Passing of Property Part 2

In the commercial world, with the effect of the legal system, there is an important concept related to the passing of the property. This concept is to be imbibed as to work in this world legally and without getting defrauded.

‘Passing of the Property’ is connected with the passing of the risk, which further ascertains on who’s liability the property is understood to be held. Hence this matter of discussion is needed.

Passing of Property

Sale of goods or property means a transfer or passing of the ownership to the buyer. The passing of property is one of the important aspects of the Sales of Goods Act. This determines the rights and duties of both the buyer and the seller (the contracting party in the agreement). A property once passed to the buyer, is now of the buyer. Also, the related risk in the goods is now of the buyer and not the liability of the seller, disregarding the fact whether the goods are in the possession of the seller or not.

There are four important rules which govern ‘the passing of property’:

1. Specific (Ascertained Goods).

2. Passing of the unascertained goods.

3. Goods sent on approval (sale or return).

4. Transfer of the property in the case of reservation of the right to disposal.

Passing of Property in Goods

The passing of property means that the transfer of ownership and not the physical possession of goods. An example is where a principal sends goods to his agent, he only transfers the physical possession and not the owner of goods. The principle here is the owner of the goods even if he does not have the physical possession of goods and the agent is having possession of goods but he is not the owner. The significance of Transfer of Property is that at the time of transfer of ownership of goods decides various rights and liabilities of the seller and the buyer gets decided. Thus, it becomes noteworthy to know the exact time of transfer of ownership of goods from the seller to the buyer.

Passing of Property in the Sale of Goods Act 1930

“Passing of goods or property” enlightens about the transfer of ownership which is governed by the principles of the Sale of Goods Act, 1930. For the total understanding of the rights, duties and liabilities of both the buyer and seller and the buyer is important to first understand the concept of ‘passing of property’. It is an already established principle of law that together with the ownership of the goods or property, the risk also gets transferred from the seller to the buyer.

Passing of Property and Risk

The passing of property is the ownership of the goods from the seller to the buyer. This is one of the essentials of a contract of sale. It is an essence of a contract of sale. To determine the liability of parties, it is important to dive into this concept of the passing of property.

The theory of passing of risk is yet another topic difficult regarding contract sales law. When the sold goods are lost or damaged by accident, the buyer does not receive what he bought as the seller is discharged from its obligation of delivering the goods or services.

Passing of Property Commercial Law

Section 20 in commercial law relates to the specific goods in a deliverable state. It states that if the contract is an unconditional one, which is for the sale of specific goods in a deliverable state, then the property within the goods is passed to the buyer the moment the contract is made. The rule holds even if the payment or delivery of the goods is postponed.

There are quite a few concepts to be dealt with under SOGA, 1930. The importance of which is passing or transfer of the property. The real meaning of passing of property is the transfer of the ownership on a determined price. The ownership is transferred solely when the proprietary of the property rights are transferred from the seller to the buyer. This is to be noted that the transfer of ownership is distinct from that of possession of the goods where the latter means that the goods are subject only to the custody or under physical control. Under SOGA, 1930, ‘property’ is not a special property but assumed as a general property in goods.