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. Seller‟s 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.

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 Transfer of Property

Section 26 of the Act provides that, “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.”
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
Amar’s 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 Anil’s premises. The wood is allowed to remain at Anil’s place till a
certain date and not to be taken away till paid for. Before payment, and while the
firewood is at Anil’s 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 Bhanu’s 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 Sunil’s 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.

Seller’s 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

1
[1949] 1 All. E.R. 435

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 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.

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

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 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 B’s 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 T’s
ground to B’s 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
[1809] 11 East 210
4
[1863] 2 H. C.174

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 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
[1952] STC 147
6
[1809] East Privy Council 210

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 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 seller‟s 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
Somesh’s 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
[1809] Camp 240, 11 Royal Reports 704
8
[1880] 5 C.P.D. 321

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 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 X’s 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 A’s
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.

9
[1897] 1 Q.B. 201 C.A.
10
[1905] 2 K.B. 172

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 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 specified 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 The goods must be in a deliverable state.

3 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
[1901] 1 K.B. 608
12
[1815] 5 Camp. 181
13
[1941] 43 Bombay L.R. 95

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 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 Bhanu’s 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 owner‟s 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 authority 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 F’s
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)

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 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 seller‟s 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 the seller‟s 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 Suresh’s 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 Suresh’s 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 co-
owners.
(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
seller‟s 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.

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 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 Bittoo’s 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 stoppage 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 Aanand’s 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.

2 Distinguish between:
a) Ascertained and Unascertained goods.
b) Specific and Unascertained.
c) Part delivery and installment delivery.

3 Explain the term: Risk Prima facie passes with ownership.

4 Explain the exceptions to the above given rule.

Long answer questions:

1 Explain the importance of the determination of the time of transfer of

ownership of property.

2 What are the conditions and when does the property pass from the seller
to the buyer?

3 What are the circumstances which the property passess after the signing
of the contract?

4 Explain the exception to the rule that no one can transfer a title better
than he himself possesses.

5 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?

Answer: Rama can recover the price of the saree as the delivery to the courier
company is delivery to the buyer.

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?

Answer: Mr. Singh can recover the money for the books, as the same have
been dispatched and the property had transferred to Mr. Chary.

3 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?

Answer: In this case, Ram will bear the loss as the goods had been ascertained.

4. Sheela sells Seema‟s cycle in her presence. Seema does not object at
that time. Can she object later?

Answer: Seema cannot object later and sale is valid (title by estoppel).

5. 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?

Answer: Yes, Shopkeeperr can recover the price from Shyam as the vacuum
cleaner had not been returned in 3 days time to the shopkeeper.

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