Page 127 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes under the contract. Unless and until the required quantity of 200 quintals is separated from the
larger quantity and the goods have been ascertained the property therein cannot pass from the
seller to the buyer.
Section 23 provides that in the case of sale of unascertained goods or future goods by description,
property passes to the buyer when goods of that description 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.

Unconditional appropriation: The unconditional appropriation of goods may be made either
by the seller with the buyer’s assent or by the buyer with the seller’s assent. Normally goods
shall be appropriated by the seller. Where he appropriates the goods to the contract, the property
shall pass to the buyer only when the latter has assented to the appropriation. The assent,
however, may be given before or after appropriation. Whether the appropriation is done by the
seller or the buyer, the assent of the other party must be obtained. Where goods are in the
possession of the buyer, he may do the appropriation.

Example: There are 500 bags of wheat lying with the seller and he selects 100 bags out of
the lot with the buyer’s assent, the ownership of those 100 bags would pass to the buyer as soon
as this is done.
Mode of appropriation: The appropriation by the seller may be done by (i) putting the quantity
contracted for in suitable receptacles, such as boxes, gunny bags, bottles, etc., with the assent of
the buyer, or (ii) deliver to the carrier or other bailee for transmission to the buyer, without
reserving the right of disposal.

Example: A seller contracts with a buyer for sale of certain goods with a stipulation that
delivery is against payment in cash. No property passes to the buyer till cash payment is made.
Seller reserving the right of disposal: Whether or not the seller has retained the right of disposal
over the goods even after delivering them to a common carrier, is a question of fact depending
on all the surrounding circumstances. But where the railway receipt (R/R) or bill of leading
(B/L) is taken in the name of the buyer or his agent, it is presumed (though rebuttable) that the
seller did not retain the right of disposal. If these documents are made out in the seller or his
agent’s name, the presumption is that the right of disposal is reserved by him.

Section 25 (3) provides that where the seller of goods draws a bill of exchange (B/E) on the buyer
for the price, and transmits the B/E along with B/L to the buyer, to secure acceptance or payment
of the B/E, the buyer is bound to return the bill of lading if he does not honour the bill of
exchange. In case the buyer wrongfully retains the bill of lading, the property in the goods does
not pass to him.
Sale on ‘approval’ or ‘sale or return’ basis: Where goods are delivered to another person on
approval or on ‘sale or return’ or similar terms, the property passes to him when he (i) signifies
his approval or acceptance to the seller; (ii) does any act adopting the transaction e.g., pledges
the goods with a third party; or (iii) retains the goods, without giving notice of rejection, beyond
the time fixed for the return of goods, or if no time is fixed, beyond a reasonable time.
Sale for cash only or return: In this type of sale, property does not pass to the buyer until paid
for. In such a case, if the buyer creates a pledge, it will be invalid, and the seller will have a right
to recover the goods from the pledgee.

120 LOVELY PROFESSIONAL UNIVERSITY