Description
The Sale of Goods Act 1979 is an Act of the Parliament of the United Kingdom which regulates English contract law and UK commercial law in respect of goods that are sold and bought.
Sale of Goods: Transfer of Property
1
Sale of Goods: Transfer of Property
2
McEntire v Crossley Brothers Ltd
3
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 60 before delivery. The remaining 180 pounds were to be paid in eight quarterly instalments.
4
Terms of Contract
… will not in any way sell, assign, or sublet, or otherwise part with the possession of the 'Otto' gasengine … until the several sums shall have been fully paid … the sole and absolute property of the owners and 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.
5
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 be taken by McEntire as it still belonged to Crossley Ltd.. The claim was contested by McEntire.
6
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 property shall 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 law which prevents it from being given effect to.
7
Judgement
That is a question which entirely depends upon the intention of the parties. The law permits them to settle the point for themselves by any expression of their intention upon the point. In this case the matter is not left to implication; because, if there be one point on the face of this contract clearer than another, it is that the intention of the parties was that the seller should not part with his dominion over the thing which he was selling, and that the property should not become vested in the purchaser until the last farthing of the price was paid.
8
Judgement
Applying the principle, the time Mr. Peel failed to pay an instalment, the contract got breached. As result, Crossley Ltd. acquired the right, either to sue for the remaining money or take the possession of its gas engine and claim damages.
9
Vasantha Vishwanathan v. V. K. Elayalwar
10
Facts
• Vasantha- In transport business and owns 19 buses. • Elayalwar: Enters in an agreement with Vasantha to buy 5 buses covered by route permit.
• A joint application is made by the two for transfer of 5 permits in the name of Elayawar before the Regional Transport Authority. • Under the agreement, after the transfer of permit, the price for the buses was to be settled, money collected and then buses given to Elayawar.
11
Facts
• An ordinance was made requiring surrender of
permits in excess of 10 permits. Following this, the Regional Transport Authority rejected the application for transfer.
• The Act requiring surrender of permit was quashed as unconstitutional. •Regional Transport Authority transfers in favour of Elayalwar.
12
Summary of Judgement
The Court noted that the Motor Vehicles Act, 1939 required that when motor vehicles are bought or sold, both, buyer and seller are required to report and enter in the certificate of registration. The transfer of ownership is not effected by registration. It is the other way round. It only registers the fact of sale which has taken place. The Act „simply prescribes procedure for entering the factum of transfer in the registration certificate, which is an act posterior to the transfer?. The question of transfer of ownership has to be judged within the Sale of Goods Act.
13
Judgement
The transfer of vehicles in question would be governed by the provisions of Section 19 of the Sale of Goods Act according to which property in the vehicle would pass … at such time as the parties to the contract intend to be transferred. Thus the passing of property in the goods would be dependent upon the intention of the parties as evidenced from the contract. From the contract, … it would appear that the parties intended that after the registration formalities were completed, price of the vehicles covered by the permits would be ascertained and thereafter the same would be paid by the 1st defendant, entitling him to take possession of the vehicles.
14
Legal Provision
Section 19. Property passes when intended to pass.- (1) 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 it to be transferred. (2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case.
15
Agricultural Market Committee v. Shalimar Chemical Works Ltd.
16
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.?
17
Trade Arrangement
• Shalimar?s dealers despatched the goods by lorry to Hyderabad and send the documents for collecting the consignment at Hyderabad to a bank. The invoices raised by the dealers mentioned that the despatch of the good was made solely at the risk and responsibility of M/s. Shalimar Chemical Works. The invoices also mentioned that the seller took „no responsibility or liability as to delayed despatches, losses due to theft, pilferage, rain or damage?. • Shalimar had also obtained insurance of the goods and had paid the policy premium.
18
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.
19
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 already passed at Kerala and it was not dependant upon the payment of price or the delivery of goods to the respondent.
20
Dennant v. Skinner
21
Car Auction
Dennant carries on business as the South London Motor Auctions. Highest bidder, to whom cars were knocked down, was George Albert King. King represented that he was the son of King?s Motors, a well known motor car dealer in Oxford. By showing counterfoils of several large payments to motor car dealers, he persuaded Dennant to accept payment by cheque. As a protection, Dennant took the following written undertaking from King:
22
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 been credited to South London Motor Auction account at Lloyds Bank.
23
The Cheque is Dishonoured
Assured with the above protection, Dennant let King take away the vehicles. The cheque, however, was dishonoured on presentation and it transpired that King had no connection with the King's Motors. In this while, King had sold the car to a person, who in turn sold it to Skinner, another motor car company. The police was informed of the matter. King pleaded guilty and was convicted. Dennant sought to recover the car, claiming to be his property, from Skinner. Skinner and Dennant had a dispute as to the ownership of the car.
24
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.
25
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 passed to 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.
26
Judgement
The court constructed the subsequent signing of the document on ownership: The document contemplates that the ownership of the vehicle has not passed to the bidder, but, as I have already said, in my judgment, it had passed on the fall of the hammer, and, if subsequently the bidder executed the document acknowledging that the ownership of the vehicle would not pass to him, that could not have any effect on what had already taken place.
27
Judgement
… the property had passed on the fall of the hammer, but still the plaintiff had a right to retain possession of the goods until payment was made. If, when he was ready to deliver the goods, payment was not made, he could have sued for the price, or he could have exercised powers of re-sale, and he could have secured 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 or honest, to part with the possession of the vehicle by giving delivery of it,
28
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 property in the vehicle had passed to King…. His right to the property had gone and his right to possession had gone.
29
Judgement
The Court concluded:
In my view, the property had passed on the falling of the hammer. The right to possession had passed when the plaintiff, persuaded and misled by King's lies, parted with his seller's lien, and there was nothing left on which he could found a claim in detinue against some third person, in this case the defendant, who was thus put in possession of the vehicle.
30
Legal Provision
47. Sellers lien.- (1) Subject to the provisions of this Act, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender 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 lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer.
31
Consolidated Coffee Ltd v. Coffee Board, Bangalore
32
Auction and Sales Tax
Coffee Board auctions coffee to licensed And registered exporters exclusively for exports to specified countries within 3 months. In no case, the coffee was to be released in India.
Within Section 5 of the Central Sales Tax, penultimate local sales „in the course of export? was exempted from local sales tax. The condition was that „such last sale? was for the purpose of complying with, „the agreement or order for or in relation to such export?.
33
Exports and Sales Tax
The permit holders argued that the conditions and impositions by the Coffee Board on them was an „agreement? to export. As a penultimate sale, local sales tax should not be payable. The Coffee Board, instead, required them to bring firm export orders for availing the benefit of Section 5. The nature of the auction sale had to be constructed for deciding the tax implications.
34
Legal Provision
The Sale of Goods Act, 1930 makes provisions on sale by auction. Sub-sec. (2) of S. 64 provides: Section 64. In the case of a sale by auction (1) x x x x x x x x x
(2) the sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner; and, until such announcement is made, any bidder may retract his bid.
35
Export, Auction and Sale
It was argued by the permit holders that as it was a sale by auction, the sale was complete on fall of the hammer. Thus, auction by the Coffee Board was a sale, entitling them of the tax benefit. The coffee Board, however, gave them this benefit only if they had a firm order. In other cases, it imposed the CST.
36
Judgement
Regarding S. 64 (2) of the Sale of Goods Act it seems to us that that provision does not deal with question of the passing of the property in the goods sold at auction sale but instead it deals with the completion of the contract of sale. The passing of property is to be decided on whether it is a conditional or unconditional contract of sale.
If an auction is unconditional, as in Dennant v. Skinner, the property would pass on the fall of the hammer. But in the present case, there were several conditions of auction. Thus, property did not pass with the conclusion of the auction. 37
Underwood Limited v Burgh Castle Brick and Cement Syndicate
38
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 the ground and loading on to train, the engine got damaged. On arrival, the buyer refused to accept it.
39
Judgement
The sale was that of a specific chattel to be delivered by the Plaintiffs, but the fact that it was to be delivered 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 a deliverable state; and by that I understand a state in which the thing will be the article contracted for by the buyer; I do not mean deliverable in the sense that it is properly packed or anything of that kind. It must have everything done to it that the sellers had to do to it as an article. …
40
Judgement
I do not think therefore that the fact by itself that the sellers had to take the engine to pieces would postpone the time when the property passed. Many chattels 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 sale and is not postponed until the article is actually taken to pieces and delivered.
41
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, and that 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 it into a loose chattel these processes had first to be performed.
42
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 putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof.
43
Kirkham v Attenborough and Gill
44
Jewellery on „Sale or Return?
Kirkham, a jewellery maker, passed on jewellery to Mr. Winter in early 1895 with a contract note mentioning 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 not paid Kirkham for the jewellery nor had he intimated Kirkham that he intended to keep the jewellery. Kirkham demanded the return of the jewellery from Attenborough and Gill. Attenborough and Gill refused to return the jewellery unless the borrowed amount was paid back to them.
45
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 in three 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…
46
Legal Provision
Section 24 of the India Act law): (Same as the British
Section 24: „When goods are delivered to the buyer on approval 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 to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time.? 47
Judgement
I think that, if he retains the goods for an unreasonable time, he does something which is inconsistent with a return of the goods. Again, if he does an act which is inconsistent with a return, as, for instance, if he sells the goods, that is an act "adopting the transaction," and the property passes. Again, if he pawns the goods, he adopts the transaction, because he has not then the free control over the goods so as to be able to return them. In all these cases, he comes within the words of the section, as having done an act „adopting the transaction?, and the property in the goods passes.
48
Judgement
The Court concluded:
If that is the true construction of the section, it is perfectly clear that the defendants are entitled to retain 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.
49
Ms. Marwar Tent Factory v. Union of India
50
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 of pilferage 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.
51
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) to make 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 the price becomes payable.
52
Judgement
The words f.o.r. are well known words in commercial contracts. In my judgment they mean when used to qualify the place of delivery, that the seller's liability is to place the goods 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 seller after delivering the goods and loading the same in the railway wagons at Jodhpur for transmission to the buyer …
53
doc_606317909.ppt
The Sale of Goods Act 1979 is an Act of the Parliament of the United Kingdom which regulates English contract law and UK commercial law in respect of goods that are sold and bought.
Sale of Goods: Transfer of Property
1
Sale of Goods: Transfer of Property
2
McEntire v Crossley Brothers Ltd
3
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 60 before delivery. The remaining 180 pounds were to be paid in eight quarterly instalments.
4
Terms of Contract
… will not in any way sell, assign, or sublet, or otherwise part with the possession of the 'Otto' gasengine … until the several sums shall have been fully paid … the sole and absolute property of the owners and 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.
5
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 be taken by McEntire as it still belonged to Crossley Ltd.. The claim was contested by McEntire.
6
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 property shall 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 law which prevents it from being given effect to.
7
Judgement
That is a question which entirely depends upon the intention of the parties. The law permits them to settle the point for themselves by any expression of their intention upon the point. In this case the matter is not left to implication; because, if there be one point on the face of this contract clearer than another, it is that the intention of the parties was that the seller should not part with his dominion over the thing which he was selling, and that the property should not become vested in the purchaser until the last farthing of the price was paid.
8
Judgement
Applying the principle, the time Mr. Peel failed to pay an instalment, the contract got breached. As result, Crossley Ltd. acquired the right, either to sue for the remaining money or take the possession of its gas engine and claim damages.
9
Vasantha Vishwanathan v. V. K. Elayalwar
10
Facts
• Vasantha- In transport business and owns 19 buses. • Elayalwar: Enters in an agreement with Vasantha to buy 5 buses covered by route permit.
• A joint application is made by the two for transfer of 5 permits in the name of Elayawar before the Regional Transport Authority. • Under the agreement, after the transfer of permit, the price for the buses was to be settled, money collected and then buses given to Elayawar.
11
Facts
• An ordinance was made requiring surrender of
permits in excess of 10 permits. Following this, the Regional Transport Authority rejected the application for transfer.
• The Act requiring surrender of permit was quashed as unconstitutional. •Regional Transport Authority transfers in favour of Elayalwar.
12
Summary of Judgement
The Court noted that the Motor Vehicles Act, 1939 required that when motor vehicles are bought or sold, both, buyer and seller are required to report and enter in the certificate of registration. The transfer of ownership is not effected by registration. It is the other way round. It only registers the fact of sale which has taken place. The Act „simply prescribes procedure for entering the factum of transfer in the registration certificate, which is an act posterior to the transfer?. The question of transfer of ownership has to be judged within the Sale of Goods Act.
13
Judgement
The transfer of vehicles in question would be governed by the provisions of Section 19 of the Sale of Goods Act according to which property in the vehicle would pass … at such time as the parties to the contract intend to be transferred. Thus the passing of property in the goods would be dependent upon the intention of the parties as evidenced from the contract. From the contract, … it would appear that the parties intended that after the registration formalities were completed, price of the vehicles covered by the permits would be ascertained and thereafter the same would be paid by the 1st defendant, entitling him to take possession of the vehicles.
14
Legal Provision
Section 19. Property passes when intended to pass.- (1) 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 it to be transferred. (2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case.
15
Agricultural Market Committee v. Shalimar Chemical Works Ltd.
16
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.?
17
Trade Arrangement
• Shalimar?s dealers despatched the goods by lorry to Hyderabad and send the documents for collecting the consignment at Hyderabad to a bank. The invoices raised by the dealers mentioned that the despatch of the good was made solely at the risk and responsibility of M/s. Shalimar Chemical Works. The invoices also mentioned that the seller took „no responsibility or liability as to delayed despatches, losses due to theft, pilferage, rain or damage?. • Shalimar had also obtained insurance of the goods and had paid the policy premium.
18
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.
19
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 already passed at Kerala and it was not dependant upon the payment of price or the delivery of goods to the respondent.
20
Dennant v. Skinner
21
Car Auction
Dennant carries on business as the South London Motor Auctions. Highest bidder, to whom cars were knocked down, was George Albert King. King represented that he was the son of King?s Motors, a well known motor car dealer in Oxford. By showing counterfoils of several large payments to motor car dealers, he persuaded Dennant to accept payment by cheque. As a protection, Dennant took the following written undertaking from King:
22
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 been credited to South London Motor Auction account at Lloyds Bank.
23
The Cheque is Dishonoured
Assured with the above protection, Dennant let King take away the vehicles. The cheque, however, was dishonoured on presentation and it transpired that King had no connection with the King's Motors. In this while, King had sold the car to a person, who in turn sold it to Skinner, another motor car company. The police was informed of the matter. King pleaded guilty and was convicted. Dennant sought to recover the car, claiming to be his property, from Skinner. Skinner and Dennant had a dispute as to the ownership of the car.
24
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.
25
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 passed to 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.
26
Judgement
The court constructed the subsequent signing of the document on ownership: The document contemplates that the ownership of the vehicle has not passed to the bidder, but, as I have already said, in my judgment, it had passed on the fall of the hammer, and, if subsequently the bidder executed the document acknowledging that the ownership of the vehicle would not pass to him, that could not have any effect on what had already taken place.
27
Judgement
… the property had passed on the fall of the hammer, but still the plaintiff had a right to retain possession of the goods until payment was made. If, when he was ready to deliver the goods, payment was not made, he could have sued for the price, or he could have exercised powers of re-sale, and he could have secured 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 or honest, to part with the possession of the vehicle by giving delivery of it,
28
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 property in the vehicle had passed to King…. His right to the property had gone and his right to possession had gone.
29
Judgement
The Court concluded:
In my view, the property had passed on the falling of the hammer. The right to possession had passed when the plaintiff, persuaded and misled by King's lies, parted with his seller's lien, and there was nothing left on which he could found a claim in detinue against some third person, in this case the defendant, who was thus put in possession of the vehicle.
30
Legal Provision
47. Sellers lien.- (1) Subject to the provisions of this Act, the unpaid seller of goods who is in possession of them is entitled to retain possession of them until payment or tender 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 lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer.31
Consolidated Coffee Ltd v. Coffee Board, Bangalore
32
Auction and Sales Tax
Coffee Board auctions coffee to licensed And registered exporters exclusively for exports to specified countries within 3 months. In no case, the coffee was to be released in India.
Within Section 5 of the Central Sales Tax, penultimate local sales „in the course of export? was exempted from local sales tax. The condition was that „such last sale? was for the purpose of complying with, „the agreement or order for or in relation to such export?.
33
Exports and Sales Tax
The permit holders argued that the conditions and impositions by the Coffee Board on them was an „agreement? to export. As a penultimate sale, local sales tax should not be payable. The Coffee Board, instead, required them to bring firm export orders for availing the benefit of Section 5. The nature of the auction sale had to be constructed for deciding the tax implications.
34
Legal Provision
The Sale of Goods Act, 1930 makes provisions on sale by auction. Sub-sec. (2) of S. 64 provides: Section 64. In the case of a sale by auction (1) x x x x x x x x x
(2) the sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner; and, until such announcement is made, any bidder may retract his bid.
35
Export, Auction and Sale
It was argued by the permit holders that as it was a sale by auction, the sale was complete on fall of the hammer. Thus, auction by the Coffee Board was a sale, entitling them of the tax benefit. The coffee Board, however, gave them this benefit only if they had a firm order. In other cases, it imposed the CST.
36
Judgement
Regarding S. 64 (2) of the Sale of Goods Act it seems to us that that provision does not deal with question of the passing of the property in the goods sold at auction sale but instead it deals with the completion of the contract of sale. The passing of property is to be decided on whether it is a conditional or unconditional contract of sale.
If an auction is unconditional, as in Dennant v. Skinner, the property would pass on the fall of the hammer. But in the present case, there were several conditions of auction. Thus, property did not pass with the conclusion of the auction. 37
Underwood Limited v Burgh Castle Brick and Cement Syndicate
38
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 the ground and loading on to train, the engine got damaged. On arrival, the buyer refused to accept it.
39
Judgement
The sale was that of a specific chattel to be delivered by the Plaintiffs, but the fact that it was to be delivered 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 a deliverable state; and by that I understand a state in which the thing will be the article contracted for by the buyer; I do not mean deliverable in the sense that it is properly packed or anything of that kind. It must have everything done to it that the sellers had to do to it as an article. …
40
Judgement
I do not think therefore that the fact by itself that the sellers had to take the engine to pieces would postpone the time when the property passed. Many chattels 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 sale and is not postponed until the article is actually taken to pieces and delivered.
41
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, and that 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 it into a loose chattel these processes had first to be performed.
42
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 putting them into a deliverable state, the property does not pass until such thing is done and the buyer has notice thereof.
43
Kirkham v Attenborough and Gill
44
Jewellery on „Sale or Return?
Kirkham, a jewellery maker, passed on jewellery to Mr. Winter in early 1895 with a contract note mentioning 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 not paid Kirkham for the jewellery nor had he intimated Kirkham that he intended to keep the jewellery. Kirkham demanded the return of the jewellery from Attenborough and Gill. Attenborough and Gill refused to return the jewellery unless the borrowed amount was paid back to them.
45
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 in three 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…
46
Legal Provision
Section 24 of the India Act law): (Same as the British
Section 24: „When goods are delivered to the buyer on approval 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 to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time.? 47
Judgement
I think that, if he retains the goods for an unreasonable time, he does something which is inconsistent with a return of the goods. Again, if he does an act which is inconsistent with a return, as, for instance, if he sells the goods, that is an act "adopting the transaction," and the property passes. Again, if he pawns the goods, he adopts the transaction, because he has not then the free control over the goods so as to be able to return them. In all these cases, he comes within the words of the section, as having done an act „adopting the transaction?, and the property in the goods passes.
48
Judgement
The Court concluded:
If that is the true construction of the section, it is perfectly clear that the defendants are entitled to retain 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.
49
Ms. Marwar Tent Factory v. Union of India
50
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 of pilferage 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.
51
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) to make 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 the price becomes payable.
52
Judgement
The words f.o.r. are well known words in commercial contracts. In my judgment they mean when used to qualify the place of delivery, that the seller's liability is to place the goods 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 seller after delivering the goods and loading the same in the railway wagons at Jodhpur for transmission to the buyer …
53
doc_606317909.ppt