Transfer of Property in Unascertained & Future Goods

March 22, 2018 General Studies

TRANSFER OF PROPERTY IN UNASCERTAINED AND FUTURE GOODS INTRODUCTION: Where there is contract for the sale of unascertained or future goods, the property therein does not pass at the time of making of the contract. The property in unascertained goods cannot pass until the goods are ascertained . Similarly, if the subject- matter is future goods , the contract operates as an agreement to sell , i. e. , the buyer does not become the owner at the time of making of the contract. After the goods have been ascertained, the property in them will pass when the parties intend it to pass .

If the parties have expressed the intention, the property in them passes in accordance with the provisions of Sec. 23, which is as under: Section 23(1): When there1 is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be expressed or implied, and may be given either before or after the appropriation is made.

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Section 23(2): Wherein pursuance of the contract, the seller delivers the goods to the buyer or to a carrier as other bailees (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract. As required by Sec. 23(1), the property in respect of unascertained or future goods sold by description passes to the buyer when the following conditions are satisfied: 1. There is appropriation of the goods to the contract either by the seller or by the buyer. 2.

The appropriation of the goods is made by one party with the assent of the other, i. e. , if the seller makes the appropriation it must be with the buyer’s assent and if the appropriation is made by the buyer, seller’s assent thereto is necessary. 3. The goods appropriated to the contract are of same description as given in the contract and are in a deliverable state, and 4. The appropriation is unconditional. Examples – The section may be illustrated by the following examples:- •Sale of twenty hogsheds of sugar out of a larger quantity. The seller fills four hogsheds which the buyer takes away.

Subsequently the seller fills sixteen more hogsheads, and informs the buyer of this, asking him to come and take them away. The buyer promises to do so. The property has passed to the buyer. •A contract to sell to B a 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. •Sale on May 6th of eight hundred and fourteen tins of oil, for which the buyer pays the price. The goods were not in the possession of the sellers at the date of the contract, but had been dispatched to them on April 25th.

Subsequently they received the railway receipt and endorsed it and sent it to the buyers. Afterwards, on May 12th, the goods were destroyed by fire while in transit. The property had passed to the buyers and they had to bear the loss. •Sale of shares. A broker hands certificates to a buyer, together with transfers signed in blank by the registered holders. The shares are ascertained, the sale is complete and the property has passed to the buyer. 1. Appropriation : Appropriation of the goods to the contract means doing of any act by the parties which indicates that certain goods are to be assigned to a particular contract, i. e. certain goods are considered to be meant for the performance of a particular contract. For example, a seller agrees to supply me a wrist watch which he has yet to manufacture, and after manufacturing some watches, he dispatches one of them to me, that particular watch has been appropriated to the contract, by the seller. Similarly, when there is a contract to supply 100 bags out of the 1000 bags of cement lying in the seller’s godown, if the seller subsequently puts some mark of buyer’s name on 100 bags, or otherwise indicates to the buyer that which 100 bags would be delivered to him, or despatches 100 bags to the buyer, there has been ppropriation of the goods to the contract. Generally, the appropriation is to be made by the seller. In some cases, however, the appropriation may have to be made by the buyer. For example, B has 1,000 bags of wheat belonging to A lying in his godown and if A agrees to 100 bags of wheat to B permitting B to select 100 bags out of the 1,000 bags of A which are ready in B’s possession, the appropriation of the goods to the contract would, in this case, be made by B, the buyer. When the goods are destroyed before the appropriation could be mad, the loss has to be borne by the seller as no property in them is deemed to have been passed.

Thus, for example, out of a big heap of coal only 10 tons are to be supplies t a buyer, the seller having a duty to separate and despatch the coal, if before the seller could separate the despatch the 10 tons, the whole of the lot is destroyed by fire, the seller will have to bear the loss for the same as the property in the goods has passed to the buyer. In M/s oriental Fire & General insurance Co. Ltd. V. Union of India , there was a contract for the sale of a transformer on F. O. R. basis. The seller booked the same to the buyer through Rail.

It was held that the property in the transformer had passed to the buyer when the delivery of the transformer was made to the Railway. During transmit, the transformer was damaged, the seller got back the R. R. , again took the delivery and re-booked the same. The consignor-seller had taken out an insurance policy on the transformer. The Insurance Company brought an action against the Railway for damage to the transformer. In this regard, it was held that when the transformer was originally given to the Railway, the property in the same had passed to the consignee-buyer.

The consignor was no more the owner of the transformer, and for damage to the same, neither the consignor, nor the Insurance Company as the assignee of the seller (consignor) could bring an action for damage to the transformer . In United India Ins. Co. v. Jameela Beevi, there was sale of a motor vehicle (jeep). The price stiputed in the agreement was Rs. 10,000 out of which Rs. 2,000 had been paid by the buyer immediately and the document containing the agreement of sale stipulated registration in the name of the buyer, after the balance of Rs. 8,000 was paid. It was also agreed that: 1.

Until the entire price is paid, the ownership in the vehicle shall not pass to the buyer, and 2. The seller was to execute the requisite papers after the payment of the balance of the price. Before the above said conditions were fulfilled, there was an accident, and the question arose as to who was the owner of the vehicle for the purpose of liability of the insurance company. It was held that since the requisite conditions necessary for the transfer of property had not yet been fulfilled, the seller was the owner of the vehicle at the time of the accident. 2. Assent to the appropriation

The appropriation to the goods to the contract is not enough. The appropriation by one party has got to be coupled with the assent of the other party thereto. If the seller makes the appropriation, buyer’s assent to it, and if the buyer makes the appropriation, the seller’s assent to it, is necessary. Unless the assent of the other party has been obtained the appropriation is incomplete and since the property is not deemed to have passed until such an assent has been obtained, the party making the appropriation may change the appropriation by using those goods for some other contract and appropriating some other goods to this contract.

In the words of Person, J…. .the element of common intention has always to be borne in mind. A mere setting apart or selection by the seller of the goods which he expects to use in performance of the contract is not enough. If that is all, he can change his mind and use those goods in performance of this contract. To constitute an appropriation of the goods to the contract, the parties must have had, an intention to attach the contract irrevocably to those goods, so that so that those goods and no others are the subject of the sale and become the property of the buyer. In Pignataro v.

Gilory & Son , the plaintiff purchased 140 bags of rice from the defendants. On February 27, 1918, he sent a cheque for the price of those bags and requested for the delivery of the goods. On February 28, 1918 the defendants sent the delivery order for 125 bags and wrote to the plaintiff requesting that he should collect the 15 bags from there warehouse in Long Acre. The plaintiff sent for those 15 bags on 25th March and then it was discovered that those bags had been stolen. The plaintiff having already paid the price for all the 140 bags filed a suit against the defendants to recover back the value of the missing bags.

It was held that the property in the 15 bags which had been stolen had passed to the buyer and therefore his claim failed. It was observed that the sellers had appropriated those 15 bags to the contract in response to the buyer’s letter requesting for the delivery of goods and the buyer keeping silent for one month, when requested to take delivery, could lead to only inference, that the buyer had assented to the appropriation made by the seller and therefore the property has passed and the goods were at the buyer’s risk.

In Aldridge v. Johnson , the plaintiff agreed to buy 100 out of the 200 quarters of barley lying with knights. The plaintiff was to send his sacks, which were then to be filled by Knights and despatched by rail to the plaintiff. The plaintiff send 200 sacks for the purpose and filled 155 of them, which was only a part of the 100 quarters purchased by the plaintiff. The plaintiff frequently made request for the despatch of the barley but the same was not despatched for the non-availability of the transport.

Later Knights got into financial difficulties and then he emptied the 155 sacks of barley into the bulk. The defendant, Knight’s assignee in bankruptcy removed the whole amount of barley and the plaintiff sued him for conversion, contending that he has already become the owner of the barley removed by the defendant. It was held that the plaintiff had become the owner of as much of the barley as by being filled in the 155 sacks had been unconditionally appropriated to the contract by the seller with the buyer’s assent and the removal of barley by the defendant, therefore, amounted to conversion.

The assent to the appropriation may be expressed or implied and may be given either before or after the appropriation has been made. In case one party has made the appropriation but the other party has not assented to it, the property in the goods does not pass. In Atkinson v. Bell , the buyer ordered for certain machines to be manufactured by the seller according to certain design. After the machines were manufactured, they were packed in boxes for being despatched to the buyer. The seller then wrote to the buyer to enquire by what conveyance they were to be sent. Before the seller could get any reply he became insolvent.

The seller’s assignees sued the buyer for goods bargained and sold, an action which could be possible if the property in goods had passed to the buyer. The buyer refused to take the goods contending that no property in them had passed to him. It was held that property in the machines has not yet passed to the buyer, which could be possible only when the buyer had assented to the appropriation made by the seller; before the buyer’s assent had been obtained the seller was free to change this appropriation and supply these machines to somebody else and appropriate some other machines answering the description to the contract.

The seller’s remedy, therefore, was an action against the buyer for damages for non-acceptance of the offer. 3. Appropriation of the Goods of Contract Description and in a Deliverable State – For the passing of property in unascertained goods, it is further necessary that the goods which are subsequently appropriated to the contract are of the same description as given in the contract and also in a deliverable state. If the goods of a different description or those not in a deliverable state are appropriated to the contract, no property would pass by such an appropriation .

For example, A agrees to supply 100 bags of ‘first quality wheat ‘ to B, which he has yet to purchase from the market. Subsequently, A purchases and despatches to B 100 bags of ‘second quality wheat’. The property in 100 bags of wheat would not paas to B as the goods appropriated to the contract are of a description different from that given in the contract. Similarly, if A’s contract with b is to supply 1,000 litres of oil contained in tins of 10 litres each, the goods appropriated not being in deliverable state, the property in them is not transferred to the buyer.

In Viger’s v. Sanderson , there was a contract for two parcels of swan laths which were to be of specified length and it was provided that they were to be shipped by the seller and the property was to be passed on shipment. The seller shipped the laths which were of a different description. In his action against the buyer to recover the price, it was held that he was not entitled to the same as the property in the goods had not passed as the goods of the description contracted for had not been appropriated to the contract.

Similarly, when the goods in larger quantity than agreed for, are supplied, giving a choice to the buyer to reject the goods in excess, no definite goods are appropriated to the contract and therefore the property in such goods cannot pass to the buyer. Thus, where there was a contract for the supply of 10 hogsheads of claret and the seller sent 15, it was held that the property in the goods had not passed to the buyer and on buyer’s refusal to accept any of these hogsheads, the seller could not sue him for goods sold and delivered . 4. Unconditional Appropriation-

It is also necessary that the appropriation of the goods to the contract should be unconditional. If goods are appropriated to the contract but the appropriation is conditional one, the property in the goods does not pass on such appropriation. When the seller keeps apart certain goods for being supplied to a buyer but requires him to pay before he can take their delivery, or sends a V. P. P parcel to the buyer, or after despatching the goods to the buyer’s destination refuses to endorse or part with the Railway receipt or the bill of lading or other documents until the buyer pays the price, the appropriation is not unconditional.

In such a case, it is deemed that the seller has reserved the right of disposal of goods untill certain conditions are fulfilled. Where the seller has reserved the right of disposal, according to Sec. 25(1), notwithstanding the delivery of the goods to a buyer, or to a carrier or other bailee for the purpose of transmission of the buyer, the property in the goods does not paas until the buyer pays for it and receives the same . Similarly, if the condition set by the seller is that buyer cannot obtain the goods or documents of title, etc. until he has paid for the goods, the property in such goods would paas when the buyer pays for them. Section 23(2) : It gives an example of unconditional appropriation. Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer without reserving the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract. Thus, when the contract stipulates the delivery of the goods “F. O. R. ” at the place of despatch, the property in the goods together with the risk passes from consignor to consignee as soon as goods are loaded at the place of despatch . If the appropriation is conditional and the intention of the parties is that no property in the goods would pass until some particular act, say the shipment of the goods is done, the property in the goods does not pass until that act is done even though the goods have been appropriated to the contract. The authority for this rule in the case of Carlos Feserspiel & Co.

V. Charles Twigg & Co. In that case the sellers agree to supply a number of cycles to a foreign buyer “F. O. B. I. k. port”. The buyer paid the price and the seller packed the cycles in boxes and marked them with the port of destination in their preparation for the shipment. Before the goods could be shipped the sellers became insolvent. The buyer sued the liquidator for the goods contending that since the sellers had unconditionally appropriated the goods to the contract, the property in the same had been passed to the buyers.

It was held that the buyer’s were not entitled to claim because the property in the goods had not been passed to the buyer. It was observed that from the intention of the parties it appeared that shipment of the goods was the decisive act to be done by the seller and the parties intended that no property in the goods should paas until the act of shipment was performed. Pearson J. said : ….. usually, but not necessarily, the appropriating act is the last act to be performed by the seller.

For instance, if delivery is to be taken by the buyer at the seller’s premises and the seller has completed his part of the contract and has appropriated the goods when he has made the goods ready and has identified them and placed them in position to be taken by the buyer and had so informed the buyer, and if the buyer agrees to come and take them, that is the assent to the appropriation. But if there is a further act, an important and decisive act to be done by the seller, then there is prima facie evidence that probably the property does not pass until the final act is done. Applying those principles to the present case I would say this… he intention was that the ownership should pass on shipment (or possibly at some later date) because the emphasis is throughout on shipment as the decisive act to be done by the seller in performance of the contract. Sec. 25: Reservation of the Right of Disposal The object of reserving the right of disposal of goods is generally to secure that the price shall be paid before the property passes to the buyer. The seller is said to have reserved the right of disposal where his action shows that he does not intend to part with ownership of goods till certain conditions are fulfilled.

Sec. 25(1) provides in this regard that “Where there is contract for the sale of specific goods or where the good are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of disposal of goods until certain conditions are fulfilled. In such cases, notwithstanding the delivery of the goods to a buyer or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled. So the seller has been given the right of reservation of the right of disposal. In such cases the property of goods does not pass to the buyer until certain conditions are fulfilled. Even delivery of goods to a carrier or other bailee for the purpose of transmission to the buyer will not make any difference. Example: In Loeschman v. Williams – A piano was agreed to be delivered at a packer’s premises and it was to be delivered to buyer only on payment. Seller left it with the packer on the condition that it was not to be delivered to buyer without getting the payment.

The packer delivered it without payment. It was held that property did not pass to the buyer. Sections 25(2) and (3) mention two methods of reservation of the right of disposal. Sec. 25(2) provides that where the goods are shipped or delivered to railways for carriage, and goods are deliverable to the order of seller or his agent by the bill of lading or railway receipt, the seller is presumed to have reserved the right of disposal. In this way the seller keeps to himself the right of dealing with the goods and may even prevent the buyer from claiming any right under the goods.

Example: In Carona Sahu Co. Pvt. Ltd. V. State of Maharashtra- Goods were sent by sea and seller sent them from Cochin to Bombay. He took bill of lading making the goods deliverable to his own order or to that of his agent at Bombay. He transmitted those goods to his agents with the instructions not to hand them over except on payment of the price. The property in this case did not pass to the buyer as the seller had reserved the right of disposal. Example: In Mirabita v. Imperial Ottoman Bank – A cargo of timber was shipped and bill of lading and bill of exchange were given by seller to his banker.

The banker was to handover the bill of lading to the buyer in his accepting and paying the bill of exchange. Initially the buyer refused payment but subsequently tendered the amount. But then the banker refused to accept the tender and sold the goods. It was held that the property in goods passed to the buyer when he tendered the amount of the bill. The banker’s conduct in selling the cargo was wrongful. LIST OF REFERRENCES •Sales of Goods Act, Polluck & Mulla •Sales of Goods Act, R. K. Bangia •www. vakilno1. com/saarclaw/… /saleofgoodsact/chapter3. htm

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