TMH Copyright 2010

TMH Copyright 2010

Case: Sale without ownership

Akash buys a laptop computer from Ramesh in response to an advertisement. Ramesh is an assistant to Ravi, and has access to the laptop which belongs to Ravi. Akash has no idea that Ramesh is not the owner of the laptop. Owner: Ravi Seller: Ramesh Buyer: Akash Who should get the laptop?
TMH Copyright 2010 3

Judgement: Bishopgate v. Brakes

In the development of our law, two principles have striven for mastery. The first is the protection of property. No one can give a better title than he himself possesses. The second is the protection of commercial transactions. The person who takes in good faith and for value without notice should get a good title. The first principle has held sway for a long time... (Lord Denning)
TMH Copyright 2010 4

Judgement: Rowland v. Diwall

there has been a total failure of consideration, that is to say that the buyer has not got any part of that for which he paid the purchase money. He paid the money in order that he might get the property, and he has not got it.

TMH Copyright 2010

Case: Sale of a Stolen Car

Sold On 3 Feb, 1983 6 Feb, 83 14 March 1983 18 March, 1983 6 Jan, 1984
TMH Copyright 2010

Sold to

Amount

Car stolen from Miss Hopkin Autochoice (Bridgend) Ltd Mid-Glamorgan Motors Ltd Jones 2, 100 2, 350 2, 650

Insurers ask for the car

6

Case: Sale of a Hired Car

Sold on Aug 1, 1951 Aug 11, 1951 Aug 11, 1951 Aug 30, 1951 Sold to Leonard Kennedy Mr. Hayton Kingsway Motors Ltd. Mr. Butterworth Amount (in Pounds) 1000 1015 1030 1275

TMH Copyright 2010

Case: Hired Car: List of Events

Date (All in 1952) July 16 or 17 July 17 or 18 July 25 Aug 2
TMH Copyright 2010

Event Butterworth gets to know the real owner Kingsway Motors asked to repudiate contract (By Butterworth) Miss Rudolf becomes the Owner of the car Butterworth insists (with reference to July 17 letter) to repudiate contract
8

Case: Washing Machine

X was selling and installing a washing machine for Y. Y had to pay for the machine in advance. The terms of the contract were that property in the washing machine would pass when X installed the machine to the satisfaction of Y. The plug point at Ys house was defective. There was a spark and the washing machine, while being installed, got damaged. Y is insisting that he be given a new machine while X says that Y must bear the loss of the damage. Decide.
TMH Copyright 2010 9

Case: Collection at Warehouse

X bought a washing machine from a shop, Y. X paid through credit card and the shop gave him a receipt mentioning the serial number of the washing machine. The purchase order which X had signed mentioned that the ownership in the washing machine would pass at the time of issuing of receipt. Thereafter, the buyer could take the receipt and collect it from a warehouse run by another person W. X went two days later to collect the washing machine. In these two days, the shop made sales to many other customers. By mistake, the shop wrote the same serial number to another customer, C. Both, X and C are at the warehouse, claiming the washing machine. To whom should the warehouse give the machine?

TMH Copyright 2010

10

Legal Provision
Section 19. Property passes when intended to pass.- (1) Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. (2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case.
TMH Copyright 2010 11

Case: Delivery of the TV Set

Z bought a television from a shop. The shop made a receipt for payment of the money and mentioned the model of the purchase. The purchase order which Z had signed mentioned that the ownership passes at the time of issuing of the receipt. Thereafter, the buyer could take the receipt and collect it from a warehouse run by another person W. Z went two days later to collect his television. In these two days, the shop made many sales to other customers. When Z reached the warehouse, there was only one set of that model and W was handing it over to another buyer, B. Z insists that he should be given the television set as his receipt was for a date earlier than Bs.
TMH Copyright 2010 12

Case: Sale of Sugar

X sold 100 kg of sugar to Y at the rate of Rs. 20 per kg. X collected Rs. 2000 from Y. X had only two hundred kg in stock. Half the stock got destroyed. X is claiming that Y should bear half the loss. He should be entitled to receive only 50 kgs. Decide

TMH Copyright 2010

13

Summary
The contract provides for the transfer of ownership when the receipt is issued. However, ownership can pass only in a specific machine. Thus, ownership does not pass when the receipt is issued.

TMH Copyright 2010

14

Section 18
18. Goods must be ascertained.- Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained.

TMH Copyright 2010

15

McEntire v Crossley Brothers Ltd

TMH Copyright 2010

16

Hire-Purchase
Crossley Ltd. entered in an agreement with Mr. Thomas Frederick Peel on 23 June 1892 to supply Peel Otto gas engine. The price of the gas engine was placed at Pounds 240. Peel was to pay Pounds 60 before delivery. The remaining 180 pounds were to be paid in eight quarterly instalments.

TMH Copyright 2010

17

Terms of Contract
will not in any way sell, assign, or sublet, or otherwise part with the possession of the 'Otto' gasengine until the several sums shall have been fully paid the sole and absolute property of the owners and lessors, it being hereby expressly agreed and declared that the said 'Otto' gas-engine is only let on hire to the lessee until all sums of money due under this agreement are paid.

TMH Copyright 2010

18

Sale of Engine
Before paying all the instalments, Mr. Peel became bankrupt. Following the bankruptcy, the gas engine was taken over by McEntire, a creditor, in settlement. Crossley Ltd. questioned that the engine cannot be taken by McEntire as it still belonged to Crossley Ltd.. The claim was contested by McEntire.

TMH Copyright 2010

19

Judgement
Upon an agreement to sell, it depends upon the intention of the parties whether the property passes or does not pass. Here the parties have in terms expressed their intention, and said that the property shall not pass until the full purchase money is paid. I know no reason to prevent that being a perfectly lawful agreement. If that was really the intention of the parties, I know of no rule or principle of law which prevents it from being given effect to.

TMH Copyright 2010

20

Judgement
That is a question which entirely depends upon the intention of the parties. The law permits them to settle the point for themselves by any expression of their intention upon the point. In this case the matter is not left to implication; because, if there be one point on the face of this contract clearer than another, it is that the intention of the parties was that the seller should not part with his dominion over the thing which he was selling, and that the property should not become vested in the purchaser until the last farthing of the price was paid.
TMH Copyright 2010 21

Judgement
Applying the principle, the time Mr. Peel failed to pay an instalment, the contract got breached. As a result, Crossley Ltd. acquired the right, either to sue for the remaining money or take the possession of its gas engine and claim damages.

TMH Copyright 2010

22

Dennant v. Skinner

TMH Copyright 2010

23

Car Auction
Dennant carries on business as the South London Motor Auctions. Highest bidder, to whom cars were knocked down, was George Albert King. King represented that he was the son of Kings Motors, a well known motor car dealer in Oxford. By showing counterfoils of several large payments to motor car dealers, he persuaded Dennant to accept payment by cheque. As a protection, Dennant took the following written undertaking from King:

TMH Copyright 2010

24

Undertaking by King
I hereby certify my cheque No._____ will be met on presentation at my bank. Furthermore, I agree that the ownership of the vehicles will not pass to me until such time as the proceeds of my cheque have been credited to South London Motor Auction account at Lloyds Bank.

TMH Copyright 2010

25

The Cheque is Dishonoured

Assured with the above protection, Dennant let King take away the vehicles. The cheque, however, was dishonoured on presentation and it transpired that King had no connection with the King's Motors. In this while, King had sold the car to a person, who in turn sold it to Skinner, another motor car company. The police was informed of the matter. King pleaded guilty and was convicted. Dennant sought to recover the car, claiming to be his property from Skinner. Skinner and Dennant had a dispute as to the ownership of the car.
TMH Copyright 2010 26

Legal Provision
Section 18 of the British Sale of Goods Act, 1893. (Section 19 of the Indian Sale of Goods Act) provides: Where there is an unconditional contract for the sale of specific goods, in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery or both be postponed.
TMH Copyright 2010 27

Judgement
A contract of sale is concluded in an auction sale on the fall of the hammer, and, indeed, the Sale of Goods Act, 1893, s. 58 (2), so provides. Accordingly, on the fall of the hammer the property of this car passed to King unless that prima facie rule is excluded from applying because of a different intention appearing or because there was some condition in the contract which prevented the rule from applying.

TMH Copyright 2010

28

Judgement
The court constructed the subsequent signing of the document on ownership: The document contemplates that the ownership of the vehicle has not passed to the bidder, but, as I have already said, in my judgment, it had passed on the fall of the hammer, and, if subsequently the bidder executed the document acknowledging that the ownership of the vehicle would not pass to him, that could not have any effect on what had already taken place.
TMH Copyright 2010 29

Judgement
the property had passed on the fall of the hammer, but still the plaintiff had a right to retain possession of the goods until payment was made. If, when he was ready to deliver the goods, payment was not made, he could have sued for the price, or he could have exercised powers of re-sale, and he could have secured himself by way of lien on the goods for the price, but once he chose, for reasons good, bad, or indifferent, as a result of statements fraudulent or honest, to part with the possession of the vehicle by giving delivery of it,
TMH Copyright 2010 30

Judgement
he then lost his seller's lien and he no longer had a right to possession of the vehicle. He had a right until it was delivered, but as the right of retainer was not exercised he had no right in the vehicle. The property in the vehicle had passed to King. His right to the property had gone and his right to possession had gone.

TMH Copyright 2010

31

Judgement
The Court concluded: In my view, the property had passed on the falling of the hammer. The right to possession had passed when the plaintiff, persuaded and misled by King's lies, parted with his seller's lien, and there was nothing left on which he could found a claim in detinue against some third person, in this case the defendant, who was thus put in possession of the vehicle.
TMH Copyright 2010 32

Legal Provision
47. Sellers lien.- (1) Subject to the provisions of this Act, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender of the price in the following cases, namely: (a) where the goods have been sold without any stipulation as to credit; (b) where the goods have been sold on credit, but the term of credit has expired; (c) where the buyer becomes insolvent. (2) The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer.

TMH Copyright 2010

33

Agricultural Market Committee v. Shalimar Chemical Works Ltd.

TMH Copyright 2010

34

Tax on Purchase
Shalimar Chemical Works Ltd. based in Hyderabad, imports dried coconut kernel from various places in Kerala for manufacturing coconut oil. Agriculture Market Committee levies taxes on transactions of purchase and sale take place within the notified area of the Committee.

TMH Copyright 2010

35

Trade Arrangement
Shalimars dealers despatched the goods by lorry to Hyderabad and send the documents for collecting the consignment at Hyderabad to a bank. The invoices raised by the dealers mentioned that the despatch of the good was made solely at the risk and responsibility of M/s. Shalimar Chemical Works. The invoices also mentioned that the seller took no responsibility or liability as to delayed despatches, losses due to theft, pilferage, rain or damage. Shalimar had also obtained insurance of the goods and had paid the policy premium.
TMH Copyright 2010 36

Trade Arrangement
Shalimar Ltd. after receiving documents from the bank on making payment, would unload the lorry at its premises. Weighing was done to verify the quantity. If there was a shortage in the quantity received, which was rare, Shalimar would raise a debit note against the dealer for the shortage.

TMH Copyright 2010

37

Judgement
The weighment of the goods at Hyderabad or the collection of documents from the bank or payment of price through the bank at Hyderbad were immaterial, inasmuch as the property in the goods had already passed at Kerala and it was not dependant upon the payment of price or the delivery of goods to the respondent.

TMH Copyright 2010

38

Underwood Limited v Burgh Castle Brick and Cement Syndicate

TMH Copyright 2010

39

Unconditional Contract
It was an unconditional contract for sale of an engine. The engine was attached to the ground. It had sunk into concrete and it had to be taken to pieces to unfasten it. In the course of detaching from the ground and loading on to train, the engine got damaged. On arrival, the buyer refused to accept it.

TMH Copyright 2010

40

Judgement
The sale was that of a specific chattel to be delivered by the Plaintiffs, but the fact that it was to be delivered by them is not the test whether the property passed. The test is whether anything remained to be done to the engine by the sellers to put it into a deliverable state; and by that I understand a state in which the thing will be the article contracted for by the buyer; I do not mean deliverable in the sense that it is properly packed or anything of that kind. It must have everything done to it that the sellers had to do to it as an article.
TMH Copyright 2010 41

Judgement
I do not think therefore that the fact by itself that the sellers had to take the engine to pieces would postpone the time when the property passed. Many chattels have to be taken to pieces before they can be delivered - e.g. a sideboard or a billiard table; nevertheless the property in these passes on the sale and is not postponed until the article is actually taken to pieces and delivered.

TMH Copyright 2010

42

Judgement
I do not, therefore, lay any stress on the fact of the engine having to be taken to pieces. I think the important point is that the parties were dealing with an article which was a fixture to the premises, and that is different from the case of a loose chattel. The buyers' intention was to buy an article which would be a loose chattel when the processes of detaching and dismantling it were completed, and to convert it into a loose chattel these processes had first to be performed.
TMH Copyright 2010 43

Legal Provision
Section 21: Specific goods to be put into a deliverable state.- Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods for the purpose of putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof.

TMH Copyright 2010

44

Kirkham v Attenborough and Gill

TMH Copyright 2010

45

Jewellery on Sale or Return

Kirkham, a jewellery maker, passed on jewellery to Mr. Winter in early 1895 with a contract note mentioning the price on sale or return basis. Winter pawned some jewellery to Attenborough and some to Gill. In January 1898, Mr. Winter died. He had not paid Kirkham for the jewellery nor had he intimated Kirkham that he intended to keep the jewellery. Kirkham demanded the return of the jewellery from Attenborough and Gill. Attenborough and Gill refused to return the jewellery unless the borrowed amount was paid back to them.
TMH Copyright 2010 46

Judgement
The position of a person to whom goods have been delivered on a contract of "sale or return" is this: He has an option of becoming the absolute purchaser of the goods, and may become the absolute purchaser in three ways. He may buy them at the price fixed; he may retain them so long as to make it unreasonable to return them; or he may do something inconsistent with a return of the goods

TMH Copyright 2010

47

Legal Provision
Section 24 of the India Act (Same as the British law):

Section 24: When goods are delivered to the buyer on approval or on sale or return or other similar terms, the property therein passes to the buyer (a) when he signifies his approval or acceptance to the seller or does any other act adopting the transaction; (b) if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time.
TMH Copyright 2010 48

Judgement
I think that, if he retains the goods for an unreasonable time, he does something which is inconsistent with a return of the goods. Again, if he does an act which is inconsistent with a return, as, for instance, if he sells the goods, that is an act "adopting the transaction," and the property passes. Again, if he pawns the goods, he adopts the transaction, because he has not then the free control over the goods so as to be able to return them. In all these cases, he comes within the words of the section, as having done an act adopting the transaction, and the property in the goods passes.
TMH Copyright 2010 49

Judgement
The Court concluded: If that is the true construction of the section, it is perfectly clear that the defendants are entitled to retain the goods, because they have been pawned to them. An act has been done which is inconsistent with a return of the goods, and, therefore, the property in the goods passed to Winter, and, therefore, to the defendants.
TMH Copyright 2010 50

Case: Sale and Transportation

Niraj settled on a TV and paid the price. As the TV was bulky, he expected the shopkeeper to deliver it to his place. The shop said they could organise it in the afternoon. The shop called him in the afternoon and said that they have loaded it on a three wheeler and Niraj should settle on the carriage charges with the driver. Niraj was unhappy with the petty behaviour of the shop. He had bought a TV for Rs. 18,000 without bargaining and negotiating. The least the shop could have done is provided free carriage.

TMH Copyright 2010

51

cont
A car hit the three wheeler at a cross section and the picture tube of the TV broke. Niraj is insisting that the shopkeeper give him a new television while the shopkeeper says that the carrier was carrying the television for Niraj.

TMH Copyright 2010

52

Risk, Carriage and Insurance

In all transactions thereafter Niraj was cautious and asked the question: When does the ownership gets transferred? Who pays for carriage and insurance? Who bears the risk of damage?

TMH Copyright 2010

53

Incoterms
Group E F Ex W FCA FAS FOB CFR CIF CPT Ex Works Free Carrier Free Alongside Ship Free on Board Cost and Freight Cost, insurance Freight Carriage Paid To
54

TMH Copyright 2010

FAC
Free carrier (FCA) can be used for all modes of transportation and different modes in the same delivery. The seller delivers the goods into the custody of the first carrier, and this is where risk passes from seller to buyer. The buyer pays for the transportation. FCA would be followed by the city name. For example, FCA Hong Kong would mean that the supplier would deliver the goods to the carrier in Hong Kong.

TMH Copyright 2010

55

FAS
Free Alongside Ship (FAS) means that the seller pays for transportation of the goods to the port of shipment. The buyer pays loading costs, freight, insurance, unloading costs and transportation from the port of destination to his premises. The passing of risk occurs when the goods have been delivered to the quay at the port of shipment.

TMH Copyright 2010

56

FOB
Free On Board (FOB) means that the seller pays for transportation of the goods to the port of shipment and loading on the ship. The buyer pays freight, insurance, unloading costs and transportation from the port of destination to his factory. The passing of risks occurs when the goods pass the ship's rail at the port of shipment. The term specifies the port of origin, e.g. "FOB New York" or "FOB Mumbai".

TMH Copyright 2010

57

CFR
Cost and Freight (CFR) means that the seller pays for transportation to the port of shipment, loading and freight. The buyer pays for the insurance and transportation of the goods from the port of destination to premises. The passing of risk occurs when the goods pass the ships rail at the port of shipment.

TMH Copyright 2010

58

CIF
Cost, Insurance and Freight (CIF) is a common term in sale contract in ocean transport. When a price is quoted CIF, it means that the selling price includes the cost of the goods, the freight or transport costs and also the cost of marine insurance. The seller pays for transportation to the port of shipment, loading and freight and marine insurance. The seller's responsibility for the goods ends when the goods have been delivered to the marine carrier or have been delivered on board the shipping vessel, depending upon the terms of the contract.
TMH Copyright 2010 59

Ms. Marwar Tent Factory v. Union of India

TMH Copyright 2010

60

Loss in Transit
After the tents were passed by the inspector, the tents were to be despatched to Commandant, C.O.D., Kanpur. Tents were to be put on rails at Jodhpur under the terms of f.o.r. Jodhpur. Delivery note was to be sent to C.O.D. Kanpur by registered post. On receipt of the delivery note, C.O.D. was to pay 95% of the price to the Marwar Tent Company. The remaining 5% was to be paid after receipt of the goods in good condition by the C.O.D., Kanpur. A consignment of 1500 tents was despatched by the Marwar Tent Company. As a result of pilferage in transit, C.O.D. Kanpur received only 1276 tents. It, thus, deducted for the loss of 224 tents from the payment to Marwar Tent Company.
TMH Copyright 2010 61

Judgement
Under a free on rail contract (F.O.R.) the seller undertakes to deliver the goods into railway wagons or at the station (depending on the practice of the railway) at his own expense, and (commonly) to make such contract with the railway on behalf of the buyer as is reasonable in the circumstances. Prima facie the time of delivery F.O.R. fixes the point at which- property and risk pass to the buyer and the price becomes payable.

TMH Copyright 2010

62

Judgement
The words f.o.r. are well known words in commercial contracts. In my judgment they mean when used to qualify the place of delivery, that the seller's liability is to place the goods free on the rail as the place of delivery. Once that is done the risk belongs to the buyer. in view of the terms and conditions of the contract regarding the place of delivery 'F.O.R. Jodhpur', the property in the goods passed immediately on to the seller after delivering the goods and loading the same in the railway wagons at Jodhpur for transmission to the buyer
TMH Copyright 2010 63