing to the buyer does not arise. In the case; Emperor v. Kuverji Kavasji, MANU/MH/0111/1940 : AIR 1941 Bom 106: (1941) 43 Bom LR 95, there was a contract for the sale of a quantity of liquor out of a cask containing much larger quantity and it was observed that having no part separated or bottled, the property did not pass.

Another example can be found in the case-Healey v. Howlett & Sons, (1917) 116 LT 591: (1917) 1 KB 337-The defendants had ordered the plaintiff for supply of twenty boxes of fishes of hard bright mackerel. The plaintiff sent

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1. Chalmers, Sale of Goods, p. 77

a consignment of 190 boxes of fishes by railway to defendants. These 190 boxes also contained boxes for two other consignees. Somehow, the consignment got delayed en route and when the defendant received their 20 boxes, it was found that the fishes were deteriorated and were not merchantable. The defendants refused to accept them then the sellers sued for the price.

It was observed that at the time of deterioration of goods, the same were not passed to the buyers. Ridley J., said-

"I think it is clear on the authorities that goods become the property of a consignee as soon as they are marked off by some distinct act... and are delivered to the carrier as agent to complete delivery to the purchaser. Here, however, out of a large number of boxes only a portion were to belong to the defendants and none had been marked off.... Suppose half the boxes had been lost, who could say whether they were those of the defendants or of the other purchaser? The name of the consignee should have been placed on the boxes."

8.2 Appropriation without Buyer's Assent

An appropriation without the buyer's assent is ineffective. In Jenner v. Smith, (1869) 4 CP 270, the plaintiff had undergone a contract with the defendants orally to sell two pockets of hops which were available there and others two lying in a warehouse in London. The buyer took the possession of available two and asked for remaining two on a future date. When the plaintiff came to London, he went to the warehouse and selected two out of three pockets lying there and asked the warehouse keeper to mark them "to wait the buyer's order".

It was held that in this way, the property did not pass to the buyer since there was no evidence that the appropriation of the two pockets in the London warehouse was either originally authorised or subsequently assented to by the buyer.

8.3 Buyer's Assent may be Express or Implied

The assent of buyer may be express or implied for appropriation. In the case; Pignataro v. Gilroy & Sons, (1957) 1 Lloyd's Rep 230 (240), the buyer was informed that the goods were available for collection at the seller's warehouse and he did not give any reply for two months and before he sent his man to collect the goods, the goods were stolen from the warehouse without the seller's fault, it was held that the seller had appropriated the goods; that the buyer's assent was implied from his failure to reply and that the goods were the buyer's property at the time of theft and the seller was not liable for non-delivery.

8.4 Appropriation - Unconditional and Goods of Contract Quality

For effective appropriation, it should be unconditional and the goods must be of contract quality. This is the last act which has to be performed by the seller.

In the case; Carles Fedorspid & Co. S.A. v. Charles Tueiga & Co. Ltd., (1957) 1 Lloyd's Rep 240 (255), the seller had to dispatch cycles and tricycles. They had the goods packed and also marked with the port of destination. Before sending the shipment the sellers went into liquidation. The buyers claimed the goods from the liquidator on the ground that the goods, having been unconditionally appropriated, became their property. It was held that the parties' intention was that property should pass on shipment and the mere preparation for shipment did not amount to an "appropriation" Pearson J. then observed as follows:

"Usually, but not necessarily, the appropriating act is the last act to be performed by the seller. For instance, if delivery is to be taken at the buyer's premises and the seller has appropriated the goods when he has made the goods ready and identified them and placed them in position to be taken away by the buyer and so informed the buyer, and if the buyer agrees to come and take them, that is the assent to the appropriation, but if there is a further act, an important and decisive act, to be done by the seller, then there is prima facie evidence that probably the property does not pass until the final act is done."

9. Delivery to a Carrier

Sub-section (2) of section 23 gives statutory recognition to the important rule that, where goods are delivered to a carrier or the like for transmission to a buyer, the carrier is presumed to be the buyer's agent not only to take delivery, but to assent to the appropriation to the contract of the goods so delivered, subject of course to any just grounds of exception which may subsequently be discovered.

It may be admitted, Baron Parke said in 1949 (Wait v. Baker, (1848) 2 Ex 1, 7, 76 RR 469)-

"If goods are ordered by a person, although they are to be selected by the vendor and to be delivered to a common carrier to be sent to the person by whom they have been ordered, the moment the goods which have been selected in pursuance of the contract are delivered to the carrier, the carrier becomes the agent of the vendee and such a delivery amounts to a delivery to the vendee; and if there is a binding contract between the vendor and vendee, then there is no doubt that the property passes by such delivery to the carrier. It is necessary, of course, that the goods should be compatible agree with the contract."

· Acknowledgement by Bailee

If the goods are already in the possession of bailee and he acknowledges to hold them on the seller's behalf, it amounts to an "unconditional appropriation".

In the case; Wardar's (Import and Export) Co. Ltd. v. W. Norwood & Sons Ltd., the seller had 1500 cartons of frozen Ox kidneys, which were lying in a third party's cold store. Out of 1500 cartons, he sold 600 cartons to the buyer and gave him a delivery order. The day after, the buyer's agent went to take the delivery of goods but he found that 600 cartons were waiting for him on the pavement. He gave the delivery order and it was accepted by an officer of the cold store. At this time, there was no evidence of the condition of the packed meat. But, it was found during loading that the meat has deteriorated and on arrival at the buyer's premises, it was unfit for consumption.

It was held by the Court of Appeal that in the above circumstances the loss fell upon the buyer, since the property had passed to him as soon as the officer of the cold store accepted the delivery order and the deterioration was followed later on.

10. Goods Sent on Approval or 'On Sale or Return - Section 24 of the Act says as

"When goods are delivered to the buyer on approval or "on sale or return" or other similar terms, the property therein passes to the buyer-

(a)when he signifies his approval or acceptance to the seller or does any other act adopting the transaction;

(b)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 goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time."

10.1 Delivery of Goods on Sale or Return

Q. Is it essential on the part of buyer to approve or `on sale or return' before the goods passes to the buyer?

A delivery of goods after the approval, might have been held to pass the property subject to a condition that it should revert in the former owner if the optional buyer returned the goods within the prescribed time, or if the term is not mentioned then in a reasonable time. By, the accepted rule, which is as per the Act in such a case there is no complete sale until the buyer has either-

(i)signified his approval, either expressly or by dealing with the goods as owner, or

(ii)kept the goods until the lapse of the prescribed or a reasonable time without returning them, or

(iii)made return impossible by his own act or default, as by letting the goods be destroyed or spoilt.

10.2 Risk of Loss or Damage

If the subject-matter perishes due to some inevitable accident then it is at the original owner's risk. As in the case Elphick v. Barnes, (1880) 5 CPD 321, it was observed that if a horse delivered on sale or return dies before the expiration of the time allowed for return, than provisional purchaser is not liable unless the accident is due to a defect for which the provisional purchaser is answerable by the terms of the contract or otherwise.

In the case, Head and Tattersall (1871) LR 7 Ex 7, it was observed that intervening damage which only depreciates the goods without the holder's fault, such as an accident to a horse while being tied, does not generally affect the right to return them.

10.3 Delivery on Sale or Return and Conditional Sale

It is not always easy to distinguish a transaction of sale or return from a conditional sale in which the property passes at once on the condition of buyer to return the goods if the prescribed condition is not fulfilled.

11. Reservation of right of disposal

Q. Explain the provision of section 25 of the Sale of Goods Act as—"Where there is a contract for the sale of specific goods or where goods are subsequently appropriated to the contract, the seller may, by the term of the contract or appropriation reserve the right of disposal of the goods until certain conditions are fulfilled."

Section 25 of the Act, speaks about the Reservation of right of disposal-

"(1) Where there is a contract for the sale of specific goods or where goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled. In such a case, notwithstanding the delivery of the goods to a buyer, or to a carrier or other bailee for the purpose of transmission, to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled.

(2) Where goods are shipped or delivered to a railway administration for carriage by railway and by the bill of lading or railway receipts, as the case may be, the goods are deliverable to the order of the seller

or his agent, the seller is prima facie deemed to reserve the right of disposal.

(3) Where the seller of goods draws on the buyer for the price and transmits to the buyer the bill of exchange together with the bill of lading or, as the case may be, the railway receipt, to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading or the railway receipt if he does not honour the bill of exchange; and if he wrongfully retains the bill of lading or the railway receipt, the property in the goods does not pass to him."

Explanation.-In this section, the expressions, "railway" and "railway administration" shall have the meanings respectively assigned to them under the Indian Railways Act, 1890 (9 of 1890).

We can take here the example of; Loeschman v. Williams, (1815) 4 Camp 181: 16 RR 772. A piano was sold, the payment was to be paid in cash and piano was to be delivered at the packer's premises. Piano was left at the packer's premises on the express condition that it was not to be delivered to the buyer till the payment is paid. The packer, however, delivered it without payment. It was observed that the instrument was the seller's property and the packer was liable in trover in wrongfully delivering it to the buyer.

Sub-section (2) of this section gives an illustration of the right of disposal:

"Where goods are shipped or delivered to a railway administration for carriage by railway and by the bill of lading or railway receipts, as the case may be, the goods are deliverable to the order of the seller or his agent, the seller is prima facie deemed to reserve the right of disposal."

So, the meaning of above lines are that if by the contract of carriage the goods are deliverable to the seller himself or his agent, the property remains in the seller. Similarly, where the seller draws a bill of exchange on the buyer for the price and transmits the same to the buyer alongwith the bill of lading or railway receipt to secure the buyer's acceptance or payment, the property does not pass until the buyer accepts or pays, as the case may be.

12. Transfer of Risk

Q. When it is decided that risk of goods has been transferred to buyer? Discuss it with the help of relevant cases.

Section 26 speaks about the transfer of risk with property. Blackburn J., has said about this as-"As a general rule, res perit domino, the old civil law maxim, is a maxim of our law, and when you can show that the property passed the risk of the loss prima facie is on the person in whom the property is." Blackbun gave this observation in the case; Martinean v. Kitching, (1872) LR 7 QB 436.

Section 26 is as follows:

Risk prima facie passes with property-Unless otherwise agreed, the goods remain at the seller's 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 buyer's risk whether delivery has been made or not:

Provided that, where delivery has been delayed through the fault of either buyer or seller, the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault:

Provided also that nothing in this section shall affect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party."

In the case; Sterns Ltd. v. Vickers Ltd., (1923) 1 KB 78 CA, there was a sale of 1,20,000 gallons of white spirit out of 2,00,000 gallons in a tank which belonged to a third party. The buyer received a delivery warrant and it was accepted by the owner of the tank. But the buyer did not take the delivery of the spirit for some months for his own convenience. The spirit deteriorated. The buyer was responsible for loss because the property had passed by attornment, and even if it had not because the buyer did not take the delivery on time.

In the words of Scrutton LJ.,-

"The transfer of the undivided interest carries with it the risk of loss from something happening to the goods, such as deterioration in their quality, at all events after the vendor has given the purchaser a delivery order upon the party in possession of them."

12.1 Separation of Risk from Property

Although risk and property go hand in hand but these are not inseparable. Sometimes 'risk' may be in one party and 'property' in another. The expression 'unless otherwise agreed' indicates that section 26 is subject to a contract to the contrary.

12.2 Delay in Delivery of Goods

Second part of section 26 can be understood better if we refer Pothier here.

Second paragraph of section 26-

"Provided that, where delivery has been delayed through the fault of either buyer or seller, the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault."

Pothier's illustration¹-

If, I sell you a horse and make default in delivery, and it is struck by lightening in my stables the loss falls on me, because the accident would not have happened if I had duly delivered the horse. But, if the horse dies from a disease which would have killed him in any case, I am not liable.

In the case; Demby Hamilton & Co. Ltd. v. Barden (Endeavour Wines) Ltd., (1949) 1 All ER 435. There was a contract between defendants and plaintiffs for supply of 30 tons of apple juice which was to be supplied weekly. The plaintiffs crushed all the apples what they had for the season and put the juice in casks to enable them to perform the contract. The delivery was to be completed by February, 1946 but on buyer's request delivery was held up. The buyer again took some delivery and then stopped completely. The juice was kept waiting for the order of buyer and by November, it deteriorated.

It was held by the Court that in the circumstances, the loss fell upon the buyer.

12.3 Express Agreement

If parties are agreed then risk and property may be separated. Section 40 also provides that where the seller agrees to deliver the goods at his own risk at a distant place from where they are, the buyer has, unless otherwise agreed, to take any risk of deterioration if it happens to the goods in transit. Lord Normand said in; Comptoir d' Achat et de Vented du Boernbod Belge S/A v. Luis de Ridder Limitada, 1949 AC 293-"In those cases in which it has been held that the risk without the property has passed to the buyer it has been because the buyer rather than the seller was seen to have an immediate and practical interest in the goods, as for instance when he has an immediate right under the shop-keeper's delivery warrant to the delivery of an undivided bulk of in store or to an immediate right under several contracts."

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1. Contract De Vente, section 58, cited Chalmer's Sale of Goods, 13th Edn., 1957, pp. 79-80