4)TRANSFER OF PROPERTY IN GOODS AS BETWEEN SELLER AND BUYER & RISK The property in the goods is defined to be transferred from the seller to the buyer when the latter acquires the proprietary rights over the goods and the obligations linked thereto. ‘Property in Goods’ which means the ownership of goods, is different from possession of goods which means the physical custody or control of the goods.
Otherwise , a person may be in possession the goods passes to the buyer because of the consequences flowing which a goods remain at the seller’s risk until the property therein is transferred to the buyer, the goods are at the buyer’s risk irrespective of whether delivery has been made. It is related with the section 26 in Sales Of Good Act. But sometimes the buyer cannot transfer title to another person whether by way of sale or gift unless he has title As a general rules that, the title passes when the parties to a contract of sale intend that it should pass. So, there are some condition or specific rules that can apply.
1. 1 Firstly, in section 18 of Sale Of Goods Act is the good must be ascertained. This section reads as follows: Where there is a contract for the sale of unascertained goods means that goods defined by description only and not identified until after the contract is made and no property in the goods is transferred to the buyer unless and until the goods are ascertained. Therefore, if a contract to buy a new car which form part of a larger consignment, so no title passes until the seller has ascertained the good to be sold by setting aside a particular car for the purpose of the sale.
1. 2 Secondly in section 19 allows the property passes when intended to pass3. Its can makes a effect of the contact between seller and buyer. This section provides : (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 times 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.
(3)Unless a different intention appears the rules contained in section 20 to section 24 provides 3 rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. These rules are only presumptions and may be varied or overridden by the contractual parties. The moment the property in goods passes, the seller ceases to be their owner and the buyer acquires the ownership. The buyer can exercise the proprietary rights over the goods. For example, the buyer may sue the seller for non-delivery of the goods or when the seller has resold the goods and more.
1. 3 Thirdly, unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. In the section 20 that: The first of these rules provides that 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 the price or the time of delivery of the goods, or both is postponed.
It is truth that the Act treats the passing of property as a matter distinct from the rights to payment and to delivery. For example is a person who agrees to buy a particular book on credit. On the sales, the ownership immediately happened when a book passes through payment is postponed. The deliverable state when a goods are in the state that the buyer would under the contract be bound to take delivery of them’ which in section 2 Sale of Goods Act. In Underwood Ltd vs. Burgh Castle Brick and Cement Syndicate(1922) 1 KB 343, there was a contract for the sale of a condensing engine to be delivered free on rail in London.
At the time, the engine was affixed to the seller’s premises and it had to be separated from the concrete floor and dismantled before it could be delivered on rail. While the main engine was being loaded on a railway truck, it was partially broken by accident. So the Court of Appeal that it had not passed to the buyer at the time of the accident and the engine was still at the seller’s risk. Furthermore, based on rules 2 in section 18 same as section 20 of Sale of Goods Act also could not be applied simply because the engine was not the time in a deliverable state.
And to be delivered state, the goods must be in such a physical state that the buyer can take delivery and it is agreed that he will take delivery upon the contract. Here property in the goods passes from the seller to the buyer where the contract for sale is unconditional in other cases that held is this was a contract for an immediate and not a future sale, and that the property in the hay passed by it immediately to the vendee and that the same having been subsequently destroyed by fire, the loss fell upon him. 1. 4 Fourth, a another rules for establishing the time for passing of property is specific goods to be in a deliverable state.
Where the good is specific but certain steps have to be taken to put the good into a deliverable state, except such steps have been undertaken no property will pass. The section 21 read as follows : Where there is a contract to sell 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 be done and the buyer has notice thereof This rule is in negative form and difference with the obligation to act placed on the seller.
It would happened when passing of property to the buyer is suspended until the goods are put in a deliverable state and the buyer has notice of it. Example is if Ali agrees to sell a particular second hand motorcycle to Timah and promises to change the tires, the property in the motorcycle does not pass to Timah until they are changed and Timah has knowledge of the fact. 1. 5 Fifth, the section 22 allows the specific goods in a deliverable state when the seller has to do anything thereto in order to ascertain price.
Its provide that : Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test, or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing is done and the buyer has notice thereof. The sale of specific goods until the quantity but the price cannot be calculated until the quantity of the goods is ascertained by weighing.
So this situation is defined when example as if A agrees to sell all the remaining sugar contained in a particular bag for RM3 per kilogram, the property does not pass to the buyer until the seller weighs them and the buyer knows that they have weighed. Where the good is specific and in a deliverable state but the price is to be determined as a condition of the sale, except that is done no property in the good passes on to the buyer . The act done by seller is the purpose of ascertaining not the extent of the goods but the identity of the goods to be sold, the goods will not be specific goods.
Then, if the seller is required to measure 10 kilograms from a bag containing more than the quantity to be sold that is not a sale of specific goods but that of unascertained goods which is governed by section 23(1). The seller can sue the buyer for the price, unless otherwise agreed, only after the gods have become the property of the buyer. Otherwise when knows that it shall be told in section 21 and 22 that the act required to be done performed by the seller, not the buyer.
If the buyer is bound to perform the requisite act, the property will probably pass on the making of the contract unless a contrary intention is indicated. 1. 6 Sixth, a contract for the sale unascertained or future goods is not a sale but an agreement to sell. The act does not define ‘unascertained goods’ but ‘future goods’ is defined in section 2 to mean ‘goods to be manufactured or produced or acquired by the seller after the making of the contract of sale’.
The unascertained goods that they are goods which cannot be specifically identified at the time of contract but concerned by the description. In the section 23 (1) provides as followed : Where there is a contract to sell 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.
The phrase ‘unconditionally appropriated to the contract’ it refers to an over act manifesting an intent to identify certain goods as those attaching to the contract and without any condition. The process of appropriate may involve selection, separation or weighing from a bulk such as weighing 10 kilograms of sugar from a bagful. The duty to appropriate may be placed on either the buyer or the seller although more commonly, it is placed on the seller . The appropriation by either the seller or the buyer must be approved by the other party.
Such approval may be express or implied, and may be given either before or after the appropriation is made. In section 23 (2) provides that if the seller : in pursuance of a contract to sell, the seller delivers the goods to the buyer, or to a carrier or other bailee, whether named by the buyer or not, for the purpose of transmission to or holding for the buyer, he is presumed to have unconditionally appropriated the goods to the contract, except in the cases provided for in the next rule and in section 20.
This presumption is applicable, although by the terms of the contract, the buyer is to pay the price before receiving delivery of the goods, and the goods are marked with the words “collect on delivery” or their equivalents. The implication is that property in goods passes to the buyer the moment goods are handed over to a carrier such as shipping company or trucking company or trail authority.
The carrier is prima facie the buyer’s agent for the purpose of delivery but if is shown that the carrier is in fact the agent of the seller, then the property will not usually pass until the goods are actually delivered to the buyer . If a contract to sell requires the seller to deliver the goods to the buyer, or at a particular place, or to pay the freight or cost of transportation to the buyer, or to a particular place, the property does not pass until the goods have been delivered to the buyer or have reached the place agreed upon.
1. 7 When goods are delivered to the buyer “on sale or return,” or on other terms indicating an intention to make a present sale but to give the buyer an option to return the goods instead of paying the price, the property passes to the buyer on delivery, but he may revert the property in the seller by returning or tendering the goods within the time fixed in the contract, or if no time has been fixed, within a reasonable time.
In the section 24 reads as follow that : When goods are delivered to the buyer on approval or on trial or on satisfaction, or other similar terms, the property therein passes to the buyer when : (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.
This section are covers goods sent on trial, giving the buyer the option to purchase on the terms specified. In the meantime, pending the decision to purchase or return, the buyer is in lawful possession as bailee. It doesn’t matter when the buyer elects to buy and signify his acceptance to the seller but the phrase ‘does any other act adopting the transaction’ is ambiguous. In Kirkham v. Attenborough (1897) 1 QB 201,held that the buyer who pledged jeweler received on sale or return to the 3rd party had adopted the transaction.
So, the buyer who sells goods received on sale or return. It is also conceivable that excessive use of goods that is more than reasonably necessary for trial can constitute an ‘act adopting transaction’ although there is no direct authority. Where a buyer does not signify acceptance or does any act amounting to adopting the transaction but a time is fixed for the return of goods, the property in the goods will pass upon the expiration of the time. If no time is fixed, the property passes upon the expiration of the reasonable time.
In the cases of Poole V. Smith’s Car Sales (Balham) Ltd (1962) 2 All Er 482, a car dealer supplied 2 cars ‘on sale or return’ to another dealer. One of the cars was sold but the unsold second car was returned about 3 months later in poor condition and consequently, it was rejected by the first dealer which then claimed for the price. So, the court of appeal applied the English rule which is similar to the local provision and found that the proper inference to be made was that a reasonable time had expired to second dealer who would have to pay the price.
If the prospective buyer is unable to return the goods received ‘on sale or return’ on account of the loss or destruction of the goods without default on his part, then he is not liable so long as the loss or destruction occurs before the due date or if no time is fixed within a reasonable time. Except a buyer indicates approval of the goods, on a sale of return transaction, no property in the goods is transferred to the seller Actually the buyer is regarded as the bailee, the burden lies on him to prove that the loss or destruction occurred without his fault.
However, it is always open for the parties to provide and that goods shall be at the risk of the buyer. 2. 0The section 25 provides that : (1) Where there is a contract to sell specific goods, or where goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of possession or property in the goods until certain conditions have been fulfilled.
The right of possession or property may thus be reserved notwithstanding the delivery of the goods to the buyer, or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled. (2) Where goods are shipped, and by the bill of lading the goods are deliverable to the seller or his agent, or to the order of the seller or of his agent, the seller is prima facie thereby reserves the property in the goods.
(3) Where the seller of goods draws on the buyer for the price, and transmits the bill of exchange and bill of lading together to the buyer to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading if he does not honor the bill of exchange, and if he wrongfully retains the bill of lading he acquires no added right thereby Where goods are shipped, and by the bill of lading the goods are deliverable to the order of the buyer or of his agent, but possession of the bill of lading is retained by the seller or his agent, the seller thereby reserves a right to the possession of the goods, as against the buyer .
But if, except for the form of the bill of lading, the property would have passed to the buyer on shipment of the goods, the seller’s property in the goods shall be deemed to be only for the purpose of securing performance by the buyer of his obligations under the contract.
If, however, the bill of lading provides that the goods are deliverable to the buyer or to the order of the buyer, or is endorsed in blank, or to the buyer by the consignee named therein, one who purchases in good faith, for value, the bill of lading or goods from the buyer will obtain the property in the goods, although the bill of exchange has not been honored: provided, that such purchaser has received delivery of the bill of lading endorsed by the consignee named therein, or of the goods, without notice of the facts making the transfer wrongful. In section 25 (3) was considered by the High Court in Shanty Kant Jinghan V.
Owners or other persons in the vessel ‘Indera Pertama’& Anor (1989) 3 MLJ 58 where the plaintiff claimed ownership of certain logs shipped to him, and the holder and the indorsed of four bills of lading where under the cargo was shipped. Although the four bills of lading were endorsed, the plaintiff had failed to pay for the goods mentioned in the bills in accordance with the terms of four bills of exchange.
Zakaria Yatim J. held that since no payment was made, the property in the goods did not pass to the plaintiff. 3. 0 The general rule is that risk passes when the property in the goods passes of whether delivery has been made. However, this rule may be varied by agreement between the contracting parties so that risk would pass before property has passed. In the section 26 of the Sale of Goods Act reads : Unless otherwise agreed, the goods remain at the seller’s risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer the goods are at the buyer’s risk whether delivery has been made or not.
Where delivery has been delayed through the fault of either buyer or seller, the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault and provided also that nothing in this section shall affect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party. Where delivery of the goods has been made to the buyer, or to a bailee for the buyer, in pursuance of the contract and the property in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, the goods are at the buyer’s risk from the time of such delivery. Then, where goods are delivered to a carrier and property passes on delivery (as when ascertained goods are delivered to a carrier without reserving a right of disposal). So the risk prima facie passes with the property.
Section 39(1) provides that: Where in pursuance of a contract of sale, the seller is authorized or required to send the goods to be buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer or delivery of the goods to buyer for safe custody, is prima facie deemed to be a delivery of the goods to the buyer. In an free on board contract once the goods are on the board a ship, property and risk pass to the buyer even if the goods are an unascertained part of a larger bulk as in cases Stock V. Inglis (1884) 12 QBD 564. Then, in cost, insurance and freight contract , risk is prima facie transferred to the buyer on shipment although property will not pass until the unconditional delivery of the bill of lading. 5)”NEMO DAT” PRINCIPE AND EXCEPTIONS 1. 0 GENERAL RULES: It is a fundamental rule that no one can give what he has not got.
So section 27 of the Sale Of Goods Act sets out the general rule as follows: Where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had. This rule in the maxim ‘nemo dat quod non habet’, means that no one can transfer a better title than he has himself. If the goods are purchased from a person who is not the owner and who does not sell them under the owner’s authority, the buyer does not acquire a title even if he has paid value in the good faith. The object of this rule is to protect the right of ownership so that if, for example the goods are stolen and subsequently sold, the right of the original owner is retained.
Both the unauthorized seller and the seller and the innocent purchaser may be sued for the tort of conversion which is a civil action against a person for dealing with a goods of another inconsistent with that person’s ownership. In Lim Chui Lai V. Zeno Ltd (1964) 30 MLJ 314, Zeno Ltd entered into an agreement with a contractor named Ahmad who had contracts with the Petaling Jaya Authority for construction of culverts. Under the contract between Zeno Ltd and Ahmad, the former was to provide Ahmad with all the materials for the construction of the culverts. They bought the materials for the projects and delivered them to the construction site. Ahmad’s contracts with the Petaling Jaya Authority were cancelled whereupon Zeno Ltd informed them that the materials on site belonged to them.
When Zeno Ltd attempted to sell the material, they discovered that the materials had been sold by Ahmad to the appellant. Action was commenced in conversion. The federal court held that Ahmad was merely the bailee and not the owner of the goods at the time he sold them to the appellant. Because Ahmad had no title to the goods or authority to sell them, it follows that he could not pass ant title to the appellant. 2. 0 EXCEPTIONS The exceptions to the nemo dat rule are found in several provisions of the Act and they may be categorize into different headings. 1. ESTOPPEL It may arise when the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.
Then, the owner of goods by his conduct makes it appear to a buyer that the person who sells the goods has his authority to do so and the buyer acts in reliance on it. The owner will be stopped from denying the seller’s authority. The buyer who takes in good faith and for value will acquire a good title by estoppels. Its illustrated in the decision of a New Zealand case, N. Z. Securities & Finance Ltd V. Wrightcars Ltd (1925) 1 NZLR 77. The owner in that case was held to be precluded from denying the seller’s authority to sell 3rd parties. In that case, A agreed to sell a car to B and B was given possession of the car upon the tender of a cheque as payment. It was agreed that property in the car was not to pass until the price had been received. B then sold the car to C and took it back on a lease.
However, before the sale to C was finalized, C had contacted A’s office and in response to C’s query was informed by A’s employee that B had paid for the car. Then, the cheque given to A by B was dishonored whereupon A repossessed the car. On the discovery of the events that had occurred, C sued A for conversion relying on the New Zealand equivalent of section 27. C successful in claiming that A was precluded by his conduct from denying B’s authority to sell so that title had passes to C . It is said that title by estoppels is binding only against the true owner and those privy to the conduct on which the estoppels is based. It has no application in respect of strangers to the conduct .
When the goods are in any way damaged or destroyed by the action of third parties, it is only the owner of the goods who can take action against them. The carelessness on the part of the owner will not operate to deprive him of his property even though it enables a person to take and dispose of his property to an innocent 3rd parties. In the words of Lord Fraser In Moorgate Mercantile Co. Ltd V. Twitching (1977) AC 890. Which the owner of property is entitled to be careless with it if he likes, and even extreme carelessness with his own property will not preclude him from recovering it from a person who bought it from someone who dishonestly purported to sell it. 2. SALES BY A MERCHANTILE AGENT.
Under the law of agency, an agent may pass a good title in selling goods belonging to his principal provided he is acting within the scope of his actual authority. However, an exception to his rule is a disposition made by mercantile agent which is defined in section 2 as an agent having in the customary course of business as such agent authority either to sell goods or to consign goods for the purposes of sale or to buy goods or to raise money on the security of goods. To be a mercantile agent, the person must in customary course of business as an agent usual authority to sell goods or consign them for sale or buy them or raise money on their security.
In section 27 which state that: Where a mercantile agent is with the consent of the owner, in possession of the goods or of a document of title to the goods any sale made by him when acting in the ordinary course of business of a mercantile agent shall be as valid as if he were expressly authorized by the owner of the goods to make the same, provided that the buyer acts in good faith and has not at the time of the contract of sale notice that the seller has no authority to sell. An agent may sell goods belong to his principal provided he is acting within his authority. However, there are condition to fulfill : (a)
The agent must be in possession of the goods (b)The possession must be with consent of the owner. The owner must have consented to the agent having possession of the goods or documents of title as mercantile agent though not necessarily for the purpose of sale . (c)The disposition must be made when acting in the ordinary course of business.
(d)The buyer must have acted in good faith. 3. SALE BY ONE OF JOINT OWNERS Goods nay be jointly owned by several persons. A sale by one of the owners not only of his share but also that of the others may effectively transfer title to a buyer. Then, the absence of authority. In the section 28 of Sale of Goods Act reads as : If one of several joint owners of goods has the sole possession of them by permission of the co-owners, the property in the goods is transferred to any person who buys them of such joint owner in good faith and has not at the time of the contract of sale notice that the seller has no authority to sell. 2 condition to fulfill which:
(a)One of the joint owners has the sole possession of the goods with permission of the co-owners. (b)The buyer acts in good faith. 4. SALE BY PERSON IN POSSESSION UNDER VOIDABLE CONTRACT By the section 29 of the Sale of Goods Act that : Where the seller of goods has obtained possession thereof under a contract voidable under section 19 and 20 of the Contracts Act 1950, but the contract has not been rescinded at the time of the sale, the buyer acquires a good title to the goods provided he buys them in good faith and without notice of the seller’s defect of title. This section of the local statute refers to the seller obtaining ‘possession thereof under’ avoidable contract.
It may be construct that where the true owner transfer to the seller possession of the goods through fraud or other factors that are voidable, the seller may pass a good title to a bona fide purchaser as long as the contract has not been rescinded by the true owner at the time of the sale. Under the English Law, the transaction between the true owner and the seller is such that there passes a voidable title to the goods to the seller. Example, a seller who obtains possession of goods under hire purchase cannot pass a good title to a buyer simply because at the time of the sale, the seller has not yet obtained title to the goods. It is not unreasonable to contend that section 29 of the local Act contemplates that the seller must obtain possession of the goods from the true owner under the voidable contract.
The whole section would have been clearer if the whole voidable title had been used instead of voidable contract. 5. SALE BY A SELLER IN POSSESSION AFTER SALE Section 30 (1) provides a futher exception to the nemo dat rule: Where a person having sold goods continues or is in possession of the goods or of the documents of title to the goods the delivery or transfer by that person or by a mercantile agent acting for him, of the goods or documents of title under ant sale, pledge or other disposition thereof to any person receiving the same in good faith and without notice of the previous sale shall have the same effect as if the person making the delivery or transfer were expressly authorized by the owner of the goods to make the same.
A seller who has parted with title to the goods but remains in possession of the goods or of the documents of title can pass a good title to a bona fide buyer. The implications as follows: (a)The second buyer gets a good title whereas the original buyer loses his. (b)The original buyer can sue the seller for remedy. In Pacific Motor Auctions Pty Ltd V. Motor Credits (Hire Finance) ltd (1965) AC 867 the Privy Council held that the words continues irrespective of capacity and it would require a break in physical possession by the seller to neutralize the effect of the provision. In that case, the plaintiffs became owners of several cars in the possession of a dealer and under a ‘floor pelan agreement’, the dealer would retain the cars and sell them in the same way as it sold other cars.
Whenever a car covered by the pelan was sold, the dealer would account to the plaintiffs discovered that the dealer was in financial difficulties. So they revoked his authority to sell. The High Court Of Australia held that the equivalent provision of the New South Wales Act to section 30(1) had no application because the character of the dealer’s possession of the cars had changed. The Privy Council reversed this decision and held that ‘continues… in possession’ was ‘intended to refer to the continuity of physical possession regardless of any private transactions between the seller and purchaser which might alter the legal title under which possession was held. 6.
SALE BY A BUYER IN POSSESSION Section 30 (2) has the same effect as section 25 (1) of the English Sale of Goods Act 1979. It reads as follow: Where a person, having bought or agreed to buy goods, obtain, with the consent of the seller, possession of the goods or the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him of the goods or documents of the title under any sale, pledge or other disposition thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods shall have effect as if lien or right did not exist.
In summary, a buyer having bought the goods or agreed to buy goods obtains possession of the goods or the documents of title with the consent of the seller, can pass a good title to the innocent buyer. It is uncommon in contracts of sale that although property in the goods may have passed to the buyer, it is still subject to some right or interest vesting in the seller. A goods