“In case of unascertained goods, the property in goods does not pass unless and until the goods are ascertained”. (Discuss and also explain S20 and S21 of the sale of goods act, 1930)
Introduction:
Goods means every kind of movable property, other than actionable claims and money; and includes stocks, shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.
Thus we can define goods as every kind of movable property except actionable claims and money.
The Sale of Goods Act:
The Sale of Goods Act is an Act to define and amend the law relating to the sale of goods. It also governs the contracts relating to sale of goods. This Act applies to the whole of India except the State of Jammu & Kashmir. It came into force on 1st July 1930. The contracts for sale of goods are subject to the general principles of the law relating to contracts i.e. the Indian Contact Act. A contract for sale of goods has, however, certain specific features such as, transfer of ownership of the goods, delivery of goods rights and duties of the buyer and seller, remedies for breach of contract, conditions and warranties implied under a contract for sale of goods.
Contract of sale:
According to Sec. 4 of the Sale of Goods Act, a contract of sale is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price.
a. Bilateral contract.
b. Money consideration.
c. Transfer of property.
d. Goods.
e. Work & Labour. (painting, carpentry etc.)
f. Essentials of a valid contract.
4 essential elements of a contract of sale:
a) The parties must be competent to contract.
b) There must be mutual consent
c) There must be transfer of property i.e. there must be transfer of general property in goods and not merely specific property
d) The buyer must pay or promise to pay, a price in money.
Thus, a sale must be the result of a contract, in pursuance, whereof, a transfer of property takes place on payment of a price. The contract may be oral or in writing. It may even be inferred from the conduct of the parties. It must however, originate in an offer and its acceptance.
Specific or ascertained goods:
Specific goods, occasionally called ‘ascertained’ in distinction to unascertained goods1, are defined by the Sale of Goods Act as goods identified and agreed on at the time a contract of sale is made2. The identity of specific goods is unique. Satisfaction of a contract of sale concerning specific goods will only be accomplished if these, and only these, are delivered. A consequence of this rule is that where there is a contract for the sale of specific goods and the goods, without the knowledge of the seller, have perished at the time the contract is made, the contract is void3. Goods may be treated as having perished when they are so damaged as no longer to answer to the description under which they have been sold4. Where there is an agreement to sell specific goods and the goods, without any fault on the part of the seller or buyer, subsequently perish before the risk has passed to the buyer, the agreement to sell is avoided.
Unascertained goods:
Goods which are not specific are unascertained1. Into this category fall (1) generic goods, and (2) uncovered portions of a larger, identified quantity of goods, the common characteristic being that the subject matter is determined only by description. If there is a contract concerning generic goods, fulfillment is achieved by the delivery of any goods which form part of that genus. In the second case, the contract is fulfilled by delivery of the requisite proportion of the designed larger quantity. The unidentified portion of an identified bulk poses considerable problems in relation to the passing of property. Perhaps the soundest view is that such a portion should be regarded as unascertained, and properties in it will not pass.
Contracts for the sales of unascertained goods:
Specific goods are defined as the goods “specifically identified at the time a contract of sale is made”, e.g. a shirt made of cotton and with a Mickey Mouse cartoon on it. If the good cannot be identified, the contract is considered as the sale of unascertained goods. In sale of specific goods the seller is obligated to deliver the identified goods.
Every contracts for the sales of unascertained goods are included in sales by description and specific goods, which the buyer has not seen the goods through any catalogue and brochure. In the case of Varley v Whipp, Varley agreed to sell to the Whipp a “second-hand self-binder reaping machine”, which quite new and used to cut only 50 or 60 acres. When the machine was delivered, Whipp claimed that it did not match with the statement. So, the court held that it was a sale of good by description and Whipp have the right to claim. In another case of Nagurdas Purshotumdas & Co. v Mitsui Bussan Kaisha Ltd, previously they had a sale of flour bearing a well-known trademark. Later on, flour was ordered based on the description as “the same as our previous contract”, which identical in quality. However, it failed to bear the same well-known trademark when it was delivered to the buyer.
There can be a sale by description where specific goods have been seen. In the case of Grant v Australian Knitting Mills Ltd, Grant claimed that the woolen garment that he bought had caused him to get dermatitis. He suspected that it was caused by external factor. Later on, it was found to be defective due to the presence of excess sulphites, which was negligently left in it in the process of manufacture. There was a sale by description even though the buyer is buying something displayed before him on the counter, as the good did not meet the description.[1]
Goods must be ascertained:
Where there is contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained Synopsis:
=>Transfer of property
=>Property cannot pass until the goods are identified
=>Part of a specific whole
=>Property and risk
=>Identification of goods
1. Transfer of property:
This and the five following sections of the Act deal with the question foreshadowed by section 4 of the Act and lay down rules which assist in deciding the question when the object of the contract of sale, namely, the transfer of the property in the goods to the buyer has been affected.
2. Property cannot pass until the goods are identified:
It is a condition precedent to the passing of the property in every case that, the ‘individuality of the thing to be delivered’ should be established. In any given case, there may be question whether this condition is fulfilled or not, and it may be that the property will not pass even if it is fulfilled, but until it is, there is no possibility of the property passing. It is essential that the article should be specific and ascertained in a manner binding on both the parties, for unless that be so, the contract cannot be construed as contract to pas the property in that category.
Where according to the terms of the contract, the seller was to supply waste coal ash as and when it was discharged from the bunkers of the powerhouse, it was held that the contract was for the sale of unascertained goods and, therefore no property passed to the buyer till the goods were ascertained.
3. Part of a specific whole
It is obvious that if the contract is merely for the sale of goods by description, such as a contract for sale of a certain quantity of malting barley, or future goods, the necessary condition is not fulfilled. Nor is it fulfilled even if the goods are so far ascertained that the parties have agreed that they shall be taken from some specified larger stock. ‘The parties did not intend to transfer the property in one portion of the stock more than in another, and the law which only gives effect to their intention does not transfer the property in any individual portion’(White Vs. Wilks 1813). And the mere fact that an order for the delivery is given by the seller to the buyer, and is lodged by the buyer with a warehouseman, who holds the specified larger stock out of which the goods sold are to be taken, is not sufficient to transfer the property to the buyer.(Laurie & Morewood Vs. Dudin & sons 1926) Thus, where the ascertainment of the goods depends upon their being separated from the bulk by the seller or a third party or the buyer, by their being severed, weighed or measured or some other process, no property can pass until this is done.
4. Property and Risk:
In this class of case, it is necessary to distinguish the passing of the property from the transfer of the risk; the risk usually passes with the property, but may pass independently of it; Thus, acceptance of the delivery warrant for a certain quantity of spirit out of a larger bulk which was liable to deteriorate in storage was held to put the risk of deterioration on the buyer, although he had acquired, not property but only undivided interest in the whole bulk. Equally, it would seem that there can be none in an individual part of a chattel, such as a tree which has been felled, of which a marked portion was sold, and of which the other portion is to be retained by the seller. In such a case, it is conceived, the whole tree remains the property of the seller until the marked portion is severed, even if the severance is to be done by the buyer.
5. Identification of the goods:
The contract itself may provide that the property shall pass on the happening of some specified event, sufficient to identify the goods, and occasionally they may become identified by other means. Thus, in a case where the seller sold 250 quarters of wheat out of a larger bulk belonging to him in a warehouse, and the buyer took delivery of 400 quarters and pledged the remaining 850 quarters to a bank, and in the meantime the seller sold the remainder of the bulk in the warehouse, of which delivery was taken, so that 850 quarters only were left in the warehouse, it was held that by this process of exhaustion the 850 quarters became ascertained goods and property therein passed to the buyer, so that the pledgee acquired a title thereto against the seller.(Wait & Midland Bank 1926) In State of karnataka Vs. The West Coast Paper Mills Ltd. AIR 1986 it was held that where under a contract a company was permitted to remove bamboos from the forest area at Rs.10 /- per ton, and the government by a subsequent order enhanced the price to Rs.20/- per ton, it was held that the enhanced rate was no applicable to the bamboos cut although not removed prior to the date of the government order, because on the bamboos being cut and extricated, the goods being ascertained and in a deliverable state, the property had passed to the company. [2]
Section 20: Specific goods in a deliverable state:
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 or the time of delivery of goods, or both, is postponed.
Examples:
This section may be illustrated by the following examples:
1. Sale on the 4th January of a haystack on the seller’s land at the price of £145 to the paid on the 4th February, the hay to be allowed to remain on the seller’s land until the 1st May: no hay to be cut until the price was paid. The property in the haystack passed on the making of the contract and on the stack being destroyed by fire, the buyer must bear the loss Tarling Vs. Baxter (1827)
2. Sale of a specified number of bushels of oats, the contents of a bin in a warehouse. The seller gives a delivery order to the buyer, addressed to the warehouseman, authorising delivery of the oats tio the buyer, and asking the warehouseman to weigh them,. The warehouseman accepts the order and enters it in his books. The property has passed to the buyer, as the weighing was not necessary to identify the oats or to ascertain the price, but was merely for the satisfaction of the buyer. Swanwik Vs. Sothern (1839)
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 putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof.[3]
Examples:
This section may be illustrated by the following example: Sale of the whole contents of a cistern of oil, the oil to be put into casks by the seller and then taken away by the buyer. Some of the casks are filled in the presence of the buyer, buy before any are removed, or the remainder are filled, filled, fire destroys the whole of the oil. The buyer must bear the loss of the oil which had been put into the casks, the seller that of the remainder .Rugg Vs. Minett (1089)
Conclusion:
From the above discussion, it is clear that where there is a contract for the sale of unascertained or future goods by description and goods of that description and 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, the property in the goods thereupon passes to the buyer. Such assent may be expressed or implied, and may be given either before or after the appropriation is made.
References:
1. Contracts for the sales of unascertained goods. (n.d.). Retrieved from Law Teacher: http://www.lawteacher.net/commercial-law/essays/unascertained-goods-law-essays.php#ixzz2OqR2dkqL
2. Look up: Unascertained Goods:. (n.d.). Retrieved from Encyclo Pedia Online: http://www.encyclo.co.uk/define/Unascertained%20Goods:
3. Pradeep, V. (n.d.). Sale of Goods Act 1930. Retrieved from Tripod: http://bizlaw0.tripod.com/id2.html
4. The Sale of Goods Act, 1930. (n.d.). Retrieved from Vakilno1: http://www.vakilno1.com/bareacts/saleofgoods/saleofgoods.html
5. The Sale Of Goods Act, 1930. (n.d.). Retrieved from Indian Kanoon: http://www.indiankanoon.org/doc/651105/
[1] .This is third footnote.
[2] This is fourth footnote.
[3] This is fifth footnote.