Ownership of goods and transfer

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 Ownership of Goods and Transfer

In the context of a sale of goods, the transfer of ownership from the seller to the buyer is a critical aspect that determines the rights and liabilities of both parties. Once ownership (or "property") passes to the buyer, the risk of loss or damage to the goods typically shifts to the buyer, even if the goods remain in the seller's possession. The rules governing the passing of property are outlined in the Sale of Goods Act, 1930, particularly focusing on specific or ascertained goods, unascertained goods, goods on approval or "sale or return," and goods with reserved rights of disposal.

Passing of Property

1. Specific or Ascertained Goods

Section 19: This section addresses the transfer of ownership for specific or ascertained goods, which passes when intended by the parties. It has three sub-sections:

  • Sub-section (1): Ownership transfers at the time specified in the contract.
  • Sub-section (2): To determine the parties' intent, consider the contract terms, conduct, and circumstances.
  • Sub-section (3): Sections 20 to 24 provide rules for ascertaining the time when property passes.

Section 20: Specific goods in a deliverable state. If a contract is unconditional for the sale of specific goods in a deliverable state, ownership passes to the buyer at the contract's formation, even if payment or delivery is delayed.

Example: Peter buys a TV from an electronics store and asks for delivery. The TV becomes Peter's property immediately upon purchase.

Section 21: Specific goods to be put into a deliverable state. If the seller must do something to the goods before delivery, ownership passes only after those actions are completed and the buyer is informed.

Example: Peter buys a laptop requiring an OS installation. Ownership transfers to Peter only after the installation is complete and he is notified.

Section 22: Specific goods in a deliverable state but requiring actions to ascertain the price. If goods are in a deliverable state but need weighing, measuring, or testing to determine the price, ownership passes after these actions are performed and the buyer is informed.

Example: Peter sells a carpet to John and agrees to install it. Ownership transfers after the carpet is laid, and John is informed. If the carpet is stolen before installation, Peter bears the loss.

2. Passing of Unascertained Goods

Section 18: Ownership of unascertained goods cannot pass to the buyer until the goods are ascertained.

Section 23: Lists two rules for passing property of unascertained goods:

  • Sale of unascertained goods by description: If a contract describes unascertained or future goods and any goods matching that description are appropriated to the contract with the buyer's or seller's consent, ownership passes to the buyer. Consent can be express or implied, given before or after appropriation.
  • Delivery to the carrier: If the seller delivers the goods to the buyer or a carrier/bailee for transmission without reserving disposal rights, the goods are deemed unconditionally appropriated, and ownership passes to the buyer.

Appropriation of Goods: Appropriation refers to selecting goods with mutual consent for fulfilling the contract. Key points include:

  • A contract for unascertained or future goods.
  • Goods conform to contract quality and description.
  • Goods are in a deliverable state.
  • Goods are unconditionally appropriated to the contract (delivery to the buyer, agent, or carrier).
  • Appropriation by mutual consent (express or implied, before or after appropriation).

Important Points to Remember

  • Risk Transfer: Once ownership passes to the buyer, the risk of loss or damage typically also transfers, irrespective of physical possession.
  • Intention and Conduct: The intention of the parties, as evidenced by contract terms and conduct, plays a crucial role in determining when ownership passes.
  • Conditional Transfers: In cases where additional actions (installation, weighing, etc.) are required, ownership passes only after these conditions are fulfilled and the buyer is informed.
  • Unascertained Goods: Ownership of unascertained goods requires clear identification and appropriation to the contract, with mutual consent between buyer and seller.

By understanding these rules, both buyers and sellers can better navigate their rights and obligations in sale transactions, ensuring that ownership and risk are transferred appropriately.