Sec 7 Goods perishing before making of

contract
• Where there is a contract for the sale of specific goods, the contract is
void if the goods without the knowledge of the seller have, at the
time when the contract was made, perished or become so damaged
as no longer to answer to their description contract.
• Specific goods
• Mutual Mistake and impossibility of performance
• Stolen or lawfully requisitioned by gov.
• Sale as well as agreement to sell
Sec 8 Goods perishing before sale but after
agreement to sell
• Where there is an agreement to sell specific goods, and subsequently
the goods without any fault on the part of the seller or buyer perish
or become so damaged as no longer to answer to their description in
the agreement before the risk passes to the buyer, the agreement is
thereby avoided
• Frustration of contract (Impossibility of performance)
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.
• (3) Unless a different intention appears, the rules contained in 
Section 20 to 24 are rules for ascertaining the intention of the parties
as to the time at which the property in the goods is to pass to the
buyer.
20. Specific goods in a deliverable state
• 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 of the
price or the time of delivery of the goods, or both, is postponed.
• Dennant v Skinner and Collom [1948] 2 KB 164 (KBD)
In an auction held by the claimant (Dennant), a man successfully bid for a
van. he identified himself as George Albert King from King’s Motors of
Oxford, a highly reputable firm in the industry. Before allowing delivery, the
claimant accepted a cheque from King, but obtained a signed certificate
which stated that ownership of the vehicles would not pass until the cheque
was honoured.
The cheque was dishonoured, and the claimant subsequently
discovered that King had no actual connection with King’s Motors.
Some time later, the relevant vehicle came to be in the possession of
the defendant (Skinner), who refused to return the vehicle.
After applying Lake v Simmons, Hallett J held that the claimant’s
mistake as to King’s identity did not affect the validity of the contract,
which was concluded on the fall of the hammer. At that point in time,
no inquiry was made about King’s identity. In fact, the identity of the
highest bidder was never considered by the claimant at the time, and
Hallett J found that the claimant would have been willing to transact
with any other person irrespective of their identity. The certificate
similarly had no effect on the contract, as the contract was concluded
before the execution of the certificate
The second issue was also decided in favour of the defendant, as Hallett
J found that property in the vehicle had passed from the claimant to
King when the lot was knocked down to him. Pursuant to Rule 1, s.18 of
SOGA 1893, the parties were deemed to have intended the property to
pass when the contract was made, irrespective of any delay in payment
or delivery. Such intention was negatived neither by conditions of the
auction nor the certificate, which only allowed the claimant to retain
possession – but not ownership – of the vehicle until the cheque was
honoured.
Sec 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.
Example: Peter buys a laptop from an electronics store and asks for a
home delivery. The shopkeeper agrees to it. However, the laptop does
not have a Windows operating system installed. The shopkeeper
promises to install it and call Peter before making the delivery. In this
case, the property transfers to Peter only after the shopkeeper has
installed the OS making the laptop ready for delivery
22. Specific goods in a deliverable state,
when the seller has to do anything thereto in
order to ascertain price
• 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.
• Example: Peter sells a carpet to John and agrees to lay it in John’s house as a part
of the contract. He delivers the carpet and informs John that he will lay it the
next day. That night the carpet gets stolen from John’s premises. In this case,
John is not liable for the loss since the property had not passed to him.
According to the terms of the contract, the carpet would be in a deliverable state
only after it is laid.
18. Goods must be ascertained (Rule 1)
• 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.
• For example, if A agrees to sell to B one bag of sugar out of the lot of one hundred bags lying in
his go down; it is a sale of unascertained goods because it is not known which bag is to be
delivered. Till this time no property in goods passes from seller to buyer. So there is no sale till
now, only agreement to sell.
As soon as a particular bag is:
a) separated from the lot for delivery (ascertainment i.e. setting apart the goods)
(Sec 18 – Rule 1)
b) With Mutual consent of the parties (consent of buyer is usually signified in act of accepting
the delivery); [Sec 23(1)- Rule 2]
And buyer either agrees to that ascertainment or accepts the delivery, sale is complete and
ownership is transferred.
23. Sale of unascertained goods and
appropriation (Rule 2)
• 1) Where there is a contract for the 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 the goods thereupon passes to the buyer. Such assent may be express or
implied, and may by given either before or after the appropriation is made.
• Appropriation means selection of goods with the exclusive intention of using
them for performance of the contract with mutual consent.
• Appropriation= Ascertainment (selection of goods with the exclusive intention
of using them for performance of the contract, which might be a unilateral
act) + mutual consent
P.S.N.S. Ambalavana Chettiar & Co. vs
Express Newspapers Ltd 1968 SC
• On 13 November 1951, the respondent agreed to sell to the appellants a stock
of 415 tonnes of newsprint in sheets then lying in the respondent’s godown.
On 26 November, the parties varied the contract by agreeing that the
appellants would buy only 300 tons out of the stock of 415 tonnes. After taking
delivery of a part of the newsprint, the appellants refused to take delivery of
the balance and repudiated the contract on 29 March 1952. On 21 April the
respondent, after notice to the appellants, resold the balance at a lesser rate.
The suit filed by the respondent claiming compensation for breach of Sale.
• Judgement: The claim of the respondent unsustainable. As this was the case of
sale of ascertained goods being substituted by unascertained goods in which
as per Sec 23(1) ownership does not gets transferred till appropriation. Here
no appropriation, no transfer of ownership hence no sale.
Ways of Appropriation
• Setting aside goods for contract with consent of buyer
• Packing goods in specific way for buyer with his consent
• Sec 23(2)
• Delivery to carrier.—(2) Where, in pursuance of the contract, the
seller delivers the goods to the buyer or to a carrier or other bailee
(whether named by the buyer or not) 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
25. Reservation of right of disposal.
• 1) Where there is a contract for the sale of specific goods or where goods
are subsequently appropriated to the contract, the seller may, by the
terms of the contract or appropriation, reserve the right of disposal of the
goods until certain conditions are fulfilled. In such case, notwithstanding
the delivery of the goods to a buyer or to a carrier or other bailee for the
purpose of transmission to the buyer, the property in the goods does not
pass to the buyer until the conditions imposed by the seller are fulfilled.
• These conditions must be specified in the contract or appropriation. Even
if the goods are delivered to the buyer or a carrier or a bailee for
transmission to the buyer, the property in the goods does not pass to the
buyer until the conditions are met.
• Example: Peter sends furniture to John’s company by a truck. He
instructs the driver not to deliver the furniture until he confirms receipt
of payment from the company. The truck reaches John’s company and
the furniture is unloaded. However, the property passes to the company
 only upon receipt of the payment.
• Generally object is to secure payment
• (2) Where goods are shipped or delivered to a railway administration for
carriage by railway and by the bill of lading or railway receipt, as the
case may be, the goods are deliverable to the order of the seller or his
agent, the seller is prima facie deemed to reserve the right of disposal
Bill of Lading/ Railway receipt in
‘Documents against Payments’ DAP/DP -
terms of payment
• Here the point is, the buyer can take delivery of goods only by
submitting original bill of lading to the carrier of goods.  If the terms
of payment is ‘Documents against Payment (DAP or DP), the buyer’s
bank can deliver original bill of lading with other documents  to buyer 
only after  receiving  the amount of sale of goods pertaining to said
shipment.  Without original bill of lading, buyer can not take delivery
of goods.  In other words, under the term Documents against
Payment, buyer can not take delivery of goods unless he remits
invoice value of goods to his bank. In turn, after collecting the amount
of sales under said consignment, buyer’s bank remits the said amount
to seller through seller’s bank.
• When goods are shipped or delivered to railways for carriage but the
document of title i.e. the bill of lading (in case of carriage of sea) or the
railway receipts (in case of carriage by railways) are taken by the seller in
his own name or in his agent’s name, the seller is presumed to have
reserved the right of disposal. The property passes over to the buyer only
when the buyer pays the price in exchange of bill of lading or the railway
receipt.
• Example : A sold certain bales of paper to B which were to be sent to him
by railway. A took the railway receipt in his own name, and sent them to
his own banker to be delivered to B on the payment of the price. Before B
paid the price, and received railway receipts, the goods were destroyed by
fire. The court held that the seller should suffer the loss as he has reserved
the right of disposal and at the time of destruction of bales, their
ownership has not been transferred to the buyer - [General Papers Ltd. v.
V.P. Mohideen & Bros. AIR 1958 Madras 482.]
• (3) Where the seller of goods draws on the buyer for the price and transmits to the
buyer the bill of exchange together with the bill of lading or, as the case may be, the
railway receipt, to secure acceptance or payment of the bill of exchange, the buyer is
bound to return the bill of lading or the railway receipt if he does not honour the bill of
exchange; and, if he wrongfully retains the bill of lading or the railway receipt, the
property in the goods does not pass to him
• As an example, in the case of a buyer wanting to buy goods from a seller, with the
intention of paying in 6 months, the purchase agreement will lie between the buyer
and the seller. The buyer will agree to payment through a bill of exchange, which can
be guaranteed by a bank.
• In this case, a seller would arrange for the goods to be delivered to the buyer, and the
buyer would draw a bill on its bank to accept
• By doing so, the bank will incur primary liability of that exchange, which is in favour of
the seller
• The bank can also provide the buyer with a line of credit. Alternatively, the seller can
agree to have extended payment terms for its buyer (e.g. 6months) knowing that the
bank has a better credit rating than the buyer
Once after sending goods, the required documents along with bill of
exchange are submitted with seller’s bank to send to buyer through
buyer’s bank.