THE SALE OF GOODS ACT, 1930

UNIT -3: TRANSFER OF OWNERSHIP AND DELIVERY OF GOODS

 PASSING OF PROPERTY:
 Passing of property constitutes the most important element to decide legal rights and liabilities of sellers and buyers. It
implies passing of ownership.
 If the property has passed to the buyer, the risk in the goods sold is that of buyer and not of seller, though the goods
may still be in the seller’s possession.
 The rules regarding transfer of property in goods from the seller to the buyer depend on two basic factors:
a) Identification of Goods: where there is a contract of safe for unascertained goods, the property in goods cannot
pass to the buyer unless and until the goods are ascertained.
b) Intentions of parties: The property in goods is transferred to the buyer at such time as the parties to the contract
intend it to be transferred. For the purpose of ascertaining the intention of the parties regard shall be:
(i) To the terms of the contract
(ii) To the conduct of the parties and
(iii) To the circumstances of the case
The primary rules determining the passing of property from seller to buyer are as follows:
A. Property (Specific or ascertained goods) passes when intended to pass (Section 19): In case of Specific or ascertained
goods, the property in the goods is transferred at such time as the parties to the contract intend it to be transferred.
1. Specific goods in a deliverable state: here, the property in the goods passes 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.
2. Specific goods to be put into a deliverable state: the property does not pass until such thing is done and the buyer
has notice thereof.
3. Specific goods in a deliverable state, when the seller has to do anything thereto in order to ascertain price: In this
case, the property does not pass until such act or thing is done and the buyer has notice thereof.
B. unascertained goods: In case of contract for the sale of unascertained goods, No property in the goods is transferred
unless and until the goods are ascertained.
Sale of unascertained goods by description and Appropriation: Appropriation of goods involves selection of goods with
the intention of using them in performance of the contract and with the mutual consent of the seller and the buyer.
The essentials are:
(a) There is a contract for the sale of unascertained or future goods.
(b) The goods should conform to the description and quality stated in the contract.
(c) The goods must be in a deliverable state.
(d) The goods must be unconditionally (as distinguished from an intention to appropriate) appropriated to the
contract either by delivery to the buyer or his agent or the carrier.
(e) The appropriation must be made by:
(i) the seller with the assent of the buyer; or
(ii) the buyer with the assent of the seller.
(f) The assent may be express or implied.
(g) The assent may be given either before or after appropriation
Delivery to the carrier: Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier
or other bailee 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.
C. Goods sent on approval or “on sale or return” (Section 24): In this case, 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 does not signify his approval or acceptance 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; or
c) he does something to the good which is equivalent to accepting the goods e.g. he pledges or sells the goods.
Sale for cash only or Return: where the goods have been delivered by a person on “sale or return” on the terms that
the goods were to remain the property of the seller till they are paid for, the property therein does not pass to the
buyer until the terms are complied with, i.e., cash is paid for.
D. Reservation of right of disposal (Section 25): in the contract for the sale the seller may reserve the right of disposal of
the goods until certain conditions are fulfilled. In such a case the property in the goods does not pass to the buyer until
the conditions imposed by the seller are fulfilled.
Circumstances under which the right to disposal may be reserved:
a) If the goods are shipped or delivered to a railway administration for carriage 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, then the seller will be
prima facie deemed to have reserved to the right of disposal.

Shubhamm Sukhlecha (CA, CS, LLM) 2.8 TapovanCA

 b) Where the seller draws a bill on the buyer for the price and sends to him the bill of exchange together with the bill
of lading or (as the case may be) the railway receipt to secure acceptance or payment thereof, the buyer must
return the bill of lading, if he does not accept or pay the bill. And if he wrongfully retains the bill of lading or the
railway receipt, the property in the goods does not pass to him.
 RISK PRIMA FACIE PASSES WITH PROPERTY (SECTION 26)
 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.
 The aforesaid rule is, however, subject to two qualifications:
(i) If delivery has been delayed by the fault of the seller or the buyer, the goods shall be at the risk of the party in
default, as regards loss which might not have arisen but for the default.
(ii) The duties and liabilities of the seller or the buyer as bailee of goods for the other party remain unaffected even
when the risk has passed generally.
 TRANSFER OF TITLE BY NON OWNERS (SECTIONS 27 – 30)
Sale by person not the owner (Section 27):
 Sometimes a person may sell goods of which he is not the owner. The general rule regarding the transfer of title is that
the seller cannot transfer to the buyer of goods a better title than he himself has. If the seller is not the owner of goods,
then the buyer also will not become the owner i.e. the title of the buyer shall be the same as that of the seller.
 This rule is expressed in the Latin maxim “Nemo dat quod non habet” which means that no one can give what he has
not got.
Exceptions: In the following cases, a non-owner can convey better title to the bona fide purchaser of goods for value.
1. Sale by a Mercantile Agent: A sale made by a mercantile agent of the goods for document of title to goods would pass
a good title to the buyer in the following circumstances; namely;
a) If he was in possession of the goods or documents with the consent of the owner;
b) If the sale was made by him when acting in the ordinary course of business as a mercantile agent; and
c) If the buyer had acted in good faith and has at the time of the contract of sale, no notice of the fact that the seller
had no authority to sell
2. Sale by one of the joint owners: If one of several joint owners has the sole possession of the goods by permission of
the co-owners, the property in the goods is transferred to any person who buys them in good faith and has not at the
time of the contract of sale notice that the seller has no authority to sell.
3. Sale by a person in possession under voidable contract: A buyer would acquire a good title to the goods sold to him by
a seller who had obtained possession of the goods under a contract voidable on the ground of coercion, fraud,
misrepresentation or undue influence provided that the contract had not been rescinded until the time of the sale.
4. Sale by one who has already sold the goods but continues in possession thereof: In this case, he may sell them to a
third person, and if such person obtains the delivery thereof in good faith and without notice of the previous sale, he
would have good title to them.
5. Sale by buyer obtaining possession before the property in the goods has vested in him: Here, he may sell, pledge or
otherwise dispose of the goods to a third person, and if such person obtains delivery of the goods in good faith and
without notice of the lien or other right of the original seller in respect of the goods, he would get a good title to them.
However, a person in possession of goods under a ‘hire-purchase’ agreement is not covered within the section unless
it amounts to a sale.
6. Effect of Estoppel: Where the owner is estopped by the conduct from denying the seller’s authority to sell, the
transferee will get a good title as against the true owner. But before a good title by estoppel can be made, it must be
shown that the true owner had actively suffered or held out the other person in question as the true owner or as a
person authorized to sell the goods.
7. Sale by an unpaid seller: Where an unpaid seller who had exercised his right of lien or stoppage in transit resells the
goods, the buyer acquires a good title to the goods as against the original buyer.
8. Sale under the provisions of other Acts:
(i) Sale by an Official Receiver or Liquidator of the Company will give the purchaser a valid title.
(ii) Purchase of goods from a finder of goods will get a valid title under circumstances
(iii) A sale by pawnee can convey a good title to the buyer
 PERFORMANCE OF THE CONTRACT OF SALE (SECTIONS 31 – 44)
The performance of a contract of sale implies delivery of goods by the seller and acceptance of the delivery of goods and
payment of price for them by the buyer in accordance of the terms of the contract.
 Delivery means voluntary transfer of possession from one person to another. For delivery, physical possession is not
important. The buyer should be placed in a position so that he can exercise his right over the goods. Thus, if the
possession is taken through unfair means, there is no delivery of the goods.
 Delivery of goods is of three types: (a) Actual Delivery (b) Symbolic delivery (c) Constructive Delivery

Shubhamm Sukhlecha (CA, CS, LLM) 2.9 TapovanCA

 Duties of seller and buyer: It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them,
in accordance with the terms of the contract of sale.
 Payment and delivery are concurrent conditions: Unless otherwise agreed, delivery of the goods and payment of the
price are concurrent conditions, that is to say, the seller shall be ready and willing to give possession of the goods to
the buyer in exchange for the price, and the buyer shall be ready and willing to pay the price in exchange for possession
of the goods.
Rules Regarding Delivery of goods (Section 33-41)
(i) Delivery (Section 33): Delivery of goods sold may be made by doing anything which the parties agree shall be treated
as delivery or which has the effect of putting the goods in the possession of the buyer or of any person authorised to
hold them on his behalf.
(ii) Effect of part delivery: A delivery of part of goods, in progress of the delivery of the whole has the same effect, for the
purpose of passing the property in such goods, as a delivery of the whole; but a delivery of part of the goods, with an
intention of severing it from the whole, does not operate as a delivery of the remainder.
(iii) Buyer to apply for delivery: Apart from any express contract, the seller of goods is not bound to deliver them until the
buyer applies for delivery
(iv) Place of delivery: Goods sold are to be delivered at the place at which they are at the time of the sale, and goods
agreed to be sold are to be delivered at the place at which they are at the time of the agreement to sell or if not then
in existence, at the place at which they are manufactured or produced.
(v) Time of delivery: Where under the contract of sale, the seller is bound to send the goods to the buyer, but no time for
sending them is fixed, the seller is bound to send them within a reasonable time.
(vi) Goods in possession of a third party: Where the goods at the time of sale are in possession of a third person, there is
no delivery unless and until such third person acknowledges to the buyer that he holds the goods on his behalf.
Provided that nothing in this section shall affect the operation of the issue or transfer of any document of title to goods.
(vii) Time for tender of delivery: Demand or tender of delivery may be treated as ineffectual unless made at a reasonable
hour. What is reasonable hour is a question of fact.
(viii) Expenses for delivery: This expenses must be borne by the seller in the absence of a contract to the contrary.
(ix) Delivery of wrong quantity [Section 37]:
a) In case, seller delivers a quantity of goods less than he contracted to sell: The buyer may reject them, but if the
buyer accepts the goods he shall pay for them at the contract rate.
b) In case, the seller delivers a quantity of goods larger than he contracted to sell: The buyer may accept the goods
included in the contract and reject the rest, or he may reject the whole. If he accepts the whole of the goods so
delivered, he shall pay for them at the contract rate.
c) Where the seller delivers to the buyer the goods he contracted to sell mixed with goods of a different description
not included in the contract: The buyer may accept the goods which are in accordance with the contract and
reject, or may reject the whole.
(x) Instalment deliveries: Unless otherwise agreed, the buyer is not bound to accept delivery in instalments.
(xi) Delivery to carrier: Subject to the terms of contract, the delivery to the carrier for transmission to the buyer, is prima
facie deemed to be delivery to the buyer.
(xii) Deterioration during transit: Where goods are delivered at a distant place, the liability for deterioration necessarily
incidental to the course of transit will fall on the buyer, though the seller agrees to deliver at his own risk.
(xiii) Buyer’s right to examine the goods: Where the buyer has not previously examined the goods, he is entitled to a
reasonable opportunity of examining them in order to ascertain whether they are in conformity with the contract.
 Rule related to Acceptance of Delivery of Goods: The buyer is deemed to have accepted the goods when-
a) he intimates to the seller that he has accepted them, or
b) when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the
ownership of the seller, or
c) when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected
them.
 Buyer not bound to return rejected goods: Unless otherwise agreed, where goods are delivered to the buyer and he
refuses to accept them, having the right so to do, he is not bound to return them to the seller, but it is sufficient if he
intimates to the seller that he refuses to accept them.
 Liability of buyer for neglecting or refusing delivery of goods: When the seller is ready and willing to deliver the goods
and requests the buyer to take delivery, and the buyer does not within a reasonable time take delivery of the goods, he
is liable to the seller for any loss occasioned by his neglect or refusal.

Shubhamm Sukhlecha (CA, CS, LLM) 2.10 TapovanCA

 Past Year Questions
1. What is appropriation of goods under the Sale of Goods Act, 1930? State the essentials regarding appropriation of
unascertained goods. (May-2018-6 Marks)
2. "A non-owner can convey better title to the bonafide purchaser of goods for value". Discuss the cases when a person
other than the owner can transfer title in goods as per the provisions of Sales of Goods Act 1930? (June-2019-6 Marks)
3. Explain any six circumstances in detail in which non- - owner can convey better title to Bona fide purchaser of goods for
value as per The Sale of Goods Act, 1930.(Nov-2020-6 Marks)
4. "Risk Prima Facie passes with property." Elaborate in the context of The Sales of Goods Act, 1930. (July-2021-4 Marks)
5. What are the consequences of destruction of specified goods, before making of contract and after the agreement to
sell under the Sale of Goods Act, 1930. (June-2022-4 Marks)
6. Mr. D sold some goods to Mr. E for Rs. 5,00,000 on 15 days credit. Mr. D delivered the goods. On due date Mr. E refused
to pay for it. State the position and rights of Mr. D as per The Sale of Goods Act, 1930. (May-2018-6 Marks)
7. Mr. G sold some goods to Mr. H for certain price by issue of an invoice, but payment in respect of the same was not
received on that day. The goods were packed and lying in the godown of Mr. G. The goods were inspected by H's agent
and were found to be in order. Later on, the dues of the goods were settled in cash. Just after receiving cash, Mr. G
asked Mr. H that goods should be taken away from his godown to enable him to store other goods purchased by him.
After one day, since Mr. H did not take delivery of the goods, Mr. G kept the goods out of the godown in an open space.
Due to rain, some goods were damaged. Referring to the provisions of the Sale of Goods Act, 1930, analyse the above
situation and decide who will be held responsible for the above damage. Will your answer be different, if the dues were
not settled in cash and are still pending? (Nov-2018-6 Marks)
8. State the various essential elements involved in the sale of unascertained goods and its appropriation as per the Sale of
Goods Act, 1930. (Nov-2019-4 Marks)
9. Ms. R owns a Two Wheeler which she handed over to her friend Ms. K on sale or return basis. Even after a week Ms. K
neither returned the vehicle nor made payment for it. She instead pledged the vehicle to Mr. A to obtain a loan. Ms. R
now wants to claim the Two Wheeler from Mr. A. Will she succeed?
(i) Examine with reference to the provisions of the Sale of Goods Act, 1930, what recourse is available to Ms. R?
(ii) Would your answer be different if it had been expressly provided that the vehicle would remain the property of Ms.
R until the price has been paid? (Nov-2020-6 Marks)

Shubhamm Sukhlecha (CA, CS, LLM) 2.11 TapovanCA