Assignment- Contract-2

Topic – Of the Effect of Contract of Sale (ss. 18-30): As to Transfer of Property between Seller
and Buyer (ss. 18-25)-As to Passing of Risk (ss. 26)- As to the Transfer of Title by Seller having
Defective Title (ss. 27-30

TABLE OF CONTENT
1). INTRODUCTION
2). TRANSFER OF PROPERTY IN THE GOODS(SEC. 18-26)
3). TRANSFER OF TITLE(SEC. 27-30)
4). CONCLUSION
5). BIBLIOGRAPHY

1
 INTRODUCTION
This assignment deals with the functioning of the effect of contract of sale (ss.18-30) with
regards to transfer of property between seller and buyer(ss. 18-25),as to passing of risk(ss.26)
and transfer of title by seller having defective title(ss.27-30). This assignment required intensive
research and proper understanding of concepts in order to get the desirable conclusion. I have
mentioned the meaning and given suitable examples along with the case laws to give this
assignment a clear picture in order to depict the proper understanding of the given topic. The
Indian Sale Of Goods Act, 1930 is a mercantile law which came into existence on july 1 1930 1,
during the British Raj, burrowing heavily from the United Kingdom Sales of Goods Act 1893. It
provides for the setting up of contracts where the seller transfers or agrees to transfer the title
(ownership) in the goods to the buyer for consideration. It is applicable all over India. Under the

1
"Welcome to Juris World". Jurisworld.in

2
act , goods sold from owner to buyer must be sold for certain and at a given period of time.2 The
contract of sale is one of the special kinds of contract. Initially, the act governing contract of sale
that is Sale of Goods Act was part of the Indian Contract Act,1972 which was later deleted and
passed as a separate Sale Of Goods Act in 1930. As per section 4 (i) of the act , a contract of sale
of goods is termed as a contract whereby the seller transfers or agrees to transfer the property in
goods to the buyer for price consideration.3

TRANSFER OF PROPERTY IN THE GOODS

Transfer of property in the goods from seller to the buyer is the essence of contract of sale. It has
been noted in Section 4 that in such a contract , the seller either transfers or agrees to transfer the
property in the goods to the buyer for a price. Sometimes the property or the ownership in the
goods may be transferred when the contract has been entered into and sometimes at a later time.
The point of time when the ownership passed from the seller to the buyer becomes important in
various situations, that is if after the contract the goods are destroyed or damaged , the party who
is the owner of the goods at the time will have to bear the loss. If the property in the goods has
already passed, the buyer will have to bear the loss but if the seller still continues to be the owner
, the loss will have to be borne by him , as stated in section 26. Similarly, if either party to the
contract becomes insolvent after making of the contract , it may have to be seen as to whom of

2
https://en.wikipedia.org/wiki/Indian_Sale_of_Goods_Act_1930
3
Legalbites.in

3
those parties was the owner at the time of solvency in order to decide as to whether the goods
should be considered to be part of the assets of the insolvent or the other party. For the purpose
of transfer of property , goods may be divided into two classes that is specific or unascertained.
Specific goods are those goods which have been identified and agreed upon at the time of
contract of sale.4 If for example , the seller has 1000 bags of wheat in his godown and the buyer
agrees to purchase 100 bags out of them ; if the 100 bags which the buyer is to get have been
marked or otherwise identified at the time of making the contract , it is sale of specific goods. On
the other hand , if it has not been described as to which 100 of those 1000 bags are to be
delivered to the specific buyer , the goods are unascertained. In Vijay Minerals Pvt. Ltd. Vs
Bikash Chandra Deb5 , there was a contract for sale of manganese and iron ores which were
excavated and raised for delivery from mines ex pit mouth. In other words, only such ores were
sold and to be delivered as had been excavated and raised. It was held to be sale of specific
goods. Ss. 19,20,21,22 and 24 provide the rules regarding the transfer of property in specific
goods. Ss. 18,23 and 25 provide the rules regarding the transfer of property in unascertained or
future goods.
Now I am going to mention each section along with the case laws to elaborate the effect of
contract of sale.

Transfer of property in specific goods

As noted above , the rules regarding transfer of property in specific goods have been mentioned
in sections 19,20,21,22 and 24 of the Act. These provisions are being explained below.

1. Property transferred as intended- Sec.19

4
Sec. 2(14)
5
A.I.R 1996 Cal 67

4
 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.
Although the parties are free to express their intention of time of passing of property , but
they in fact seldom do so. According to sec 19(2) , if the parties do not expressely mention
anything, their intention could be inferred from their contract. For determining the intention
of the parties , regard shall be had to terms of the contract , the conduct of the parties and
circumstances of the case. In Agriculture Market Committee vs Shalimar Chemical works
ltd.6 Pursuant to the agreement between the parties, the seller of ascertained goods, loaded
the goods on a lorry in the state of Kerala and despatched the same to be delivered in the
state of Andhra Pradesh. As per the terms, the seller was not to be liable for any future loss of
goods and that the goods were despatched at the risk of the purchaser. The purchaser had also
obtained insurance of the goods and had paid the policy premium. He , therefore intended the
goods to be treated as his own so that if ther was any loss of goods in transit, he could validly
claim the insurance . In view of of the conducts of the parties, the apex court held that the
property in goods had passed in the state of seller. Weighment od goods or collection of
documents from the bank or payment of price through the bank by the purchaser in this state
were held immaterial.
Ascertaining the intention-
In an auction sale, tender with adequate fair price was accepted. Contract was entered into
between liquidator and auction purchaser. Subsequent sale of property also took place.
Possession of property had already been handed over. Petition challenging sale was rejected.
It was also rejected because it was filed one month after completion of sale 7. Attempts to
give effect to the elementary principle of the law of contract that the parties may fix the time
when the property in the contract of sale shall be treated to have passed. It may be at the time
of delivery , or the time of payment of price or even at the making of the contract.

Sale by giving physical possession of goods-

In a sale, goods may be delivered by giving physical possession without the necessity of
transferring the title document of goods transfer of document of title to the goods is one of
the methods whereby delivery of the good is effected. Delivery may be physical also.8

Meaning of owner – Transfer of ownership-

6
A.I.R 1997 S.C 2502
7
Pratap Scrap Traders vs State of Gujarat, A.I.R 2005 Guj.13
8
Indian tourist development corporation ltd. Vs Assistant Commissioner of commercial Taxes,(2012) 3 SCC 204.

5
 The ownership of vehicle is not dependent upon entries in registration certificate. The
property or ownership of vehicle will stand transferred in terms of the Sale of Goods Act
when intended by the parties.

2. Specific Goods in a deliverable state- Sec.20

If specified goods in a deliverable state are delivered , the property in the goods passes.9
According to section 20: where there is an unconditional contract for the sale of specific
goods in 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.
If the contract between the parties satisfies the following conditions, the property passes at
the time of making of the contract:

a) The goods are specific.

b) The goods are in deliverable state.
c) The contract is unconditional one.
On the fulfillment of these conditions, the property would pass even though the delivery
of the goods or the payment of the price, or both, is postponed.
A contract which is not subject to any conditions to any condition precedent or
subsequent is unconditional. If the contract is the conditional one, the property would not
pass at the time of making of the contract. Section 21 and 22 deal with the conditional
contract whether the seller is to fulfill the condition of either putting the goods in a
deliverable state under section 21 or to weigh , measure , test etc. the goods in order case
would pass only when that condition is fulfilled and the buyer has notice thereof.
Deliverable state, according to section 2(3), means such state of things that the buyer
would under the contract be bound to take their delivery. For example, A purchases a
table which , according to the contract , has to be polished by the seller before delivery ,
the table is not in a deliverable state. It will become in a deliverable state when the same
has been polished. The property in such a case would not pass at the time of the making
of the contract.

3.Specific goods not in a deliverable state- Sec 21

According to Sec.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 such thing is done and buyer has notice there of.

9
M/s. Xerox Modi Corp. Ltd vs State of Karnataka, A.I.R 2005 S.C 3336.

6
 When the contract is for sale of specific good but the goods at the time of the contract are
not in a deliverable state, the property in such goods passes when the goods are put in a
deliverable state the buyer has notice thereof. For example , a seller agrees to sell the
whole amount of sugar lying in his godown but according to the terms of the contract he
has got it packed in the bags. The property in sugar will not pass to the buyer until the
seller has packed the sugar into bags abd the buyer gets buyer gets notice of the same. If
parts of the goods have been put in a deliverable state within the knowledge of the buyer
and before the remainder could be put in a deliverable state, the whole lot is destroyed by
fire, the property in those goods which have been put in a deliverable state has passed to
the buyer and he must bear the loss in respect of them.10

Notice to the buyer-

When the goods are not in a deliverable state at the time of making of the contract , merely
putting of the goods in a deliverable state would not result in the transfer of property in the
goods from seller to the buyer. It is further necessary that the buyer must have notice
thereof. What is required is that fact of the goods being put in a deliverable state must
come to the knowledge of the buyer , it is immaterial whether the fact comes to his
knowledge by an information given to him seller or in any other way. The idea behind the
rule is to enable the buyer to know as to the point of time when the property in the goods
passes to him because on the passing of the property , the goods are considered to be at his
risk.

4.Specific Goods to be weighed, etc. by the seller- Sec.22

According to section 22. : where there is a contract for 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 notice thereof.
In the contract of sale of specific goods, the goods may be in a deliverable state at the time
of the making of the contract but, according to the contract , the seller may be bound to
weigh , measure or test or do something else to ascertain the price of the goods. In such a
case , the property in the goods does not pass until the seller has done all that and the

10
Rugg vs Minnet (1809) 11 EAST 210; 8 R.R 572

7
 buyer has notice thereof. In Simmons vs swift 11, there was a contract for the sale of a
stack of bark at $9-5 s. per ton, the bark was to be weighed by the seller’s and buyer’s
agents. Part of the bark was weighed and taken away by floods. It was held that the loss
for the unweighed portion, which was carried away by floods , fell upon the seller as the
property therein had not passed to the buyer. It has been noted above that for the
application of this section, something must remain to be done by the seller that is
weighing measurement etc. and the property does not pass until the seller has done that
and the buyer has the notice of the same. If the seller has done all what he was required to
do and nothing remains to be done by him, Sec.22 is not applicable and the property may
pass at the time of making of the contract , under Section 20. Thus, if the buyer has to get
the goods weighed for his own satisfaction and the seller undertakes to make good the
deficiency, if any, the property would immediately pass as nothing remains to be done by
the seller.

5.Goods delivered on approval or on sale or return- Sec. 24

Sec. 24 , which deals with the goods delivered to the buyer on approval, provides as
under: 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 dies 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.
When the goods are sold on approval, on sale or return basis or on trial, the delivery of
goods may be made to the buyer but that does not result in transfer of property in the
goods to the buyer.

6.Transfer of property in unascertained or future goods- Ss.23 and 25

Where there is a contract for the sale of unascertained or future goods, 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 that is the
buyer does not become become the owner at the time of making of the contract. After
the goods have been ascertained, the peoperty in them will pass when the parties

11
(1826) 5 B&C. 857 : 29 R.R 438

8
 intend it to pass. If the parties have expressed the intention, the property in them
passes in accordance with the provision of Sec23, which is as under :
a) Where there is a contract for 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 the assent of the buyer or by
the buyer with the assent of the seller, the property in thegoods thereupon passes to
the buyer. Such assent may be expressed or implied and may be given either before
or after the appropriation is made.
b) Where, in pursuance of the contract, the seller delivers the goods to the buyer or to
a carrier as other bailees 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.

7. Risk follows Property – Sec. 26

When there is any loss or damage to the goods after making the contract, the question
which generally arises is as to which of the two parties is to bear the loss. In this regard , the
general rule contained in Sec 26 is that goods are at the risk of the person in whom the property
in the goods vests. The section reads as under: 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:
provided that where delivery has been delayed through the fault of either buyer or seller, the
goods are at the risk of the party in fault as regards any loss which might not have occurred but
for such fault: provided also that nothing in this section shall affect the duties or liabilities of
either seller or buyer as a bailee of the goods of the other party. The general rule contained in
section 26 states that the loss is to be borne by the seller, but if the property has been transferred
to the buyer , such loss has to be borne by the buyer. This rule operates whether the delivery of
the goods has been made or not. Who is to bear the loss is not to be decided on the fact as to who
is in possession of goods, but the deciding factor is , who is the owner of the goods at the time
when the loss of the goods occur. Thus, if the contract stipulates delivery of goods ‘FOR’. at the
place of dispatch, the property in the goods together with the risk passes to the consignee as soon
as goods are despatched.12

TRANSFER OF TITLE
8.Nemo dat quod non habet- Sec.27
When the seller himself is the owner of the goods which he sells or he is somebody’s agent to
dispose of the goods, he conveys a good title in the goods to the buyer. Difficulty arises when the

12
Marwar Tent Factory vs U.O.I A.I.R 1990 S.C. 1753

9
seller is neither himself the owner nor has he any such authority from the owner to sell the goods
that is a person finds goods lying on the road and sells them, or theif sells the goods after he has
stolen them, or a person purchases the goods on credit or hire purchase basis and disposes them
of, or a person continuing in possession of the goods which he has already sold resells the goods.
The question which in such cases arises is : should the rights of the owner of the goods be
protected and he be entitled to recover back the possession of the goods from one to whom they
have been sold, or should the buyer who might have bought them in good faith and for value be
protected and allowed to retain the goods defeating the rights and the title of the real owner.

9.Sale by one of the joint owners – Sec.28

Sale by one of the joint owners constitue another exception to the rule of nemo dat quod non
habet. According to section 28 , if one of the several joint owners is in sole possession of the
goods with the permission of the other co-owners ,a sale by him will convey a good title to the
buyer who buys in good faith and at the tine of buying has no notice of the fact that such a joint
owner has no authority to sell.

10.Sale by a person in possession under a voidable contract- Sec.29

According to section 19 and 19-A of the contract act, if the consent of a party to the contract has
been obtained by coercion , fraud , misrepresentation or undue influence, the contract is voidable
at the option of the party whose consent has been so obtained. Section 29 provides that if a
person has obtained the possession of some goods under a contract which is voidable under
section 19 or 19-A of the contract act and he sells those goods before the contract has been
avoided by the party entitled to do so, the buyer of such goods acquires a good title to them. This
section does not apply to a contract which is void and not voidable, or where the seller has no
title at all.

11. Sale by the seller in Possession –Sec. 30(1)

If a seller has sold the goods and the property in the goods has passed to the buyer the seller
cannot deal with such goods. If he is still in possession of the goods and deals with them, the
buyer can sue him for the tort of conversion. Sec 30(1) , however provides that if a seller having
sold the good is still in possession of the goods or of the document of title to them, the delivery
or transfer of the goods or of the documents of title to them, the delivery or transfer of the goods
or the documents of title under any sale, pledge or other disposition thereof by the seller or by a
mercantile agent on his behalf will convey a good title to the buyer provided the buyer has been
acting in good faith and he has no notice of the previous sale.

10
12. Sale by the buyer in possession-Sec.30(2)
Section 3(2) deals with a case where the buyer is in possession of the goods but the property in
them has not passed to him. This section says that if a buyer has obtained the possession of the
goods or document of title to them with the consent of the seller, any sale, pledge or other
disposition there of any person will convey a good title to the transferee provided that person
receiving the goods was acting in good faith and without any notice as regards any lien or other
right of the original seller in respect of those goods.

CONCLUSION
From the above discussion we can conclude that the concept of transfer of property in the goods
is different from delivery of goods as it essentially calls for transfer or passing of ownership title
in the goods. The passing of property or ownership in goods may occur even without the delivery
of such goods and also mere delivery of goods may not constitute the transfer of its ownership in
goods. Thus , the transfer of property in goods is distinct from its delivery.

BIBLIOGRAPHY
1.R.K Bangia , Contract –II ,7TH Edition, Allahabad law Agency, 2017
2. "Welcome to Juris World". Jurisworld.in
3. https://en.wikipedia.org/wiki/Indian_Sale_of_Goods_Act_1930
4.Legalbites.in
5. Sec. 2(14)
6.A.I.R 1996 Cal 67
7. A.I.R 1997 S.C 2502
11
8.Pratap Scrap Traders vs State of Gujarat, A.I.R 2005 Guj.13

9. Indian tourist development corporation ltd. Vs Assistant Commissioner of commercial

Taxes,(2012) 3 SCC 204.
10.M/s. Xerox Modi Corp. Ltd vs State of Karnataka, A.I.R 2005 S.C 3336.
11. Rugg vs Minnet (1809) 11 EAST 210; 8 R.R 572
12. (1826) 5 B&C. 857 : 29 R.R 438
13. Marwar Tent Factory vs U.O.I A.I.R 1990 S.C. 1753

12