part2 sale and transfer of ownership

7/28/2019 Part2 Sale and Transfer of Ownership

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1TMH Copyright 2010


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2TMH Copyright 2010


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Case: Sale without ownership

Akash buys a laptop computer from Ramesh inresponse to an advertisement. Ramesh is an assistantto Ravi, and has access to the laptop which belongs toRavi. Akash has no idea that Ramesh is not the owner

of the laptop.

Owner: Ravi Seller: Ramesh

Buyer: Akash

Who should get the laptop?

3TMH Copyright 2010


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Judgement: Bishopgate v. Brakes

In the development of our law, two principles havestriven for mastery. The first is the protection of

property. No one can give a better title than hehimself possesses. The second is the protection ofcommercial transactions. The person who takes ingood faith and for value without notice should get agood title. The first principle has held sway for a longtime...

(Lord Denning)

4TMH Copyright 2010


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Judgement: Rowland v. Diwall

there has been a total failure of consideration, thatis to say that the buyer has not got any part of that forwhich he paid the purchase money. He paid themoney in order that he might get the property, and hehas not got it.

5TMH Copyright 2010


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Case: Sale of a Stolen Car

Sold On Sold to Amount

3 Feb, 1983 Car stolen from Miss Hopkin

6 Feb, 83 Autochoice

(Bridgend) Ltd

2, 100

14 March1983

Mid-GlamorganMotors Ltd

2, 350

18 March,1983

Jones 2, 650

6 Jan, 1984 Insurers ask for the car

6TMH Copyright 2010


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Case: Sale of a Hired Car

Sold on Sold to Amount (in

Pounds)

Aug 1, 1951 LeonardKennedy

1000

Aug 11, 1951 Mr. Hayton 1015

Aug 11, 1951 KingswayMotors Ltd.

1030

Aug 30, 1951 Mr.Butterworth

1275

7TMH Copyright 2010


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Case: Hired Car: List of Events

Date

(All in 1952)

Event

July 16 or 17 Butterworth gets to know the realowner

July 17 or 18 Kingsway Motors asked to repudiatecontract (By Butterworth)

July 25 Miss Rudolf becomes the Owner of

the car

Aug 2 Butterworth insists (with reference toJuly 17 letter) to repudiate contract

8TMH Copyright 2010


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Case: Washing Machine

X was selling and installing a washing machine for Y.Y had to pay for the machine in advance. The termsof the contract were that property in the washingmachine would pass when X installed the machine tothe satisfaction of Y. The plug point at Ys house wasdefective. There was a spark and the washingmachine, while being installed, got damaged. Y isinsisting that he be given a new machine while X says

that Y must bear the loss of the damage.

Decide.

9TMH Copyright 2010


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Case: Collection at Warehouse

X bought a washing machine from a shop, Y. X paid throughcredit card and the shop gave him a receipt mentioning theserial number of the washing machine. The purchase orderwhich X had signed mentioned that the ownership in the

washing machine would pass at the time of issuing of receipt.Thereafter, the buyer could take the receipt and collect it froma warehouse run by another person W. X went two days laterto collect the washing machine. In these two days, the shopmade sales to many other customers. By mistake, the shop

wrote the same serial number to another customer, C. Both, Xand C are at the warehouse, claiming the washing machine.

To whom should the warehouse give the machine?

10TMH Copyright 2010


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Case: Delivery of the TV Set

Z bought a television from a shop. The shop made areceipt for payment of the money and mentioned themodel of the purchase. The purchase order which Z hadsigned mentioned that the ownership passes at the time of

issuing of the receipt. Thereafter, the buyer could take thereceipt and collect it from a warehouse run by another

person W. Z went two days later to collect his television.In these two days, the shop made many sales to other

customers. When Z reached the warehouse, there wasonly one set of that model and W was handing it over toanother buyer, B. Z insists that he should be given thetelevision set as his receipt was for a date earlier than Bs.



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Case: Sale of Sugar

X sold 100 kg of sugar to Y at the rate of Rs. 20 per

kg. X collected Rs. 2000 from Y. X had only two

hundred kg in stock. Half the stock got destroyed. X

is claiming that Y should bear half the loss. He shouldbe entitled to receive only 50 kgs.

Decide



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Summary

The contract provides for the transfer of ownershipwhen the receipt is issued. However, ownership can

pass only in a specific machine. Thus, ownershipdoes not pass when the receipt is issued.



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Section 18

18. Goods must be ascertained.- 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.



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McEntire v Crossley Brothers

Ltd



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Hire-Purchase

Crossley Ltd. entered in an agreement with Mr.

Thomas Frederick Peel on 23 June 1892 to supply

Peel Otto gas engine. The price of the gas engine was

placed at Pounds 240. Peel was to pay Pounds 60before delivery. The remaining 180 pounds were to be

paid in eight quarterly instalments.



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Terms of Contract

will not in any way sell, assign, or sublet, or

otherwise part with the possession of the 'Otto' gas-

engine until the several sums shall have been fully

paid the sole and absolute property of the ownersand lessors, it being hereby expressly agreed and

declared that the said 'Otto' gas-engine is only let on

hire to the lessee until all sums of money due under

this agreement are paid.



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Sale of Engine

Before paying all the instalments, Mr. Peel became

bankrupt. Following the bankruptcy, the gas engine

was taken over by McEntire, a creditor, in settlement.

Crossley Ltd. questioned that the engine cannot betaken by McEntire as it still belonged to Crossley

Ltd.. The claim was contested by McEntire.



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Judgement

Upon an agreement to sell, it depends upon the

intention of the parties whether the property passes or

does not pass. Here the parties have in terms

expressed their intention, and said that the propertyshall not pass until the full purchase money is paid. I

know no reason to prevent that being a perfectly

lawful agreement. If that was really the intention of

the parties, I know of no rule or principle of lawwhich prevents it from being given effect to.



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Judgement

That is a question which entirely depends upon theintention of the parties. The law permits them to settlethe point for themselves by any expression of theirintention upon the point. In this case the matter is notleft to implication; because, if there be one point onthe face of this contract clearer than another, it is thatthe intention of the parties was that the seller shouldnot part with his dominion over the thing which he

was selling, and that the property should not becomevested in the purchaser until the last farthing of the

price was paid.



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Judgement

Applying the principle, the time Mr. Peel failed to

pay an instalment, the contract got breached. As a

result, Crossley Ltd. acquired the right, either to sue

for the remaining money or take the possession of itsgas engine and claim damages.



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Dennant v. Skinner



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Car Auction

Dennant carries on business as the South LondonMotor Auctions. Highest bidder, to whom cars wereknocked down, was George Albert King. Kingrepresented that he was the son of Kings Motors, awell known motor car dealer in Oxford. By showingcounterfoils of several large payments to motor cardealers, he persuaded Dennant to accept payment bycheque. As a protection, Dennant took the following

written undertaking from King:



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Undertaking by King

I hereby certify my cheque No._____ will be met on

presentation at my bank. Furthermore, I agree that the

ownership of the vehicles will not pass to me until

such time as the proceeds of my cheque have beencredited to South London Motor Auction account at

Lloyds Bank.



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The Cheque is Dishonoured

Assured with the above protection, Dennant let King takeaway the vehicles. The cheque, however, wasdishonoured on presentation and it transpired that Kinghad no connection with the King's Motors. In this while,

King had sold the car to a person, who in turn sold it toSkinner, another motor car company.

The police was informed of the matter. King pleaded

guilty and was convicted. Dennant sought to recover thecar, claiming to be his property from Skinner. Skinner and

Dennant had a dispute as to the ownership of the car.



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Legal Provision

Section 18 of the British Sale of Goods Act, 1893.

(Section 19 of the Indian Sale of Goods Act)

provides:

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 or the time of delivery or both be postponed.



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Judgement

A contract of sale is concluded in an auction sale on

the fall of the hammer, and, indeed, the Sale of Goods

Act, 1893, s. 58 (2), so provides. Accordingly, on

the fall of the hammer the property of this car passedto King unless that prima facie rule is excluded from

applying because of a different intention appearing or

because there was some condition in the contract

which prevented the rule from applying.



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Judgement

The court constructed the subsequent signing of thedocument on ownership:

The document contemplates that the ownership ofthe vehicle has not passed to the bidder, but, as Ihave already said, in my judgment, it had passedon the fall of the hammer, and, if subsequently the

bidder executed the document acknowledging thatthe ownership of the vehicle would not pass tohim, that could not have any effect on what hadalready taken place.



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Judgement

the property had passed on the fall of the hammer,but still the plaintiff had a right to retain possession ofthe goods until payment was made. If, when he wasready to deliver the goods, payment was not made, hecould have sued for the price, or he could haveexercised powers of re-sale, and he could havesecured himself by way of lien on the goods for the

price, but once he chose, for reasons good, bad, or

indifferent, as a result of statements fraudulent orhonest, to part with the possession of the vehicle bygiving delivery of it,



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Judgement

he then lost his seller's lien and he no longer had a

right to possession of the vehicle. He had a right until

it was delivered, but as the right of retainer was not

exercised he had no right in the vehicle. The propertyin the vehicle had passed to King. His right to the

property had gone and his right to possession had

gone.



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Judgement

The Court concluded:

In my view, the property had passed on the falling

of the hammer. The right to possession had passedwhen the plaintiff, persuaded and misled by King'slies, parted with his seller's lien, and there wasnothing left on which he could found a claim in

detinue against some third person, in this case thedefendant, who was thus put in possession of thevehicle.



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Legal Provision

47. Sellers lien.- (1) Subject to the provisions of this Act,the unpaid seller of goods who is in possession of them isentitled to retain possession of them until payment ortender of the price in the following cases, namely:-

(a) where the goods have been sold without any

stipulation as to credit; (b) where the goods have been sold on credit, but the term

of credit has expired; (c) where the buyer becomes insolvent.

(2) The seller may exercise his right of liennotwithstanding that he is in possession of the goods asagent or bailee for the buyer.



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Agricultural Market Committee

v. Shalimar Chemical WorksLtd.



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Tax on Purchase

Shalimar Chemical Works Ltd. based in Hyderabad,

imports dried coconut kernel from various places in

Kerala for manufacturing coconut oil.

Agriculture Market Committee levies taxes on

transactions of purchase and sale take place

within the notified area of the Committee.



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Trade Arrangement

Shalimars dealers despatched the goods by lorry toHyderabad and send the documents for collecting theconsignment at Hyderabad to a bank. The invoicesraised by the dealers mentioned that the despatch of

the good was made solely at the risk andresponsibility of M/s. Shalimar Chemical Works. Theinvoices also mentioned that the seller took noresponsibility or liability as to delayed despatches,losses due to theft, pilferage, rain or damage.

Shalimar had also obtained insurance of the goodsand had paid the policy premium.



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Trade Arrangement

Shalimar Ltd. after receiving documents from the

bank on making payment, would unload the lorry at

its premises. Weighing was done to verify the

quantity.

If there was a shortage in the quantity received, which

was rare, Shalimar would raise a debit note against

the dealer for the shortage.



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Judgement

The weighment of the goods at Hyderabad or the

collection of documents from the bank or payment of

price through the bank at Hyderbad were immaterial,

inasmuch as the property in the goods had alreadypassed at Kerala and it was not dependant upon the

payment of price or the delivery of goods to the

respondent.



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Underwood Limited v Burgh Castle

Brick and Cement Syndicate



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Unconditional Contract

It was an unconditional contract for sale of an engine.

The engine was attached to the ground. It had sunk

into concrete and it had to be taken to pieces to

unfasten it. In the course of detaching from theground and loading on to train, the engine got

damaged. On arrival, the buyer refused to accept it.



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Judgement

The sale was that of a specific chattel to be deliveredby the Plaintiffs, but the fact that it was to bedelivered by them is not the test whether the property

passed. The test is whether anything remained to be

done to the engine by the sellers to put it into adeliverable state; and by that I understand a state inwhich the thing will be the article contracted for bythe buyer; I do not mean deliverable in the sense that

it is properly packed or anything of that kind. It musthave everything done to it that the sellers had to do toit as an article.



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Judgement

I do not think therefore that the fact by itself that thesellers had to take the engine to pieces would

postpone the time when the property passed. Manychattels have to be taken to pieces before they can be

delivered - e.g. a sideboard or a billiard table;nevertheless the property in these passes on the saleand is not postponed until the article is actually takento pieces and delivered.



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Judgement

I do not, therefore, lay any stress on the fact of the

engine having to be taken to pieces. I think the

important point is that the parties were dealing with

an article which was a fixture to the premises, andthat is different from the case of a loose chattel. The

buyers' intention was to buy an article which would

be a loose chattel when the processes of detaching

and dismantling it were completed, and to convert itinto a loose chattel these processes had first to be

performed.



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Legal Provision

Section 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 puttingthem into a deliverable state, the property does not

pass until such thing is done and the buyer has notice

thereof.



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Kirkham v Attenborough and Gill



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Jewellery on Sale or Return

Kirkham, a jewellery maker, passed on jewellery toMr. Winter in early 1895 with a contract notementioning the price on sale or return basis. Winter

pawned some jewellery to Attenborough and some to

Gill. In January 1898, Mr. Winter died. He had notpaid Kirkham for the jewellery nor had he intimatedKirkham that he intended to keep the jewellery.Kirkham demanded the return of the jewellery from

Attenborough and Gill. Attenborough and Gillrefused to return the jewellery unless the borrowedamount was paid back to them.



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Judgement

The position of a person to whom goods have been

delivered on a contract of "sale or return" is this: He

has an option of becoming the absolute purchaser of

the goods, and may become the absolute purchaser inthree ways. He may buy them at the price fixed; he

may retain them so long as to make it unreasonable to

return them; or he may do something inconsistent

with a return of the goods



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Legal Provision

Section 24 of the India Act (Same as the British law):

Section 24: When goods are delivered to the buyer onapproval 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 tothe seller but retains the goods without giving notice ofrejection, then, if a time has been fixed for the return ofthe goods, on the expiration of such time, and, if no timehas been fixed, on the expiration of a reasonable time.



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Judgement

I think that, if he retains the goods for anunreasonable time, he does something which isinconsistent with a return of the goods. Again, if hedoes an act which is inconsistent with a return, as, for

instance, if he sells the goods, that is an act "adoptingthe transaction," and the property passes. Again, if hepawns the goods, he adopts the transaction, becausehe has not then the free control over the goods so asto be able to return them. In all these cases, he comes

within the words of the section, as having done an actadopting the transaction, and the property in thegoods passes.



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Judgement

The Court concluded:

If that is the true construction of the section, it is

perfectly clear that the defendants are entitled toretain the goods, because they have been pawned

to them. An act has been done which is

inconsistent with a return of the goods, and,

therefore, the property in the goods passed to

Winter, and, therefore, to the defendants.



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Case: Sale and Transportation

Niraj settled on a TV and paid the price. As the TV wasbulky, he expected the shopkeeper to deliver it to hisplace. The shop said they could organise it in theafternoon. The shop called him in the afternoon and said

that they have loaded it on a three wheeler and Nirajshould settle on the carriage charges with the driver. Nirajwas unhappy with the petty behaviour of the shop. Hehad bought a TV for Rs. 18,000 without bargaining andnegotiating. The least the shop could have done is

provided free carriage.



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cont

A car hit the three wheeler at a cross section and the

picture tube of the TV broke. Niraj is insisting that

the shopkeeper give him a new television while the

shopkeeper says that the carrier was carrying thetelevision for Niraj.



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Risk, Carriage and Insurance

In all transactions thereafter Niraj was cautious and

asked the question:

When does the ownership gets transferred?

Who pays for carriage and insurance?

Who bears the risk of damage?


I


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Incoterms

Group

E Ex W Ex Works

F FCA

FASFOB

Free Carrier

Free Alongside ShipFree on Board

C CFR

CIFCPT

Cost and Freight

Cost, insuranceFreight

Carriage Paid To



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FAC

Free carrier (FCA) can be used for all modes of

transportation and different modes in the same

delivery. The seller delivers the goods into the

custody of the first carrier, and this is where riskpasses from seller to buyer. The buyer pays for the

transportation. FCA would be followed by the city

name. For example, FCA Hong Kong would mean

that the supplier would deliver the goods to thecarrier in Hong Kong.



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FAS

Free Alongside Ship (FAS) means that the seller pays

for transportation of the goods to the port of

shipment. The buyer pays loading costs, freight,

insurance, unloading costs and transportation fromthe port of destination to his premises. The passing of

risk occurs when the goods have been delivered to the

quay at the port of shipment.



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FOB

Free On Board (FOB) means that the seller pays for

transportation of the goods to the port of shipment

and loading on the ship. The buyer pays freight,

insurance, unloading costs and transportation fromthe port of destination to his factory. The passing of

risks occurs when the goods pass the ship's rail at the

port of shipment. The term specifies the port of

origin, e.g. "FOB New York" or "FOB Mumbai".



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CFR

Cost and Freight (CFR) means that the seller pays for

transportation to the port of shipment, loading and

freight. The buyer pays for the insurance and

transportation of the goods from the port ofdestination to premises. The passing of risk occurs

when the goods pass the ships rail at the port of

shipment.



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CIF

Cost, Insurance and Freight (CIF) is a common termin sale contract in ocean transport. When a price isquoted CIF, it means that the selling price includesthe cost of the goods, the freight or transport costs

and also the cost of marine insurance. The seller paysfor transportation to the port of shipment, loading andfreight and marine insurance. The seller'sresponsibility for the goods ends when the goods

have been delivered to the marine carrier or havebeen delivered on board the shipping vessel,depending upon the terms of the contract.



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Ms. Marwar Tent Factory v.

Union of India



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Loss in Transit

After the tents were passed by the inspector, the tents were to

be despatched to Commandant, C.O.D., Kanpur. Tents were to

be put on rails at Jodhpur under the terms of f.o.r. Jodhpur.

Delivery note was to be sent to C.O.D. Kanpur by registered

post. On receipt of the delivery note, C.O.D. was to pay 95%of the price to the Marwar Tent Company. The remaining 5%

was to be paid after receipt of the goods in good condition by

the C.O.D., Kanpur. A consignment of 1500 tents was

despatched by the Marwar Tent Company. As a result ofpilferage in transit, C.O.D. Kanpur received only 1276 tents.

It, thus, deducted for the loss of 224 tents from the payment to

Marwar Tent Company.



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Judgement

Under a free on rail contract (F.O.R.) the seller

undertakes to deliver the goods into railway wagons

or at the station (depending on the practice of the

railway) at his own expense, and (commonly) tomake such contract with the railway on behalf of the

buyer as is reasonable in the circumstances. Prima

facie the time of delivery F.O.R. fixes the point at

which- property and risk pass to the buyer and theprice becomes payable.



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Judgement

The words f.o.r. are well known words in commercialcontracts. In my judgment they mean when used to qualifythe place of delivery, that the seller's liability is to place thegoods free on the rail as the place of delivery. Once that is

done the risk belongs to the buyer.

in view of the terms and conditions of the contract regarding the place of delivery 'F.O.R. Jodhpur', the

property in the goods passed immediately on to the sellerafter delivering the goods and loading the same in therailway wagons at Jodhpur for transmission to the buyer

part2 sale and transfer of ownership

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