Transfer of property in goods
Meaning of Passing of Property/Transfer of Property
Passing of property implies transfer of ownership and not the physical possession of goods.For example,where a principal sends goods to his agent,he merely transfers the physical possession and not the ownership of goods.Here,the principal is the owner of the goods but is not having possession of goods and the agent is having possession of goods but us not the owner.
Significance of Transfer of Property
The time of transfer of ownership of goods decides various rights and liabilities of the seller and the buyer.Thus,it becomes very important to know the exact time of transfer of ownership of goods from seller to buyer to answer the following questions:
1. Who shall bear the risk?
It is the owner who has to bear the risk and not the person who merely has the possession.
2. Who can take action against third party?
It is the owner who can take action and not the person who merely has the possession.
3. Whether a seller can sue for price?
The seller can sue for the price only if the ownership of goods has been transferred to the buyer.
4. In case of insolvency of a buyer whether the official receiver or assignee can take the possession of goods from seller?
The Official Receiver or Assignee can take the possession of of goods from seller only if the ownership of goods has been transferred to the buyer.
5. In case of insolvency of a seller whether the official receiver or assignee can take the possession of goods from buyer?
The official receiver or assignee can take the possession of goods from buyer onlu if the ownership of goods has not been transferred to the buyer.
Rules relating to Passing of Property/Transfer of Ownership from seller to buyer
For the purposes of ascertaining the time at which the ownership is transferred from seller to the buyer,the goods have been classified into the following three categories:
a) Specific or ascertained goods
Specific goods mean goods identified and agreed upon at the time when a contract of sale is made.[Section 2(14)]
b) Unascertained goods
c) Goods sent ‘on approval’ or ‘on sale on return’ basis.
Performance of the Contract
It is the duty of the seller and buyer that the contract is performed. The duty of the seller is to deliver the goods and that of the buyer to accept the goods and pay for them in accordance with the contract of sale.
Unless otherwise agreed, payment of the price and the delivery of the goods and concurrent conditions, i.e., they both take place at the same time as in a cash sale over a shop counter.
Delivery (Sections 33-39) Delivery is the voluntary transfer of possession from one person to another. Delivery may be actual, constructive or symbolic. Actual or physical delivery takes place where the goods are handed over by the seller to the buyer or his agent authorized to take possession of the goods.
- Constructive delivery takes place when the person in possession of the goods acknowledges that he holds the goods on behalf of and at the disposal of the buyer. For example, where the seller, after having sold the goods, may hold them as bailee for the buyer, there is constructive delivery.
- Symbolic delivery is made by indicating or giving a symbol. Here the goods themselves are not delivered, but the “means of obtaining possession” of goods is delivered, e.g, by delivering the key of the warehouse where the goods are stored, bill of lading which will entitle the holder to receive the goods on the arrival of the ship.
Rules as to delivery
The following rules apply regarding delivery of goods:
(a) Delivery should have the effect of putting the buyer in possession.
(b) The seller must deliver the goods according to the contract.
(c) The seller is to deliver the goods when the buyer applies for delivery; it is the duty of the buyer to claim delivery.
(d) Where the goods at the time of the sale are in the possession of a third person, there will be delivery only when that person acknowledges to the buyer that he holds the goods on his behalf.
(e) The seller should tender delivery so that the buyer can take the goods. It is no duty of the seller to send or carry the goods to the buyer unless the contract so provides. But the goods must be in a deliverable state at the time of delivery or tender of delivery. If by the contract the seller is bound to send the goods to the buyer, but no time is fixed, the seller is bound to send them within a reasonable time.
(f) The place of delivery is usually stated in the contract. Where it is so stated, the goods must be delivered at the specified place during working hours on a working day. Where no place is mentioned, the goods are to be delivered at a place at which they happen to be at the time of the contract of sale and if not then in existence they are to be delivered at the place at which they are manufactured or produced.
(g) The seller has to bear the cost of delivery unless the contract otherwise provides. While the cost of obtaining delivery is said to be of the buyer, the cost of the putting the goods into deliverable state must be borne by the seller. In other words, in the absence of an agreement to the contrary, the expenses of and incidental to making delivery of the goods must be borne by the seller, the expenses of and incidental to receiving delivery must be borne by the buyer.
(h) If the goods are to be delivered at a place other than where they are, the risk of deterioration in transit will, unless otherwise agreed, be borne by the buyer.
(i) Unless otherwise agreed, the buyer is not bound to accept delivery in instalments.
Acceptance of Goods by the Buyer
Acceptance of the goods by the buyer takes place when the buyer:
(a) intimates to the seller that he has accepted the goods; or
(b) retains the goods, after the lapse of a reasonable time without intimating to the seller that he has rejected them; or
(c) does any act on the goods which is inconsistent with the ownership of the seller, e.g., pledges or resells. If the seller sends the buyer a larger or smaller quantity of goods than ordered, the buyer may: (a) reject the whole; or
(b) accept the whole; or
(c) accept the quantity be ordered and reject the rest. If the seller delivers with the goods ordered, goods of a wrong description, the buyer may accept the goods ordered and reject the rest, or reject the whole.
Where the buyer rightly rejects the goods, he is not bound to return the rejected goods to the seller. It is sufficient if he intimates the seller that he refuses to accept them. In that case, the seller has to remove them.
When there is a contract for the sale of goods to be delivered by stated installments which are to be separately paid for, and either the buyer or the seller commits a breach of contract, it depends on the terms of the contract whether the breach is a repudiation of the whole contract or a severable breach merely giving right to claim for damages.
Suits for Breach of Contract
Where the property in the goods has passed to the buyer, the seller may sue him for the price.
Where the price is payable on a certain day regardless of delivery, the seller may sue for the price, if it is not paid on that day, although the property in the goods has not passed.
Where the buyer wrongfully neglects or refuses to accept the goods and pay for them, the seller may sue the buyer for damages for non-acceptance.
Where the seller wrongfully neglects or refuses to deliver the goods to the buyer, the buyer may sue him for damages for non-delivery.
Where there is a breach of warranty or where the buyer elects or is compelled to treat the breach of condition as a breach of warranty, the buyer cannot reject the goods. He can set breach of warranty in extinction or dimunition of the price payable by him and if loss suffered by him is more than the price he may sue for the damages.
If the buyer has paid the price and the goods are not delivered, the buyer can sue the seller for the recovery of the amount paid. In appropriate cases the buyer can also get an order from the court that the specific goods ought to be delivered.
Where either party to a contract of sale repudiates the contract before the date of delivery, the other party may either treat the contract as still subsisting and wait till the date of delivery, or he may treat the contract as rescinded and sue for damages for the breach.
In case the contract is treated as still subsisting it would be for the benefit of both the parties and the party who had originally repudiated will not be deprived of:
(a) his right of performance on the due date in spite of his prior repudiation; or
(b) his rights to set up any defence for non-performance which might have actually arisen after the date of the prior repudiation.
Measure of Damages
The Act does not specifically provide for rules as regards the measure of damages except by stating that nothing in the Act shall affect the right of the seller or the buyer to recover interest or special damages in any case were by law they are entitled to the same. The inference is that the rules laid down in Section 73 of the Indian Contract Act will apply.
Unpaid seller and his rights
Meaning of an Unpaid Seller [Sec 45(1)(2)]
The seller of goods is deemed to be an ‘unpaid seller’-
- When the whole of the price has not been paid or tendered
- When a bill of exchange or other negotiable instrument(such as cheque) has been received as conditional payment,and it has been dishonoured[Section 45(1)].
- The term ‘seller’includes any person who is in the position of a seller(for instance,an agent of the sellerto whom the bill of lading has been endorsed,or a consignor or agent who has himself paid,or is directly responsible for the price) [Section 4592)].