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Passing of Property Part 1

Last updated date: 21st Apr 2024
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The passing of or transfer of ownership to the buyer is implied by a sale of property or goods. The liabilities and the rights of the buyer and the seller are determined by the help of an important aspect, the passing of property in goods. After the buyer is passed on a property, any risk to the goods sold is not of the seller anymore, rather it solely is of the buyer. This stands true even when the seller possesses the goods. We shall learn more about the passing of property in the Sale of Goods Act 1930. 

Passing of Property

There are four primary rules regarding the passing of property in the sale of goods act 1930.

  • The Passing of Ascertained or Specific Goods

  • Passing of Unascertained Goods

  • Goods are Transferred upon the Basis of Approval or “On Sale or Return”

  • Passing of Property in case of reservation of the Right to Disposal

We shall be putting light into the first two rules in this article.

Passing of Ascertained Goods 

Section 19

The first rule of the passing of property in goods deals with the passing of specified goods. It states that specific goods or ascertained goods can only pass when they are intended to pass. There are three subsections under Section 19 of The Sale of Goods Act, 1930 which are as follows.

  1. Sub-section (1)

The contract for the sale of ascertained goods clearly mentions the time when the transfer of property is intended by the parties to the contract. The property is transferred only at the time which is expressed in the contract.

  1. Sub-section (2)

The terms of the contract, the conduct of the parties and the circumstances of the case are evaluated to determine the intention of the parties.

  1. Sub-section (3)

The rules to establish the intention of the parties are given in the Sections 20-24 of The Sale of Goods Act, 1930. The intention is regarding the time at which the property in the goods is supposed to pass to the buyer. We shall learn about these sections in detail.

Section 20

Section 20 deals with ascertained goods in a deliverable state. It pronounces that the property in the goods is transferred to the buyer at the time when the contract is made if the contract is unconditional in nature regarding the sale of ascertained goods in a deliverable state. Such a rule stands true even if the payment of the cost or the delivery of the goods or both are postponed.

E.g., Jack buys a refrigerator from a store and asks them to deliver it to his address and they agree. The refrigerator immediately becomes Jack’s property.

Section 21

Section 21 states that specific goods should be made to be in a deliverable state. In a contract for the sale of goods, if the seller has to get a certain thing done before the goods are ready to be delivered, the transfer of property happens only after the seller completes the task and informs the buyer about it.

E.g., Jill buys a pair of trousers and asks for home delivery and the store agrees. The trousers are longer than needed and the store promises to get them altered and call Jill before delivery. In such a situation, the property passes on to Jill after the store has altered them making them delivery ready. 

Section 22

This section states that the goods might be in a deliverable state but to ascertain the price of the goods, the seller needs to do something extra. A contract of sale of goods which are in their deliverable-state but the seller is supposed to weigh, measure, test or perform a certain action with the goods to specify the price. The property does not pass unless the seller does the mentioned extra act and informs.

E.g., Jack sells a Smart T.V. to Tim and agrees to install it by getting it mounted on Tim’s wall as a part of the contract. Jack delivers the TV and informs Tim that he will install it the next day. The same night, the TV gets stolen from Tim’s house. Here, Tim is not liable for the loss since the ownership of the property had not passed on to him. As per the terms of the contract, the TV would be in a deliverable state only after it is installed.

Passing of Unascertained Goods

Section 18 of the Sale of Goods Act, 1930 states that unless the goods are ascertained, the transfer of the property of the goods to the buyer cannot be completed, under the contract for the sale of unascertained goods.

Section 23

Two necessary rules for the transfer of property of unascertained goods are listed under Section 23. These are:

  1. Sale of unascertained Goods by Description

If the sale of unascertained or future goods is described in a contract, the goods with matching description are appropriated to the contract. It is done with either the buyer’s or the seller's consent. Consequently the property of the goods get transferred to the buyer. The consent of the party here could be clear or implied and given after or before the appropriation is done.

  1. Delivery to the Carrier

In some cases, the goods are delivered by the seller to the buyer or a bearer or a bailee (who may or may not have been named by the buyer) for getting it dispatched to the buyer. Here, the seller doesn’t retain the right of disposal. He unconditionally appropriates the goods to the contract.

Some Points to Remember about the Appropriation of Goods

Appropriation of goods is when goods are chosen with the intent to use them in making a contract with the mutual consent of the seller and buyer. Following are some of the requirements.

  • There must be an existing contract for the sale of future goods or unascertained goods.

  • The quality and the description stated in the contract should be conforming with the goods.

  • The goods should be in a deliverable state.

  • They should be unconditionally appropriated to the contract by either delivery to the buyer or his trustee or the carrier.

  • The appropriation is done by the seller with the consent of the buyer or by the buyer with the consent of the seller.

  • The consent could either be expressed or implied.

  • The consent could be given before or after the appropriation of the goods.

Solved Question of Passing of Property

Q1. Dave sells goods to Jim that is to be sent over to Jim by air. He makes a bill of lading in the name of Jim. The goods get lost in transit. Would Dave be liable here?

Ans: Since Dave makes a bill of lading in Jim’s name for a package being sent to Jim, the ownership of the goods transfers to Jim. In case of accidental loss, Dave wouldn’t be liable anymore.

Q2. For the Appropriation of Goods, the consent given by the parties has to be expressed. TRUE or FALSE?

Ans: FALSE. The consent given could be of the implied nature too.