Transfer of Ownership

A. Meaning of Transfer of ownershipThe ownership of goods is different from possession of goods. These are two different aspects of a contract of sale. The ownership of the goods may pass on from the seller to buyer, but the goods may remain in the possession the seller. Similarly a person may have possession of goods, but he may not be the owner of those goods.In a contract of sale, when the goods are sold to the buyer, the buyer becomes owner of those goods irrespective of the fact whether the buyer has taken delivery of goods or not. It is therefore transfer of ownership means transfer of general property to the buyer, on such transfer; buyer can enjoy peaceful possession, can use and further sell those goods.

B. Significance of Transfer of ownershipThe following rights and obligations of the parties are affected by such transfer.

1. Risk passes with the ownershipIn case the goods are destroyed, the real owner of those goods will bear the loss, regardless of the fact that who is having possession of those goods.However, if the delivery of goods is delayed due to fault of the seller or buyer, the goods are at the risk of the party at fault.

2. Right to take action against third partyGoods are damaged by a third party; it is the owner who can take action.

3. Right to file suit for priceIn a contract of sale, seller becomes entitled to recover the price from the buyer only when ownership has transferred to the buyer.

C. Rules regarding Transfer of ownershipIn a contract of sale of specific or ascertained goods, the ownership passes to the buyer, at the time, when the parties are intended to do so. But sometimes, the intention of the parties may not be clear from the contract. In such cases, the following rules, which are contained in section 18 to 24, are applicable. For this purpose goods may be classified into three groupsSpecific or ascertained, Unascertained or generic, goods sent on approval.

1. Specific goods or Ascertained goods(i) Specific goods in deliverable state: The ownership of goods passes to the buyer, when

the contract is made. But when contract of sale is conditional, ownership will pass when the condition is fulfilled.

(ii) Specific goods not in deliverable state: When the seller is bound to do something to the goods such as polishing, extra fitting etc., ownership will be transferred on completion of such acts and the buyer has notice thereof.

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(iii) Specific goods to be measured or weighed for determining the price: The ownership will be transferred when the task of measuring is complete and the buyer has notice thereof.

2. Unascertained goods & Future goodsOwnership is transferred only when the goods are ascertained.In the process of ascertaining the goods two processes are involved, i.e. process of identification and process of appropriation.In the first step, goods are identified and separated from the lot. And appropriation, can be done by putting goods in bags or boxes or bottles or sometimes delivery of goods to the carrier for transmitting them to the buyer, without reserving right of disposal.Appropriation can be done either by the seller or buyer. Once goods are appropriated, the ownership passes to the buyer.(Unascertained goods are unidentified goods ie. Goods defined by description or by sample. Future goods are goods which are yet to be manufactured. It should be noted that unless goods are ascertained and appropriated, there is only an agreement to sell)

3. Goods sent on ‘Sale or Return basis’Ownership passes to the buyer(i) When buyer signifies his approval or acceptance(ii) When buyer does some act which shows that he has accepted goods(iii) When buyer retains goods, at the expiration of a reasonable time

D. Sale by non ownersIt is only the real owner of the goods or person authorised by him can sell the goods and thereby can transfer the title of those goods to another person. But it is subject to following exceptions.1. Title by stoppel

A, who is the real owner of goods, tells B, who is a prospective buyer that C who is selling goods has been authorised by him to sell. B, will get good title.

2. Sale by mercantile agentA was appointed as a mercantile agent to buy raw material for B. A purchases raw material but sells it to C, who buys in good faith believing that A, has authority to sell. C gets good title.

3. Sale by joint ownersA, B and C are joint owners, of some furniture. And with the consent of B and C the furniture was kept in the possession of A. A sells the furniture to P who buys it in good faith gets good title.

4. Sale by person in possession under voidable contractA buys B’s car by seeking his consent at gun point. On obtaining possession and ownership of the car, A sells it to C before B rescinds the contract. C gets good title.

5. Sale by seller in possession after saleA buys some goods from B and leaves them with B for some time. Meantime, B resells same goods to C, who buys in good faith and he gets good title.

6. Sale by buyer in possession after sale7. Sale by unpaid seller8. Sale by finder of goods9. Sale by pledgee10. Sale by official receiver

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