RAJIV GANDHI NATIONAL UNIVERSITY

OF LAW

A PROJECT ON

“ TRANSFER OF PROPERTY AS BETWEEN SELLER

AND BUYER IN SALE CONTRACT”

IN THE COMPLETE FULFILLMSENT FOR THE REQUIREMENT OF THE

PROJECT ON THE SUBJECT OF CONSTITUTIONAL LAW-1 OF
B.A.LL.B.(HONS.), 3rd SEMESTER.

SUBMITTED TO: SUBMITTED BY:

DR. SANGEETA TAAK HARSH MANGAL

ASST. PROF. OF LAW ROLL NO. 18008

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 CERTIFICATE

This is to certify that the study entitled “” is the bonafide work carried
out by Harsh Mangal, Roll no. 18008, student of BA LLB (Hons.),
Rajiv Gandhi National University of Law, Patiala, during the year
2019. The dissertation work being submitted has been completed
under my guidance and supervision. The work is approved for
submission.

Date: Sept-2019

Place: Patiala

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 ACKNOWLEDGEMENT

First and foremost, I would like to express my deep and sincere

gratitude to my project supervisor Dr. Sangeeta Taak, Rajiv Gandhi
National University of Law, Patiala for his continual encouragement,
guidance and suggestion from starting of my work. He always
inspired me to do hard work. His comments, constructive criticisms,
suggestions, and encouragement have been of great value to me, and
this work would not have been possible without his contribution.

His patience and availability to answer my queries, and explain

problems any time were extremely helpful during the period of the
research. I wish to express my warmest thanks to my friends and
batch mates. Finally, I thank my parents and my sisters for their
endless love, encouragement, support and patience.

Harsh Mangal

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 TABLE OF CONTRACT

CHAPTER 1 : INTRODUCTION

CHAPTER 2: RULES REGARDING TRANSFER OF

PROPERTY

CHAPTER 3: INTERPRATION OF PROPERTY

CHAPTER4:ESSENTIALS OF A VALID
APPROPRIATION

CHAPTER 5 : TRANSFER OF TITLE

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Chapter 1 : Introduction

An essential part of the Sale of Goods Act is the Transfer of Property, which passes from the
seller to the buyer. Possession is different from ownership, and these must be distinguished.
Whereas a person may be the righteous owner of goods, he may not have the goods in his/her
possession. An agent, for example, is not the owner of the goods, he is in possession of, on
behalf of the seller. When there is a passing or transfer of property in the form of goods, the
element of risk also passes. The essential aspect is the „ownership‟ of the goods. This is
because several rights and liabilities of the transacting parties are directly connected with the
issue of ownership. Usually, a contract of Sale takes place over a period of a few hours, a few
days, or even a few months. During such time, there can be events which result in the entire
contract of sale being affected. The goods may be damaged, or destroyed, or lost in transit, or
confiscated etc. It is in such circumstances, that the questions relating to the passing of
property arises.

Importance Of Transfer Of Ownership

The questions of what is the exact time when the property is stated to have passed from the
seller to the buyer; when the risk in the goods is stated to be passed; and who is capable of
transferring property in goods, will be answered in this lesson. The following factors make it
necessary to decide the actual time when the property in the goods passes from the seller to
the buyer. These factors are:

A. Risk passes with property

B. Action against third parties

C. Seller‟s right for price

D. Effect of insolvency of the seller or the buyer

Risk passes with the property

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The usual rule is that in the absence of specialized terms, the risk follows the property. Till
goods are the property of the seller, the risk remains with him. When goods become property
of the buyer, he must bear any loss arising from their destruction or injury. Section 26 of the
Act provides that, “Unless otherwise agreed, the goods remain at the seller’s risk until the
property therein is transferred to the buyer, but when the property therein is transferred to the
buyer, the goods are at the buyer‟s risk whether delivery has been made or not.”

Action against third parties

It is only after the passing of property to the buyer that he can exercise proprietary rights over
the goods. For example, if after the sale, the seller refuses to deliver the goods, the buyer can
bring an action against him for forcing the delivery, and if the seller has already resold those
goods to a third person, he can also recover them from such third person in certain
circumstances. Moreover, if the goods are damaged or destroyed due to act of a third person,
the owner of the goods can take an action against him. Thus, ownership of the goods fixes the
rights of a person to have the goods as against the whole world.

Seller’s right for price

The seller becomes entitled to recover the price of the goods from the buyer only after the
property of the goods has been transferred to the buyer.

Effect of insolvency of the seller or the buyer

On insolvency of a person, the Receiver or the Official Assignee takes the possession of the
property belonging to the insolvent. Here, the decision as to the ownership of the goods is . If
the seller becomes insolvent, and the property, in the goods has already been passed to the
buyer, buyer becomes insolvent and the property in the goods is yet to pass to him, his
Official Assignee cannot take over the possession of the goods.

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Chapter 2 : Rules Regarding Transfer Of Property

Sections 18 to 24 of the Sale of Goods Act explain the rules regarding transfer of ownership
in goods. These rules are as follows:

 Goods must be ascertained : Section 18 provides that, where there is a contract for the
sale of unascertained goods, no property in goods is transferred to the buyer unless and until
the goods are ascertained

(Section 18).

 Intention of the parties : Section 19 provides that, where there is a contract for the sale
of specific or ascertained goods, the property in them passes to the buyer at the time when the
parties, intend it to pass. For determining intention of the parties, regard shall be had to the
terms of the contract, conduct of the parties and the circumstances of the case.

The time when the ownership passes from the seller to the buyer will depend upon the
category of goods that are being dealt with. In this context, the goods can be classified as
follows:

1. Specific or Ascertained goods.

2. Goods that are not ascertained.

3. Goods sent on approval or on return basis.

In each of these cases the rules will be different. Discussion on specific goods which means
goods that are identified and agreed upon at the time when a contract of sale is entered into
are the following:

Transfer of ownership in the sale of specific goods

When the contract for sale of specific goods is entered into there are three main

conditions that will apply:

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(a) The sale must be of specific goods, i.e., the identified goods at the time of

sale.

(b) The goods must be in a state that they can be delivered; and

(c) The contract of sale must be unconditional and not be restricted by any

conditions.

Passing of property delayed beyond the date of the contract

(i) When goods are not in a deliverable state

“If the goods are not in a deliverable state, and contract is for the sale of specific goods, the
property does not pass, until the seller brings them in a deliverable state and the buyer has
notice thereof. Two conditions are to be fulfilled, if the goods are not in a deliverable state:
(1) the seller has done his act of putting the goods that are not in a deliverable state; and

(2) the buyer has knowledge

thereof “(Section 21).

The seller might be required to do certain acts to put the goods into a deliverable state like
packing, filling in containers etc. No property in goods passes unless such an act is done and
the buyer knows about it.

Ownership is transferred when the parties intend to pass it

Section 19 of the Act reads as – “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”. According to this provision, it is only when the
parties so decide that the property will actually pass. In this context, the intention of the
parties can be known taking into consideration the following:

 The term of the contract

 The conduct of the parties

 The circumstances

When transfer of Ownership takes place at the time of contract

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Section 20 of the Act in this context states the following: “Where there is anunconditional
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 of
the price or the time of delivery of the goods, or both, is postponed.”

This implies that at the time of contract of sale the goods will be transferred, if the sale is of
specific goods, the contract is unconditional and the goods are in such a state that the buyer
can take delivery of them.

Cases where property in specific goods does not pass at the time of sale

The general rule that ownership of specific goods transfers at the time of contract is subject to
the above conditions. But in the following cases, the property in the specific goods does not
pass at the time of contract, but at a later time.

(a) Specific goods to be put into a deliverable state [Section 21]

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 that thing is done and the buyer has notice thereof. Here, the word
„something‟ signifies anything necessary to put the goods indeliverable state. It may be
packing, polishing, or filling them into containers, etc. The words „buyer has notice thereof‟
do not cast an obligation on the seller to inform the buyer. They mean that the buyer has
knowledge thereof, i.e., comes to know of it somehow.

(b) Goods to be weighed or measured for ascertainment of their price

[Section 22]

Where there is a contract for the sale of specific goods in a deliverable state, but the seller is
bound to weigh, measure, test or do some other act or thing 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.

However, when nothing is left to be done on the part of the seller to ascertain the price, but
the buyer does not pick up the goods from the seller‟s place because he wants to do some act
for his satisfaction, section 22 does not apply. The property in the goods passes to the buyer,
as soon as the seller completes his part of the job.

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(c) When goods are delivered on approval [Section 24]

When goods are delivered to the buyer on approval “on sale or return” or other similar terms,
the property therein passes to the buyer –

1. When he signifies his approval or acceptance to the seller, or does any other act adopting
the transaction. The buyer may accept the goods, and let the seller know of his decision.

2. 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 good, on the
expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time.
This will be known as implied acceptance.

The essence of the rule is that in the event where the sale is on approval, the ownership
passes to the buyer, either, by acceptance or failure to return the goods.

Transfer of ownership in the sale of unascertained or future goods.

Section 18 of the Act reads as – “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”.

Thus until the goods are ascertained, there are no goods on which the contract can operate.
How then are the goods to be ascertained? The goods can be ascertained in various ways.
These relate to the valid appropriation of the goods, and are discussed below.

A valid appropriation of goods is required

When the contract is for the sale of unascertained goods, the goods can be defined by the
description only, e.g., Fair Bengal Cotton, Calcutta Silk, Java Sugar, etc. Suppose that the
contract is for the sale of 100 bales of Fair Bengal Cotton out of 10000 such bales lying with
the seller. If the seller set aside 100 bales of the cotton in his own warehouse, it does not
amount to ascertainment of goods because he is at liberty to change his mind and send these
bales to some other purchase. What is required, for the transfer of property to the buyer is
unconditional appropriation of the bales to the contract. The seller giving notice to the buyer
that the bales are ready for delivery and the buyer assenting to appropriation by saying that he
will take delivery thereof, usually does this.

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In the context of appropriation, section 23 of the Act provides that, “Where there is a contract
for the sale of unascertained or future goods by description and goods of that description in
deliverable state are unconditionally appropriated to the contract, either by the seller with the
assent of the buyer or by 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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CHAPTER 3 : INTERPRATION OF PROPERTY
Property is broadly classified into the following categories:

1. Immovable Property (excluding standing timber, growing crops, and grass)

2. Movable Property

The Interpretation of the Act, says "Immovable property does not includes standing timber,
growing crops or grass". Section 3(26), The General Clauses Act, 1897, defines, " immovable
property" shall include land, benefits to arise out of the land, and things attached to the earth,
or permanently fastened to anything attached to the earth. Also, The Registration Act,1908,
2(6)

"immovable property" includes land, buildings, hereditary allowances, rights to ways, lights,
ferries, fisheries or any other benefit to arise out of the land, and things attached to the earth
or permanently fastened to anything which is attached to the earth, but not standing timber,
growing crops nor grass.

A transfer of property passes forthwith to the transferee all the interest which the transferor is
then capable of passing in the property unless a different intention is expressed or implied.

According to Section 43 of the Transfer of Property Act 1882, in case a person either
fraudulently or erroneously represents that he is authorized to transfer certain immovable
property and does some acts to transfer such property for consideration, then such a transfer
will continue to operate in future. It will operate on any interest which the transferor may
acquire in such property.

This will be at the option of the transferee and can be done during the time during which the
contract of transfer exists. As per this rule, the rights of the bona fide transferee, who has no
notice of the earlier transfer or of the option, are protected. This rule embodies a rule of
estoppel i.e. a person who makes a representation cannot later on go against it.

Every person, who is competent to contract, is competent to transfer property, which can be
transferred in whole or in part. He should be entitled to the transferable property, or
authorized to dispose of transferable property which is not his own. The right may be either
absolute or conditional, and the property may be movable or immovable, present or future.

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Such a transfer can be made orally unless a transfer in writing is specifically required under
any law.

Even when a person is mentally competent, but physically unable to sign any contract, the
property lawyer hired by him, can do that with the help of a power of attorney.

According to Section 6 of the Transfer of Property Act, the property of any kind may be
transferred. The person insisting non-transferability must prove the existence of some law or
custom which restricts the right of transfer. Unless there is some legal restriction preventing
the transfer, the owner of the property may transfer it. However, in some cases, there may be
a transfer of property by an unauthorized person who subsequently acquires an interest in
such property.

In case the property is transferred subject to the condition which absolutely restrains the
transferee from parting with or disposing of his interest in the property, the condition is void.
The only exception is in the case of a lease where the condition is for the benefit of the lessor
or those claiming under him. Generally, only the person having interest in the property is
authorized to transfer his interest in the property and can pass on the proper title to any other
person.

The rights of the transferees will not be adversely affected, provided: they acted in good faith;
the property was acquired for a consideration, and the transferees had acted without notice of
the defect in the title of the transferor.

These conditions must be satisfied :

There must be a representation by the transferor that he has authority to transfer the
immovable property. The representation should be either fraudulent or erroneous. The
transferee must act on the representation in good faith. The transfer should be done for a
consideration. The transferor should subsequently acquire some interest in the property he
had agreed to transfer. The transferee may have the option to acquire the interest which the
transferor subsequently acquires

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Chapter 3 : Essentials of a valid appropriation

An analysis of the above provision reveals the following essentials of a valid appropriation:

1. The goods should confirm to the description and quality stated in the contract.

2. The goods must be in a deliverable state.

3. The goods must be unconditionally appropriated. The goods are said to be unconditionally
appropriated when the seller does not reserve the right of disposal of the goods until certain
conditions (like payment of the price) are fulfilled.

4. The appropriation must be:

1. by seller with the assent of the buyer, or

2. by buyer with the assent of the seller.

5. The assent may be express or implied.

6. The assent may be given either before or after the appropriation.

It may be inferred from the above that the property in unascertained goods passes only when
they are ascertained, and the goods are considered to be ascertained when they are properly
appropriated. The goods may be appropriated in any of the following ways;

1. By separating the contracted goods from the other with the consent of the buyer.

2. By putting the contracted quantity in suitable containers, i.e., by putting the goods into
boxes, gunny bags, in case of liquids, by putting them into bottles, etc., with the consent of
the buyer.

3. “By delivering the contracted goods to the carrier or other bailee for the purpose of
transmission to the buyer and without reserving the right of disposal.” [Section 23(2)].

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Chapter 4 : Transfer Of Title

No one can transfer better title than he himself possess. As a general rule, no man can sell
goods and give a good title to them unless he is the owner, or someone having the authority
or consent of the owner. If a person other than the true owner sells the goods, he cannot
transfer to the buyer a title better than that of his. The maxim “nemo dat quod non habet”
applies here which means that „no one can transfer a better title than that he himself possess.

A person, however innocent, who buys goods from one who is not the owner, obtains no
property in them whatever. The above rules protects the owner’s property so that the owner
alone can pass the title. However, this rule is very harsh against the innocent transferee of the
goods in case of sale by the persons having defective title. Sections 27 to 30 of the Act
enumerate certain exceptions where this rule does not apply.

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