BUSINESS LAW PROJECT

TRANSFER OF OWNERSHIP

SUBMITTED TO:-> FALAK KHANNA SUBMITTED BY:-> (1) NUPUR JINDAL-2359 (Slide 4 to Slide 9) (2)HEENA AGGARWAL-2277 (Slide 10 to Slide 17) (3) PAYAL MITTAL-2273 (Slide 18 to Slide 24) (4) PALLAVI SAINI -2311 (Slide 25 to Slide 28)

TRANSFER OF OWNERSHIP Transfer of property means transfer of ownership of the goods from the seller to the buyer which constitutes an ownership in the buyer . Transfer of possession of goods does not necessarily mean that property in goods has also been transferred .

Important points:-> 1. RISK OF LOSS : The risk of loss also passes with the ownership of the goods from the seller to the buyer . In the case of loss or of goods it is the owner who suffers . If the goods are still in the possession of the seller and the ownership transferred to the buyer, the loss of goods shall fall on the buyer. 2. Only owner can sue : Where the goods are destroyed or damaged by the action of a third party, it is only the owner which possesses the ownership in goods , who can sue or take legal action the third party.

3. Insolvency of buyer or seller : Where the buyer or the seller have become insolvent . The question whether the official receiver or official assignee can take over the property in goods depends upon the fact that who has the ownership in goods at that time . The buyer or the seller . 4. Suit for price: The seller can sue for the price , unless otherwise agreed, only if the goods have become the property of the buyer. The

Time when property passes 1. In the case of unascertained goods :- Section 18 provides that where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the goods is transferred to the buyer unless and until the goods are ascertained. A contract to sell unascertained goods is not a complete sale, but an agreement to sell. Example: An agreement to sell 50 quintals out of a large quantity of rice in a godown does not make the buyer the owner of anything . He can become owner of 50 quintals of rice only after this quantity of rice has been separated out from the other rice in the godown.

2. In the case of ascertained goods:- 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 to be transferred. Example: There was a mixed contract for storage of paddy and its subsequent sale. The paddy was in the first instance delivered to the defendant for storage and the plaintiff had the option to name a day on which the defendant was to buy at his current buying rate for that day. In these circumstances the property in the goods was held not to pass until the option had been exercised.

Rules as regards passing of property The number of rule in are determined in sections 20 to 24 for determining as to when property will pass from the seller to the buyer. Specific goods in deliverable state (sec. 20) In a contract of sale of specific goods in a deliverable state, the property in goods passes to the buyer when the contract is made . It is applicable in following cases : The contract of sale must be unconditional, it must relate to specific goods , and the goods must be in a deliverable state. Example: B offers A for his horse Rs. 10000 on a month’s credit. A accepts the offer. The horse becomes B’s Property as soon as the offer is accepted.

{2} Specific goods not in a deliverable state Section 21 lays down that when there is a contract for the sale of specific goods and 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 therof. ‘Something’ means an act , like collecting the goods, severing the goods, or packing or loading the goods or filling them in containers , etc. Example:- There was a contract for the sale of machinery weighing 30 tons and embedded in a concrete floor. A part of the machinery was destroyed while being removed . It was held that the buyer was entitled to refuse to take the machine as it was not in a deliverable state.

{3} when goods have to be measured , tested , etc {3} when goods have to be measured , tested , etc. Section 22 lays down that 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 to 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 thing or act is done and the buyer has notice thereof. EXAMPLE:-A, the owner of a wagon of hay,contracts to sell it to B. It was to be weighed and delivered at Rs 10,000 per ton.B agrees to take and pay for it on a certain day.Part is weighed and delivered it to B;the ownership of the residue is not transferred to B until it has been weighed.

{4} unascertained goods and its appropriation Section 23 deals with the question of passing of property in the case of contract for the sale of unascertained or future goods by description. It provides that in such cases, when the goods are unconditionally appropriated to the either by the seller with the assent of the buyer, or by the buyer with the assent of the seller, the property in goods passes to the buyer. The appropriation of the goods must take place before there has been a breach of the contract by the either party. If the seller delivers the goods to the buyer or to carrier 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.

In the following two cases ,the seller is deemed to have reserved the right of disposal of himself. (a) Where the goods are shipped or delivered to a railway administration for carriage and by the bill of lading or railway receipt , they arte deliverable to the order of the seller or his agent. EXAMPLE:- B placed an order with S requesting him to send the goods by sea. S taking a bill of lading in the name of B and sent it to his own agent. The goods were destroyed in the course of voyage. S had to suffer the loss as the ownership had not passed to B.

(b) Where the seller of goods draws on the buyer for the price of the goods and sends the bill of exchange and bill of lading or railway receipt to the buyer together, the property in the goods does not pass to the buyer unless he accepts the bill of exchange. The buyer must return the bill of lading or railway receipt if he does not honor the bill of exchange.

{5} goods sent on approval or ‘on sale or return’ When goods are sold under a contract of ‘sale or return’ or on approval, the sale is a conditional sale. The property is such a case passes to the buyer- (i) when the buyer signifies his approval or acceptance to the seller; or (ii) does any other act adopting the transaction (iii) where the buyer does not signify his approval or acceptance but retains the goods without giving notice of rejection, in such a case [a] if a time has been fixed for the return of the goods, on the expiration of such time; and [b] if no time has been fixed on the expiration of a reasonable time

Passing of risk:- Section 26 lays down the general rule that risk prima facie passes with the property. It provides that subject to a contract between the parties the goods remain at the seller’s risk until property therein has passed to the buyer. But once the property in the goods is not transferred to the buyer, the goods are at buyers risk , whether delivery has been made or not.

The general rule that the risk passes with the property is subject to the following exceptions , namely: (i) The rule has no application where the parties have come to some agreement to the contrary. (ii) The rule has no application where delivery has been delayed through the fault of either buyer or seller . In such a case, the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault. (iii) The rule does not affect the rights and liabilities of the seller or the buyer as bailee of goods for the other even when the risk is passed.

DUTIES OF SELLER :-> C.I.F. Contracts- The words C.I.F. stands for cost, insurance, freight. Under such a contract the seller himself has to pay the cost of goods, insurance charges during transit to the buyer and the freight. The price agreed to be paid between the parties to contract of sale includes all these three. DUTIES OF SELLER :-> To make out an invoice of the goods sold. To ship the goods at the port of shipment. To procure on shipment a contract of affreightment under which the goods will be delivered at the destination contemplated by the contract.

DUTIES OF BUYER:-> The buyer must pay the price on the presentation of the usual or agreed documents. In case there is the contract to pay after a certain time, the buyer must accept the bill of exchange or the draft upon tender of the proper shipping documents. Where a payment is agreed through a banker’s credit, the buyer must furnish a letter of credit in favour of the seller.

F.O.B. Contracts- The words F.O.B. mean Free on Board. In a F.O.B. contract the seller is to put the goods on board a ship at his own expense, for carriage to the buyer. Thereupon the delivery is complete and the property and risk in goods pass to the buyer. Ex-ship Contracts- In case of an ex-ship contract the seller undertakes to give delivery to the buyer from a ship which has arrived at the port of delivery and has reached a place therein which is usual for the delivery of the goods of the kind.

Sale By Non-Owners:-> In the case transfer of ownership of goods from the seller to buyer, it is presumed that the seller is a full owner of goods, and on transfer the buyer also becomes an absolute owner of the goods. But where the seller is not an absolute owner of goods, the buyer will not get a better title than what the seller himself has. The rule is expressed by the maxim, “Nemo Dat Quod Non Habet”, which means that no one can pass a better title than he himself has.

Exceptions to the Rule (1)Sale by a mercantile agent- Where mercantile agent is , with the consent of the owner, in possession of the goods and sale is made by him in the ordinary course of business, such sale shall be valid provided the buyer acts in good faith and without notice that the seller has authority to sell. Here the buyer acquires a good title to the goods, though the seller had no authority to sell. The exception will hold good if the following conditions are fulfilled. the person making the sale must be a mercantile agent, the mercantile agent must be in possession of the goods or of documents of title to the goods,

Such possession must be with the consent of the owner, he must have made the sale when acting in ordinary course of business of mercantile agent, The buyer must act in good faith, The buyer should not have at the time of contract of sale notice that the agent has no authority to sell.

(2)Sale under implied authority of owner or title by estoppel- Under certain circumstances the true owner may be prevented by his conduct from denying the seller’s authority to sell. Thus, where the owner by his words or conduct causes the buyer to believe that the seller was the owner of the goods, or had the owner’s authority to sell them, and induced him to buy them in that belief, he cannot afterwards set up the seller’s want of title or authority to sell.

3. Sale by one of joint owners (section 28) Where one of several joint owners, has sole possession of the goods by permission of the co-owners the property in the goods is transferred to any person who buy them from such joint owner in good faith and without notice that the seller had no authority to sell. Example: A,B and Care joint Hindu brothers who own certain cattle in common. B and C leave the cow in possession of A, which A sells to D. D makes the purchase in good faith. The property the cow is transferred to D. 4. Sale by a person in possession of goods under a voidable contract (Section 29) Section 29 provides that a person in possession of goods under a voidable contract which has not been rescinded can transfer a good title to the buyer who buys the goods in good faith and without notice of the seller’s defect of title. Example: A, by misrepresentation induces B to sell and deliver to him a horse. A sells the horse to C before B has rescinded the contract. The property in the horse is transferred to C.

5. Sale by seller in possession after sale Section 30 (1) provides that where a person a person sold but continues 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 delivery thereof in good faith and without notice of the previous sale, he gets a good title to them. Example: A sold certain goods to B, but continued to remain in possession thereof with the consent of the buyer. A subsequently resold the goods to another person. It was held that the third person purchaser had acquire a good title. 6. Sale by buyer in possession after sale Section 30 (2) deals with a case where a buyer having bought or having agreed to buy goods, obtains with the consent of the seller possession of the goods or of documents of title to the goods and sells them to a bonafide transferee. Example: B agreed to buy a car if his solicitor approved. B obtained possession of the car and sold the same to C. But the solicitor later on disapproved of the transaction. It was held that the title has passed to C.

7. Sale by an unpaid seller Where an unpaid seller who has right of lien or stoppage in transit resells the goods, the buyer acquires a good title thereto as against the original buyer. Thus, a buyer at a resale acquires a good title. 8. Exception under other Acts Under certain Acts, a person although he is not the owner of the goods may sell the goods and pass a better title than he himself has. The following are of some cases. Under section 169 of the Contract Act a finder of the goods has the power to sell the goods under certain conditions and the buyer will acquire a better title. Thus, where a person leaves a ring or watch on a seat in a park, and the owner of the watch or ring cannot be found with reasonable diligence, the bonafide purchaser will get a good title. Under section 176 of the Contract Act, a pawnee of goods has the power to sell the goods pawned under certain conditions and he passes a better title than he himself has. In some cases, a special power of sale is given to officers of court, liquidators of companies, receivers of insolvent's estate, custom officers for duties remaining unpaid, etc. All these persons are not owners, yet they sell properties of others, and convey a better title to the buyers than they themselves possess.

9. Sale in Market Overt Under the English law, an important exception of the rule that a person can’t make a valid sale of goods, that do not belong to him is to be found in case of sales made in market overt. Where goods are sold in market overt, i.e., sale at certain place and time, the buyer acquires a good title to the goods provided he buys them in good faith and without notice of any defect or want of title on the part of the seller. This rule does not apply in India.

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