THE SALE OF GOODS ACT, 1930 3.

47

UNIT – 3: TRANSFER OF OWNERSHIP AND

DELIVERY OF GOODS

LEARNING OUTCOMES

After studying this unit, you would be able to understand-

♦ How and at what point of time the ownership in goods which are the
subject matter of a contract of sale passes to the buyer from the
seller.
♦ About what appropriation of goods is and how it affects the passing
of property in goods.
♦ Distinction between passing of property and passing of title.
♦ The rule of ‘nemo dat quod non habet’ (no one can give what he has
not got) and exceptions thereof.
♦ The rules relating to delivery of goods and acceptance of goods.

UNIT OVERVIEW

A contract of sale of goods involves transfer

of ownership in three stages:

Passing Delivery Passing

of of goods of Risk
property

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INTRODUCTION
Sale of goods involves transfer of ownership of property from seller to buyer. It is essential to
determine the time at which the ownership passes from the seller to the buyer.

Importance of the time of transfer

The general rule is that risk prima facie passes with the property. In case where goods are lost
or damaged, the burden of loss will be borne by the person who is the owner at the time when
the goods are lost or damaged. Where the goods are damaged by the act of the third party,
it is the owner who can take action. Suit for price by the seller can be filed only when the
property has passed to the buyer.

3.1 PASSING OF PROPERTY (SECTIONS 18 – 26)

Passing or transfer of property constitutes the most important element and factor to decide
legal rights and liabilities of sellers and buyers. Passing of property 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: Section 18 provides that 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. The buyer can get the ownership right on the goods only
when the goods are specific and 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. [section 19(1)]

Section 19(2) further provides that 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

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The primary rules determining the passing of property from seller to buyer are as
follows:

♦ Specific or Ascertained Goods

♦ Passing of Unascertained Goods
Passing of
♦ Goods sent on approval or ”on sale or return”
property
♦ Transfer of property in case of reservation of
right to disposal.

A. Property (Specific or ascertained goods) passes when intended to pass (Section 19):
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. [sub-section (1)]
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.
[sub-section (2)]
Unless a different intention appears, the rules contained in Sections 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. [sub-section (3)]
Stages of goods while passing of property

Specific goods in a deliverable state

Specific goods to be put into a deliverable state

Specific goods in a deliverable state when seller has to

ascertain price.

1. Specific goods in a deliverable state (Section 20): 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. Here, the condition is goods must be ready
for delivery.

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Example 1: X goes into a shop and buys a television and asks the shopkeeper
for its home delivery. The shopkeeper agrees to do it. The television
immediately becomes the property of X.

2. 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 such thing is done and the buyer has
notice thereof.
Example 2: 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 and intimated the buyer about it.
3. Specific goods in a deliverable state, when the seller has to do anything
thereto in order to ascertain 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.
Example 3: A sold carpets to the Company which were required to be laid. The
carpet was delivered to the company’s premises but was stolen before it could
be laid. It was held that the carpet was not in deliverable state as it was not laid,
which was part of the contract and hence, the property had not passed to the
buyer company.
B. Unascertained goods
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. [Section 18]

Goods of the
Delivery to the
description in
carrier for
deliverable
transmission
state

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 THE SALE OF GOODS ACT, 1930 3.51

The rules in respect of passing of property of unascertained goods are as follows:

1. Sale of unascertained goods by description and Appropriation [Section
23(1)]: 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.
2. Delivery of the goods to the carrier [Section 23(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.
Example 4: A bill of lading of railway parcel is made out in the name of the
buyer and is sent to him, the ownership in the goods passes from the seller to
the buyer. In case the goods are subjected to accidental loss or by theft, the
seller will not be liable.

Example 5: M places an order for book with a book seller in Mumbai. He asks
him to send the book by courier. Payment of the book was to be made by
cheque. The seller sends the book by courier. The book is lost in the way. The
seller wants the buyer to bear the loss. According to Section 23(2), it is an
unconditional appropriation of goods because of which buyer M has become
the owner of the goods. Therefore, he will bear the risk of loss of the book in
the way.

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C. Goods sent on approval or “on sale or return” (Section 24)

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 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 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.
Example 6: P brought a musical instrument from a musical shop on a condition that
he will purchase it, if he likes that instrument. After a week he has informed the shop
owner that he has agreed to purchase the musical instrument. The ownership is
transferred when he has decided to purchase the instrument as his own.
A buyer under a contract on the basis of ‘sale or return’ is deemed to have exercised
his option when he does any act exercising domination over the goods showing an
unequivocal intention to buy, example, if he pledges the goods with a third party.
Failure or inability to return the goods to the seller does not necessarily imply selection
to buy.
Example 7: ‘A’ delivered some jewellery to ‘B’ on sale or return basis. ‘B’ pledged the
jewellery with ‘C’. It was held that the ownership of the jewellery had been transferred
to ‘B’ as he had adopted the transaction by pledging the jewellery with ‘C’. In this case,
‘A’ has no right against ‘C’. He can only recover the price of the jewellery from ‘B’.
Example 8: A sends to B a water motor on approval or return in March, 2020. B to
return it after trial in August, 2020. The water motor has not been returned within a
reasonable time, and therefore, A is not bound to accept it and B must pay the price.
Sale for cash only or Return
It may be noted that 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.

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Example 9: ‘A’ delivered his jewellery to ‘B’ on sale for cash only or return basis. It was
expressly provided in the contract that the jewellery shall remain ‘A’s property until the
price is paid. Before the payment of the price, ‘B’ pledged the jewellery with ‘C’. It was
held that at the time of pledge, the ownership was not transferred to ‘B’. Thus, the
pledge was not valid and ‘A’ could recover the jewellery from ‘C’.

D. Reservation of right of disposal (Section 25)

This section preserves the right of disposal of goods to secure that the price is paid
before the property in goods passes to the buyer.

Where there is contract of sale of specific goods or where the goods have been
subsequently appropriated to the contract, the seller may, by the terms of the contract
or appropriation, as the case may be, reserve the right to dispose of the goods, until
certain conditions have been fulfilled. In such a case in spite of the fact that the goods
have already been delivered to the buyer or to a carrier or other bailee for the purpose
of transmitting the same to the buyer, the property therein will not pass to the buyer
till the condition imposed, if any, by the seller has been fulfilled. (sub-section1)
Example 10: X sends furniture to a company by a truck and instructs the driver not to
deliver the furniture to the company until the payment is made by company to him.
The property passes only when the payment is made.
Circumstances under which the right to disposal may be reserved: In the following
circumstances, seller is presumed to have reserved the right of disposal:
(1) 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. (sub section 2)
(2) 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. (sub section 3)
It should be noted that Section 25 deals with “conditional appropriation” as
distinguished from ‘unconditional appropriation’ dealt with under Section 23 (2).

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3.2 RISK PRIMA FACIE PASSES WITH PROPERTY

(SECTION 26)
According to 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”.
However, Section 26 also lays down an exception to the rule that ‘risk follows ownership.’ It
provides that where delivery of the goods 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.
Thus, in ordinary circumstances, risk is borne by the buyer only when the property in the
goods passes over to him. However, the parties may by special agreement stipulate that ‘risk’
will pass sometime after or before the ‘property’ has passed.
Risk prima facie passes with ownership: The owner of goods must bear the loss or damage
of goods unless otherwise is agreed to. Under Section 26 of the Sale of Goods Act, unless
otherwise agreed, the goods remain at the seller’s risk until property therein has passed to
the buyer. After that event they are at the buyer’s risk, whether delivery has been made or
not.

Seller’s risk-until Buyer’s risk-after

the property passes the property passes
to the buyer from the seller

Example 11: A bids for an antique painting at a sale by auction. After the bid, when the
auctioneer struck his hammer to signify acceptance of the bid, he hit the antique which gets
damaged. The loss will have to be borne by the seller, because the ownership of goods has
not yet passed from the seller to the buyer.

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.

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Example 12: A contracted to sell 100 bales of cotton to B to be delivered in February. B took
the delivery of the part of the cotton but made a default in accepting the remaining bales.
Consequently, the cotton becomes unfit for use. The loss will have to be borne by the buyer.
It should, however, be remembered that the general rule shall not affect the duties or liabilities
of either seller or buyer as a bailee of goods for the other, even when the risk has passed. It
is their duty to take care of the goods as a man of ordinary prudence would have done.
As noted above, the risk (i.e., the liability to bear the loss in case property is destroyed,
damaged or deteriorated) passes with ownership. The parties may, however, agree to the
contrary. For instance, the parties may agree that risk will pass sometime after or before the
property has passed from the seller to the buyer.

3.3 TRANSFER OF TITLE BY NON-OWNERS

(SECTIONS 27 – 30)
Sale by person not the owner (Section 27): In general, the seller can sell only such goods
of which he is the absolute owner. But sometimes a person may sell goods of which he is not
the owner, then the question arises as to what is the position of the buyer who has bought
the goods by paying price. The general rule regarding the transfer of title is that the seller
cannot transfer a better title to the buyer for goods 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.
Example 13: If A sells some stolen goods to B, who buys them in good faith, B will get no
title to that and the true owner has a right to get back his goods from B.

Example 14: P, the hirer of vehicle under a hire purchase agreement, sells them to Q. Q,
though a bona fide purchaser, does not acquire the ownership in the vehicle. At the most he
acquires the same right as that of the hirer.

If this rule is enforced rigidly then the innocent buyers may be put to loss in many cases.
Therefore, to protect the interests of innocent buyers, a number of exceptions have been
provided to this rule.

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;

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(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 (Proviso to Section 27).

Mercantile Agent means an agent having in the customary course of business as such
agent authority either to sell goods, or to consign goods for the purposes of sale, or
to buy goods, or to raise money on the security of goods [Section 2(9)].
(2) Sale by one of the joint owners (Section 28): If one of several joint owners of goods
has the sole possession of goods by permission of the co-owners, the property in the
goods is transferred to any person who buys them from such joint owner in good faith
and has not at the time of the contract of sale notice that the seller has no authority
to sell.
Example 15: A, B, and C are three brothers and joint owners of a T.V and VCR and with
the consent of B and C, the VCR and T.V was kept in possession of A. A sells the T.V
and VCR to P who buys it in good faith and without notice that A had no authority to
sell. P gets a good title to VCR and T.V.
(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 (Section 29).
Example 16: X fraudulently obtains a diamond ring from Y. This contract is voidable
at the option of Y. But before the contract could be terminated, X sells the ring to Z,
an innocent purchaser. Z gets the good title and Y cannot recover the ring from Z even
if the contract is subsequently set aside.
(4) Sale by one who has already sold the goods but continues in possession thereof:
If a person has sold goods but continues to be in possession of them or of the
documents of title to them, 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, although the property in the goods had passed to the
first buyer earlier. A pledge or other disposition of the goods or documents of title by
the seller in possession are equally valid [Section 30(1)].

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Example 17: During IPL matches, P buys a TV set from R. R agrees to deliver the same
to P after some days. In meanwhile R sells the same to S, at a higher price, who buys
in good faith and without knowledge about the previous sale. S gets a good title.
(5) Sale by buyer obtaining possession before the property in the goods has vested
in him: Where a buyer with the consent of the seller obtains possession of the goods
before the property in them has passed to him, 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 [Section 30(2)].
Example 18: Furniture was delivered to B under an agreement that price was to be
paid in two instalments, the furniture to become property of B on payment of second
instalment. B sold the furniture before second instalment was paid. It was held that the
buyer acquired a good title. (Lee Vs Butler)
However, a person in possession of goods under a ‘hire-purchase’ agreement which
gives him only an option to buy is not covered within the section unless it amounts to
a sale.
Example 19: A took a car from B on this condition that A would pay a monthly
instalment of ` 5,000 as hire charges with an option to purchase it by payment of
` 1,00,000 in 24 instalments.

After the payment of few instalments, A sold the car to C. B can recover the car from
C since A had neither bought the car, nor had agreed to buy the car. He had only an
option to buy the car.
(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.
Example 20: ‘A’ said to ‘B’, a buyer, in the presence of ‘C’ that he (A) is the owner of
the horse. But ‘C’ remained silent though the horse belonged to him. ‘B’ bought the
horse from ‘A’. Here the buyer (B) will get a valid title to the horse even though the
seller (A) had no title to the horse. In this case, ‘C’, by his own conduct, is prevented
from denying ‘A’s authority to sell the horse. Here, ‘C’’s silence has induced ‘B’ to
believe that ‘A’ is the owner of the horse.
(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 [Section 54 (3)].

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(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 [Section 169 of the Indian Contract Act, 1872]
(iii) A sale by pawnee can convey a good title to the buyer [Section 176 of the Indian
Contract Act, 1872]

3.4 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.
Definition of Delivery [Section 2(2)]: 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 sold may be made by doing anything which the parties agree, shall be
treated as delivery or putting the goods in the possession of the buyer or of any person
authorised to hold them on his behalf.
Delivery of goods is of three types:

(a) Actual Delivery

(b) Symbolic delivery
(c) Constructive Delivery

Duties of seller and buyer (Section 31): 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 (Section 32): 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)

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The Sale of good Act, 1930 prescribes the following rules of delivery of goods:

Delivery to
Part delivery Instalment deliveries
carrier/wharfinger

Buyer to apply for Delivery of wrong Deterioration during

delivery quantity transit

Buyer's right to
Place of delivery Expenses of delivery
examine the goods

Goods in possession
Time for delivery
of a third party

(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. (Section 34)
Example 21: Certain goods lying at wharf were sold in a lot. The seller instructed the
wharfinger to deliver them to the buyer who had paid for them and the buyer,
thereafter, accepted them and took away part. Held, there was delivery of the whole.
(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. (Section 35)

(iv) Place of delivery: Whether it is for the buyer to take possession of the goods or for
the seller to send them to the buyer is a question depending in each case on the
contract, express or implied, between the parties. Apart from any such contract,
♦ 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

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♦ if goods are not then in existence, at the place at which they are manufactured
or produced. [Section 36(1)]
(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. [Section 36(2)]
(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. [Section 36(3)]
(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. [Section 36(4)].
(viii) Expenses for delivery: The expenses of and incidental to putting the goods into a
deliverable state must be borne by the seller in the absence of a contract to the
contrary. [Section 36(5)].
(ix) Delivery of wrong quantity [Section 37]: Where the seller delivers to the buyer a
quantity of goods less than he contracted to sell, the buyer may reject them, but if the
buyer accepts the goods so delivered he shall pay for them at the contract rate. [Sub-
section (1)]
Where the seller delivers to the buyer 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 the buyer accepts the whole of the goods so delivered, he shall
pay for them at the contract rate. [Sub-section (2)]
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. [Sub-
section (3)]
The provisions of this section are subject to any usage of trade, special agreement or
course of dealing between the parties. [Sub-section (4)]
Example 22: A agrees to sell 100 quintals of wheat to B at ` 1,000 per quintal. A delivers
1,100 quintals. B may reject the whole lot or accept only 1,000 quintals and reject the
rest or accept the whole lot and pay for them at the contract of sale.

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(x) Instalment deliveries: Unless otherwise agreed, the buyer is not bound to accept
delivery in instalments. The rights and liabilities in cases of delivery by instalments and
payments thereon may be determined by the parties of contract. (Section 38)
Example 23: There was sale of 100 tons of paper to be shipped in November. The
seller shipped 80 tons in November and 20 tons in December. The buyer was entitled
to reject the whole 100 tons.
(xi) Delivery to carrier: Subject to the terms of contract, the delivery of the goods to the
carrier for transmission to the buyer, is prima facie deemed to be delivery to the buyer.
[Section 39(1)]
(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. (Section 40)
Example 24: P sold to Q a certain quantity of iron rods which were to be sent by proper
vessel. It was rusted before it reached the buyer. The rust of the rod was so minimal
and was not effecting the merchantable quality and the deterioration was not
necessarily incidental to its transmission. It was held that Q was bound to accept the
goods.
(xiii) Buyer’s right to examine the goods: Where goods are delivered to the buyer, who
has not previously examined them, he is entitled to a reasonable opportunity of
examining them in order to ascertain whether they are in conformity with the contract.
Unless otherwise agreed, the seller is bound, on request, to afford the buyer a
reasonable opportunity of examining the goods. (Section 41)
Rule related to Acceptance of Delivery of Goods (Section 42):

Acceptance is deemed to take place when the buyer-

(a) intimates to the seller that he had accepted the goods; or
(b) does any act to the goods, which is inconsistent with the ownership of the seller; or

(c) retains the goods after the lapse of a reasonable time, without intimating to the seller
that he has rejected them.

Buyer not bound to return rejected goods (Section 43): 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.

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Liability of buyer for neglecting or refusing delivery of goods (Section 44): 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 after such request take delivery of the goods, he
is liable to the seller for any loss occasioned by his neglect or refusal to take delivery and also
for a reasonable charge for the care and custody of the goods.
Provided further that nothing in this section shall affect the rights of the seller where the
neglect or refusal of the buyer to take delivery amounts to a repudiation of the contract.

SUMMARY
The property in the goods or beneficial right in the goods passes to the buyer at a point of
time depending upon ascertainment, appropriation and delivery of goods. Risk of loss of
goods prima facie follows the passing of property in goods. Goods remain at the seller’s risk
unless the property therein is transferred to the buyer, but after transfer of property therein
to the buyer the goods are at the buyer’s risk whether delivery has been made or not. An
important rule regarding passing of title in goods is that the purchaser does acquire no better
title to the goods than what the seller had.
This rule again is not applicable under certain circumstances.
Delivery of goods denotes the voluntary transfer of possession, which may be actual or even in
some constructive form and which is again subject to various rules which help in deciding when
the delivery becomes effective.

Transfer of Ownership & Delivery of Goods

Passing of Property Passing of Risk

1. No property in the goods is transferred to the Unless otherwise agreed, risk
buyer unless and until the goods are ascertained. follows ownership whether
2. Where there is a contract for the sale of specific or delivery has been made or not
ascertained goods, the property in them passes to the and whether price has been paid
buyer at the time when the parties intend it to pass. or not.
3. Goods should be in a deliverable state. Thus, the risk of loss as a rule lies
on the owner.

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 THE SALE OF GOODS ACT, 1930 3.63

Sale by Non-Owner
“Nemo dat quad non habet i.e. “no one can give that which one has not got”
Exceptions (i.e. Non owner can sale)

Sale by a Sale by a person Sale by buyer in Sale by an

mercantile in possession possession before unpaid
agent under a voidable property passed to seller
contract him.

Sale by one Sale by seller in Other Acts (E.g. finder

of joint possession after Effect of of lost goods, pawner,
owners sale estoppels Official Receiver or
Liquidator).
Delivery of Goods

“Voluntary transfer of Rules as to delivery of goods

possession of goods from
one person to another.”
1. Delivery and payment must be according to the terms of the
contract.
Types
2. Effect of part delivery - same effect for the purpose of passing
1. Actual delivery. the property in such goods.
2. Symbolic delivery. 3. Buyer to apply for delivery.
3. Constructive delivery or 4. Place of delivery - if no contract, place where they were at the
delivery by attornment. time of sale.

5. Time of delivery - if no contract, within a reasonable time.

Acceptance of Delivery 6. Goods in possession of a third party - no delivery until such third
party acknowledges to the buyer that he holds them on his
Acceptance is deemed to
behalf.
take place when buyer:
7. Time for tender of delivery – at a reasonable hour.
intimates that he has
accepted the goods. 8. Cost of delivery - borne by the seller (unless otherwise agreed).

uses the goods in a 9. Delivery of wrong quantity – Buyer may accept or reject the
goods.
manner proper only for
the owner, makes some 10. Installment deliveries - buyer is not bound to accept the goods.
alternation in the goods.
11. Delivery to a carrier - deemed to be a delivery to the buyer.
Retains the goods after 12. Deterioration during transit – liability will fall on buyer.
the lapse of a reasonable
time. 13. Buyer’s right to examine the goods.

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TEST YOUR KNOWLEDGE

Multiple Choice Questions
1. The property in the goods means-

(a) Possession of the goods

(b) Ownership of the goods
(c) Custody of the goods

(d) Both (a) and (c)

2. In case of sale on approval, the ownership is transferred to the buyer when he-
(a) Accepts the goods
(b) Adopts the transaction
(c) Fails to return the goods
(d) In all the above cases

3. If a seller hands over the keys of a ware house containing goods to the buyer, it results
in-
(a) Constructive delivery
(b) Actual delivery
(c) Symbolic delivery
(d) None of these
4. A sell to B 100 bags of wheat lying in C’s warehouse. A orders to C to deliver the wheat
to B. C agrees to hold the 100 bags on behalf of B and makes the necessary entry in his
books. This is a –

(a) Actual delivery

(b) Constructive delivery
(c) Symbolic delivery
(d) None of the above

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 THE SALE OF GOODS ACT, 1930 3.65

5. 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 is known as-

(a) distribution
(b) appropriation
(c) amortization

(d) storage
6. In contract of sale of goods, if the seller is not the owner of goods, then the title of the
buyer shall-

(a) Not be same as that of the seller

(b) Be same as that of the seller
(c) Be better than that of the seller

(d) None of the above

7. Nemo dat quad non habet means-
(a) One cannot give what one does not have
(b) Let the buyer be beware
(c) Whatever is paid, is paid according to the intention or manner of the party paying
(d) None of these

8. The goods are at the risk of the party who has the-
(a) Ownership of the goods
(b) Possession of the goods

(c) Custody of the goods

(d) Both (b) and (c)
9. If the seller delivers to the buyer a quantity less than he contracted to sell, the buyer may
(a) Reject the goods,
(b) Accept the goods
(c) Either ‘a’ or ‘b’

(d) Neither ‘a’ or ‘b’

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10. Appropriation of goods means

(a) Separating the goods sold from other goods
(b) Putting the quantity of goods sold in suitable receptacles

(c) Delivering the goods to the carrier or other bailee for the purpose of transmission
to the buyer without reserving the right of disposal
(d) All of the above
11. Which of the following is true as regards delivery of goods in instalments as provided
under Sale of Goods Act:
(a) The buyer is bound to accept the instalment deliveries only in case of perishable
goods
(b) The buyer is bound to accept the instalment deliveries only in case of sale of
goods by description
(c) The buyer is bound to accept the instalment deliveries only if agreed between the
parties
(d) Delivery of goods can’t be made in instalments

Descriptive questions
1. “Nemo Dat Quod Non Habet” – “None can give or transfer goods what he does not
himself own.” Explain the rule and state the cases in which the rule does not apply under
the provisions of the Sale of Goods Act, 1930.
2. J the owner of a Fiat car wants to sell his car. For this purpose, he hand over the car to
P, a mercantile agent for sale at a price not less than ` 50,000. The agent sells the car
for ` 40,000 to A, who buys the car in good faith and without notice of any fraud. P
misappropriated the money also. J sues A to recover the Car. Decide giving reasons
whether J would succeed.
3. Mr. S agreed to purchase 100 bales of cotton from V, out of his large stock and sent his
men to take delivery of the goods. They could pack only 60 bales. Later on, there was
an accidental fire and the entire stock was destroyed including 60 bales that were already
packed. Referring to the provisions of the Sale of Goods Act, 1930 explain as to who will
bear the loss and to what extent?

4. Ms. Preeti owned a motor car which she handed over to Mr. Joshi on sale or return basis.
After a week, Mr. Joshi pledged the motor car to Mr. Ganesh. Ms. Preeti now claims back
the motor car from Mr. Ganesh. Will she succeed? Referring to the provisions of the Sale
of Goods Act, 1930, decide and examine what recourse is available to Ms. Preeti.

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 THE SALE OF GOODS ACT, 1930 3.67

5. A, B and C were joint owner of a truck and the possession of the said truck was with B. X
purchased the truck from B without knowing that A and C were also owners of the truck.
Decide in the light of provisions of Sales of Goods Act 1930, whether the sale between B
and X is valid or not?
6. X agreed to purchase 300 tons of wheat from Y out of a larger stock. X sent his men with
the sacks and 150 tons of wheat were put into the sacks. Then there was a sudden fire
and the entire stock was gutted. Who will bear the loss and why?
7. The buyer took delivery of 20 tables from the seller on sale or return basis without
examining them. Subsequently, he sold 5 tables to his customers. The customer lodged a
complaint of some defect in the tables. The buyer sought to return tables to the seller.
Was the buyer entitled to return the tables to the seller under the provisions of the Sale
of Goods Act, 1930?
8. A delivered a horse to B on sale and return basis. The agreement provided that B should
try the horse for 8 days and return, if he did not like the horse. On the third day the horse
died without the fault of B. A file a suit against B for the recovery of price. Can he recover
the price?

ANSWER/HINTS
Answer to MCQs
1. (b) 2. (d) 3. (c) 4. (b) 5. (b) 6. (b)

7. (a) 8. (a) 9. (c) 10. (d) 11. (c)

Answers to Descriptive questions

1. Exceptions to the Rule Nemo dat Quod Non Habet: The term means, “none can give
or transfer goods what he does not himself own”. Exceptions to the rule and the cases
in which the Rule does not apply under the provisions of the Sale of Goods Act, 1930
are enumerated below:
(i) Sale by a Mercantile Agent: A sale made by a mercantile agent of the goods
or 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;

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(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.
(Proviso to Section 27).
Mercantile agent means an agent having in the customary course of business
as such agent authority either to sell goods, or to consign goods for the
purposes of sale, or to buy goods, or to raise money on the security of goods.
[section 2(9)]

(ii) Sale by one of the joint owners: If one of the several joint owners of goods
has the sole possession of them with the permission of the others the property
in the goods may be transferred to any person who buys them from such a joint
owner in good faith and does not at the time of the contract of sale have notice
that the seller has no authority to sell. (Section 28)
(iii) Sale by a person in possession under voidable contract: A buyer would
acquire a good title to the goods sold to him by 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 (Section 29).
(iv) Sale by one who has already sold the goods but continues in possession
thereof: If a person has sold goods but continues to be in possession of them
or of the documents of title to them, he may sell them to a third person, and if
such person obtains the delivery thereof in good faith without notice of the
previous sale, he would have good title to them, although the property in the
goods had passed to the first buyer earlier. A pledge or other deposition of the
goods or documents of title by the seller in possession are equally valid.
[Section 30(1)]
(v) Sale by buyer obtaining possession before the property in the goods has
vested in him: Where a buyer with the consent of seller obtains possession of
the goods before the property in them has passed to him, 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 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. [Section 30(2)].

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(vi) Sale by an unpaid seller: Where on 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 [Section 54(3)].
(vii) 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) Sale by a pawnee under default of pawnor will give valid title to the
purchaser.
2. The problem in this case is based on the provisions of the Sale of Goods Act, 1930
contained in the proviso to Section 27. The proviso provides that a mercantile agent
is one who in the customary course of his business, has, as such agent, authority either
to sell goods, or to consign goods, for the purpose of sale, or to buy goods, or to raise
money on the security of goods [Section 2(9)]. The buyer of goods from a mercantile
agent, who has no authority from the principal to sell, gets a good title to the goods
if the following conditions are satisfied:

(1) The agent should be in possession of the goods or documents of title to the
goods with the consent of the owner.
(2) The agent should sell the goods while acting in the ordinary course of business
of a mercantile agent.
(3) The buyer should act in good faith.
(4) The buyer should not have at the time of the contract of sale notice that the
agent has no authority to sell.
In the instant case, P, the agent, was in the possession of the car with J’s consent for
the purpose of sale. We assume the agent P acted in the ordinary course of business
and sold the car to buyer A in good faith. Therefore A, the buyer obtained a good title
to the car. Hence, J in this case, cannot recover the car from A.
3. Section 26 of the Sale of Goods Act, 1930 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 buyer’s risk
whether delivery has been made or not. Further Section 18 read with Section 23 of the
Act provide that in 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. Also
where there is contract for the sale of unascertained or future goods by description,

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the property in the goods thereupon passes to the buyer. when goods of that
description are put in a deliverable state and 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, Such assent may be express or implied.
Applying the aforesaid law to the facts of the case in hand, it is clear that Mr. S has the
right to select the goods out of the bulk and he has sent his men for the same purpose.

Hence the problem can be answered based on the following two assumptions and the
answer will vary accordingly.
(i) Where the bales have been selected with the consent of the buyer’s
representatives:
In this case, the property in the 60 bales has been transferred to the buyer and
goods have been appropriated to the contract. Thus, loss arising due to fire in
case of 60 bales would be borne by Mr. S. As regards 40 bales, the loss would
be borne by Mr. V, since the goods have not been identified and appropriated.
(ii) Where the bales have not been selected with the consent of buyer’s
representatives:
In this case, the property in the goods has not been transferred at all and hence
the loss of 100 bales would be borne by Mr. V completely.
4. As per the provisions of section 24 of the Sale of Goods Act, 1930, 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 the buyer 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 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; or

(c) he does something to the good which is equivalent to accepting the goods e.g.
he pledges or sells the goods.
Referring to the above provisions, we can analyse the situation given in the question.

Since, Mr. Joshi, who had taken delivery of the Motor car on Sale or Return basis and
pledged the motor car to Mr. Ganesh, has attracted the third condition that he has
done something to the good which is equivalent to accepting the goods e.g. he
pledges or sells the goods. Therefore, the property therein (Motor car) passes to Mr.

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Joshi. Now in this situation, Ms. Preeti cannot claim back her Motor Car from Mr.
Ganesh, but she can claim the price of the motor car from Mr. Joshi only.

5. According to Section 28 of the Sales of Goods Act, sale by one of the several joint
owners is valid if the following conditions are satisfied:-
(i) One of the several joint owners has the sole possession of them.

(ii) Possession of the goods is by the permission of the co-owners.

(iii) The buyer buys them in good faith and has not at the time of contract of sale
knowledge that the seller has no authority to sell.
In the above case, A, B and C were the joint owners of the truck and the possession of
the truck was with B. Now B sold the said truck to X. X without knowing this fact
purchased the truck from B.

The sale between B and X is perfectly valid because Section 28 of the Sales of Goods
Act provides that in case one of the several joint owners has the possession of the
goods by the permission of the co-owners and if the buyer buys them in good faith
without the knowledge of the fact that seller has no authority to sell, it will give rise to
a valid contract of sale.
6. According to Section 21 of the Sales of Goods Act, 1930, if the goods are not in a
deliverable state and the contract is for the sale of specific goods, the property does
not pass to the buyer unless:-
(i) The seller has done his act of putting the goods in a deliverable state and

(ii) The buyer has knowledge of it.

Sometimes the seller is required to do certain acts so as to put the goods in deliverable
state like packing, filling in containers etc. No property in goods passes unless such
act is done and buyer knows about it.
In the given case, X has agreed to purchase 300 tons of wheat from Y out of a larger
stock. X sent his men (agent) to put the wheat in the sacks. Out of 300 tones only 150
tons were put into the sacks. There was a sudden fire and the entire stock was gutted.
In this case, according to the provisions of law, for 150 tons of wheat, sale has taken
place. So, buyer X will be responsible to bear the loss. The loss of rest of the wheat will
be that of the seller Y.
The wheat which was put in the sacks fulfils both the conditions that are:-
(1) The wheat is put in a deliverable state in the sacks.

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(2) The buyer is presumed to have knowledge of it because the men who put the
wheat in the sacks are that of the buyer.
7. According to Section 24 of the Sales of Goods Act, 1930, in case of delivery of goods
on approval basis, the property in goods passes from seller to the buyer:-
(i) When the person to whom the goods are given either accepts them or does an
act which implies adopting the transaction.

(ii) When the person to whom the goods are given retains the goods without giving
his approval or giving notice of rejection beyond the time fixed for the return
of goods and in case no time is fixed after the lapse of reasonable time.
In the given case, seller has delivered 20 tables to the buyer on sale or return basis.
Buyer received the tables without examining them. Out of these 20 tables, he sold 5
tables to his customer. It implies that he has accepted 5 tables out of 20.

When the buyer received the complaint of some defect in the tables, he wanted to
return all the tables to the seller. According to the provisions of law he is entitled to
return only 15 tables to the seller and not those 5 tables which he has already sold to
his customer. These 5 tables are already accepted by him so the buyer becomes liable
under the doctrine of “Caveat Emptor”.
8. A delivered the horse to B on sale or return basis. It was decided between them that B
will try the horse for 8 days and in case he does not like it, he will return the horse to
the owner A. But on the third day the horse died without any fault of B. The time given
by the seller A to the buyer B has not expired yet. Therefore, the ownership of the
horse still belongs to the seller A. B will be considered as the owner of the horse only
when B does not return the horse to A within stipulated time of 8 days.
The suit filed by A for the recovery of price from B is invalid and he cannot recover the
price from B. [Section 24].
Had the horse died after the expiry of given time i.e. 8 days, then B would have been
held liable (if the horse was still with him) but not before that time period.

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