Hand Out 22-B

(Session 25)
Transfer of Property and Title

The seller can pass on to the buyer only as good a title as he has himself. The
principle is “Nemo dat quod non habet.”

Property differs from title. While the buyer may have property, the title may
belong to another. For example, under a retention of title clause, the buyer acquires the
right to use and enjoy the goods, while the title continues to vest in the seller till he has
been paid or other conditions fulfilled.

Property differs from possession. While the buyer may have property, possession
(physical control) may remain with the seller. For example, where the buyer requests
the seller to hold the goods for him in his warehouse till he is ready to take delivery.

The seller can give the buyer a title that is no better than his own. As we know,
the legal maxim is “nemo dat quod non habet” (“No one can give what he/she has not
got”), which means that, if the seller does not own the goods (e.g., he has stolen them),
he cannot pass on the ownership of them to the buyer.

When someone who is not the owner does not sells goods with the authority or
consent of the owner, the buyer gets no better title than the seller’s (Sale of Goods Act,
1930 , section 27).

The seller can pass on a better title to the buyer than his own where he sells goods
he has acquired through some wrong-doing, e.g., under a voidable contract, if the true
owner fails to take steps to avoid the contract before the sale takes place. Car and
Universal Finance Co Ltd v. Caldwell (1965): where a car owner was deceived into
selling his car to a rogue in exchange for a car of much lower value and part payment
by a cheque which turned out to be dud, with the rogue then absconding after
reselling the car and the car passing thru several hands thereafter ending up with a
buyer in good faith, held the buyer did not get title because the owner had already
taken steps to avoid the original contract (by informing the automobile association
and asking the police to recover his car the moment he discovered the cheque was a
dud, which was the very next day), it making no difference that he had not been able
to inform the other party (the rogue) of those steps, because this was thru no fault of
his own but that of the rogue who had decided to abscond and so become unreachable.
Contra Lewis v. Averay (1972): where a rogue who bought a car by deceiving the
owner and resold it to an innocent buyer before the owner could take steps to reclaim
the car, held the innocent buyer got good title.

The moral is that if you buy goods from another, you should take possession as
soon as possible, your legal remedies against that other in case he dishonestly sells the
goods again to a third party being only a second best solution.
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A buyer who has possession of the goods and the documents of title can sell the
goods to another buyer and pass on a better title to him than his own, even though the
original seller has lien on or other right to those goods. This exception has become
particularly important in recent years owing to the widespread use of the Romalpa
(retention of title) clause. Exception, however, applies only to sale contracts, and is
not available in respect of hire-purchase agreements or conditional sale agreements
(under which title remains with the original seller).

Prima facie the risk passes with the property. Transfer of property is also
sometimes referred to as transfer of risk.

This rule can be varied by express agreement of the parties. For example, so
that risk passes before property. (See Borden (UK) Ltd v. Scottish Timber Products
Ltd (1981), where the contract stated expressly that the risk would pass immediately
on delivery, and property only upon payment of the full price).

The parties can agree to vary this rule by implication, or by trade usage
(custom of the trade). Demby Hamilton & Co v. Barden (1949): where seller set aside
final order of apple juice ready for delivery on buyer’s weekly instructions as
stipulated, held buyer to take loss when juice went bad waiting many months for
buyer’s instructions, which never came. Sterns v. Vickers (1923): where white spirit
was held by seller as part of a bulk (in a tank) without being appropriated to the
contract, held loss fell on buyer nevertheless when the spirit spoiled waiting many
months for buyer to act on a warrant of delivery issued by seller.

Sale of specific goods, e.g., so and so make of car, with such and such
registration number.

When specific goods are sold, property passes when the contract is made. In
the case of goods sold by auction, property passes upon the fall of the hammer or
performance of some other act in which it is customary to announce completion of the
sale.

Property passes irrespective of delivery or payment of price. Tarling v. Baxter

(1827): where the goods were destroyed by fire after date of contract but before dates
of payment and delivery, held property had passed and loss therefore fell on buyer.

Property passes when something has been done to put the goods in a deliverable
state, for example, putting four new tires on a car. Underwood v. Burgh Castle
Cement Syndicate (1922): where machinery was destroyed in transit before it could be
delivered free on rail as stipulated in the contract, held property and therefore risk had
not passed to the buyer as machinery was not in a deliverable state.

Property passes when something has been done to them to ascertain the price.
For example, the number of units bought at a certain rate per unit is multiplied by
that rate to arrive at the total price. Nanka Bruce v. Commonwealth Trust (1926):
where a certain number of bags of cocoa was sold at a certain price per load, held goods
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in a deliverable state and property had passed to the buyer, even though known they
would be check-weighed before being re-sold to a third party.

Buyer signifying acceptance of goods delivered to him on approval. Such as,

e.g., pledging the goods with a pawnbroker who takes in good faith (Kirkham v.
Attenborough (1897));.or by failing to give approval/acceptance within the stipulated
time/or a reasonable time, and keeping the goods without giving notice of rejection

Unascertained goods include future goods (in the terminology of the 1930 Act),
i.e., goods to be manufactured or acquired or produced by the seller after the contract
of sale is made.

Property in unascertained goods passes when they are separated from the
bulk and appropriated to the contract or otherwise put in a deliverable state.
Pignataro v. Gilroy (1919): where upon buyer’s request for delivery, seller set aside a
certain number of bags of rice and asked him to pick them up from his place of
business, held property had passed to buyer and when buyer delayed picking up the bags
and they were stolen meanwhile he has to bear the loss. Philip Head v. Showfronts Ltd
(1970): where carpets delivered to buyer’s premises were stolen from there before
being installed by seller, held property in carpets had not passed to buyer because not
in a deliverable state, and so loss was to be borne by seller.

Property does not pass even where the goods have been appropriated to the
contract, where they are sold subject to a retention of title clause, unless and until the
stipulated conditions have been fulfilled, e.g., the seller has been paid his price. This
clause (which states that title will not pass to the buyer until the seller has been paid)
offers the seller a number of advantages, e.g., he will be able to claim the unpaid price
of the goods ahead of unsecured creditors in the event of the buyer’s subsequent
liquidation/receivership; or trace the proceeds of sale, in the event of a subsequent
resale by the buyer, if the goods remain in an unaltered state; or receive payment
derived from a lien/charge on the goods, if they are admixed with his own goods or
turned into something else by the buyer. In certain circumstances, the unpaid seller
can trace the proceeds of the sale of finished goods and claim to be paid out of those
ahead of general creditors. The clause (quite common on Continental Europe before
that) received judicial recognition in England in Aluminum Industrie Vaassen BV v.
Romalpa Aluminum Ltd (1976). This clause is popularly known as the “Romalpa”
clause. The clause has since received legislative recognition as well under the English
Sale of Goods Act 1979, and it is very much in the contemplation of the Pakistan Sale
of Goods Act 1930 (section 25).

AH
5/5/2020