Transfer of Title

Passing of Property
Introduction
• In case of Sale of Goods Act, both the seller and the buyer are
executing their respective duties to fulfill the terms and conditions
enshrined in the sale contract, i.e., the seller delivers the goods to the
buyer and the buyer accepting the delivery and pay to the seller.
• Passing of general property is needed in case of sale.
• Transfer of property means transfer of legal ownership.
• Risk accompanies property in goods i.e., when property in goods
passes, risk too passes.
• There are 3 levels in the process of performance of contract of sale of
goods by a seller-
• The transfer of property in goods
• The transfer of possession of the goods (i.e. delivery)
• Passing of risk
• The transfer of property in goods from the seller to the buyer is the
prime aim of a contract of sale.
• The expression “property in goods” is different from “possession of
goods”. Property in goods mean the ownership of goods whereas
possession of goods mean the custody of goods.
Rules regarding Transfer of Property
• These rules are divided into two categories:
• Transfer of property in specific goods (ascertained goods)
• Transfer of property in future goods (unascertained goods)
Transfer of property in specific goods (ascertained goods): Sec 19
• Sec 19(1) provides that “where there is a contract for the sale of
specific goods, the property in them is transferred to the buyer at
such time as the parties to the contract intend it to be transferred.”
Explanation: in case of specific goods, the transfer of property takes
place when the parties intend to pass it. The parties may intend to pass
the property:
1) at once at the time of making the contract
2) when the goods are delivered
3) when the goods are paid for.
Rules:
• Specific goods in deliverable state (sec 20): where there is an
unconditional contract for the sale of specific goods in a deliverable
state, the property in goods passes to the buyer when the contract is
made, and it is immaterial whether the time of payment of price or
the time of delivery of goods, or both, is postponed.
Eg. A buys a bike for Rs.40,000 from B on one month’s credit and ask
him to deliver the bike to his house. The shopkeeper consents to do so.
The bike immediately becomes the property of A.
• Specific goods to be put into a deliverable state (sec 21):
Where there is a contract for 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 in the goods does not passes until
such thing is done and the buyer has a notice thereof.

• Specific goods in a deliverable state, when the seller has to do

anything thereto in order to ascertain price (sec 22):
Where there is a contract for sale of specific goods in a deliverable
state, but the seller is bound to weight, measure or do something with
reference to the goods for the purpose of ascertaining the price, the
property does not pass until such act or thing is done and the buyer
has notice thereof.
Unascertained
• Where the contract is goods
for sale of unascertained 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 the assent of the buyer or the buyer with the assent of the seller,
the property in the goods thereupon passes to the buyer.
• It is important to note that where there is a contract for sale of
unascertained goods, no property in goods is transferred to the buyer
unless and until the goods are ascertained (sec 18).
• Two pre conditions are important in case of unascertained goods:
(1) ascertainment of goods: it is the process by which goods answering
the description are identified and set apart
(2) Their unconditional appropriation to the contract which involves
selection of goods with the intention of using them in the
performance of contract with the consent of the buyer and the
seller.
Transfer of Title
• A true seller can sell and transfer ownership title to the buyer.
• The common rule for transfer of title is that “no one can give that
which one has not got or no one can pass a better title than what he
has.”
• This is contained in Latin maxim “nemo dat quo non habet” meaning
“no one gives what he doesn’t have.
Eg. A sells some goods to B, who buys them in good faith. Y will get no
title to that and the true owner has a right to get back his goods from Y.
Sale by person not the owner (Sec 27)
• As a rule, a mercantile agent having an authority to sell goods grant a good
title to the buyer.
• A mercantile agent can communicate a good title to the buyer although he
sells goods without having any authority from the principal to do so,
provided the following conditions are fulfilled:
a) The mercantile agent should be in possession of the goods or documents
of title to the goods in his capacity as a mercantile agent and with the
consent of the owner.
b) The mercantile agent should sell the goods while acting as an agent in the
ordinary course of business.
c) The buyer should act in good faith. He should presume that the
mercantile agent has authority to sell the goods.