Contents

01Chapter Overview 02Importance of Ownership 03Passing of Property 04Specific Goods 05Unascertained Goods 06Sale on Approval 07Reservation of Disposal 08Passing of Risk 09Nemo Dat Rule 10Exceptions to Nemo Dat 11Performance and Delivery 12Rules of Delivery 13Wrong Quantity and Instalments 14Carrier, Transit and Examination 15Acceptance of Goods 16Case Study Bank 17Quick Revision 18Revision Mind Map
01
FoundationChapter Overview

This unit answers one core question: when does ownership in goods pass from seller to buyer? Once ownership passes, the legal consequences change immediately. Risk, right to sue, right to price, insolvency consequences and title disputes all depend on this point.

Transfer of ownership normally moves through three ideas: passing of property, delivery of goods and passing of risk.
Step 1Has property/ownership passed?
Step 2Who bears the risk of loss?
Step 3Can title pass through a non-owner?
Step 4Was delivery and acceptance proper?
ICAI Learning Outcomes
  • How and when ownership passes from seller to buyer.
  • Meaning of appropriation and its effect on passing of property.
  • Distinction between passing of property and passing of title.
  • Nemo dat quod non habet and its exceptions.
  • Rules relating to delivery and acceptance of goods.
Main Exam Traps
  • Confusing ownership with possession.
  • Assuming risk always passes only on delivery.
  • Missing appropriation in unascertained goods.
  • Confusing Section 23 unconditional appropriation with Section 25 reservation of disposal.
  • Applying nemo dat without checking exceptions.
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Master Test In every problem, first ask: Are the goods specific/ascertained or unascertained? Then ask whether the parties intended ownership to pass.
02
Why It MattersImportance of Time of Transfer

Passing of property means passing of ownership. It is the most important factor for deciding rights and liabilities of buyer and seller.

Why ownership mattersLegal consequence
Risk of loss or damageThe person who owns the goods generally bears the loss.
Right to sue third partyThe owner can sue if goods are damaged by a third party.
Seller’s suit for priceSeller can generally sue for price after property has passed.
InsolvencyOwnership decides whether goods belong to buyer’s estate or seller’s estate.
Memory hook: Ownership decides risk. Possession alone does not decide risk.
03
Sections 18–26Passing of Property

The rules for passing of property depend on two basic factors: identification of goods and intention of parties.

FactorRuleSection
Identification of goodsIn unascertained goods, property cannot pass until goods are ascertained.18
Intention of partiesIn specific or ascertained goods, property passes when parties intend it to pass.19
Default rulesSections 20 to 24 help determine intention unless contrary intention appears.20–24
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Important Language In this unit, “property” means ownership, not physical property or possession.
04
Sections 20–22Specific or Ascertained Goods

Section 19 — Intention of Parties

Where there is a contract for sale of specific or ascertained goods, the property passes at such time as the parties intend. Intention is gathered from the terms of contract, conduct of parties and circumstances of the case.

Section 20 — Specific Goods in Deliverable State

Rule
Where there is an unconditional contract for sale of specific goods in a deliverable state, property passes to the buyer when the contract is made, even if payment or delivery is postponed.
ICAI-style Example

X buys a television in a shop and asks for home delivery. The shopkeeper agrees. The television immediately becomes the property of X because it is specific and in a deliverable state.

Section 21 — Specific Goods to be Put into Deliverable State

If seller has to do something to put specific goods into deliverable state, property does not pass until that thing is done and the buyer has notice of it.

ICAI-style Example

Peter buys a laptop but Windows is not installed. Seller promises to install it and call Peter before delivery. Ownership passes only after installation and notice to Peter.

Section 22 — Seller Must Ascertain Price

If goods are already in deliverable state but seller must weigh, measure, test or do some act to ascertain price, property does not pass until the act is done and buyer has notice.

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Carpet Laying Example
Deliverable state and price-related act

Facts Carpets were sold to a company and delivered to its premises, but under the contract they still had to be laid. Before laying, the carpets were stolen.

Issue Had ownership passed merely because the carpets reached the buyer’s premises?

Held No. Laying the carpet was part of putting goods into the contracted deliverable state. Therefore ownership had not passed to the buyer.

Exam Memory Line Specific goods + pending seller act = ownership waits.
SectionSituationWhen property passes
20Specific goods in deliverable stateWhen contract is made.
21Seller must make goods deliverableWhen act is done and buyer has notice.
22Seller must weigh/measure/test to ascertain priceWhen act is done and buyer has notice.
05
Sections 18 and 23Unascertained Goods and Appropriation

In a contract for sale of unascertained goods, no property passes until the goods are ascertained. Once goods answering the contract description are selected and unconditionally appropriated with mutual assent, ownership passes.

Appropriation
Appropriation means selection of goods with the intention of using them in performance of the contract, with mutual consent of buyer and seller.

Essentials of Valid Appropriation

ContractSale of unascertained or future goods.
DescriptionGoods conform to contract description and quality.
Deliverable StateGoods are ready for delivery.
UnconditionalGoods are definitely appropriated, not merely intended to be appropriated.
Mutual AssentSeller with buyer’s assent or buyer with seller’s assent.
TimingAssent may be express/implied and before/after appropriation.

Section 23(2) — Delivery to Carrier

When the seller delivers goods to buyer, carrier or other bailee for transmission to buyer and does not reserve right of disposal, he is deemed to have unconditionally appropriated the goods to the contract.

ICAI-style Example

M orders a book from a Mumbai bookseller and asks for courier delivery. Seller sends the book by courier. The book is lost in transit. Since this is unconditional appropriation by delivery to carrier, M bears the loss.

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Cotton Bales Appropriation Problem
Sections 18 and 23

Facts Seller had 100 bales. Buyer’s representatives were sent to select 60 bales. Fire destroyed the bales before final delivery.

Issue Who bears the loss: seller or buyer?

Held If 60 bales were selected with buyer’s assent, property in those 60 passed to buyer, so buyer bears that loss. If no valid selection/assent occurred, seller bears the loss.

Exam Memory Line Unascertained goods become buyer’s risk only after ascertainment + appropriation.
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Exam Trap Selection alone is not enough. There must be unconditional appropriation and mutual assent.
06
Section 24Goods Sent on Approval or Sale or Return

When goods are delivered on approval, sale or return, or similar terms, ownership passes only in the situations given under Section 24.

SituationWhen property passes
Buyer signifies approval or acceptanceWhen approval/acceptance is communicated.
Buyer does an act adopting the transactionWhen buyer sells, pledges or otherwise deals as owner.
Buyer retains goods without rejectionOn expiry of fixed return time; if no time fixed, after reasonable time.
Sale for cash only or returnProperty does not pass until cash/payment condition is fulfilled.
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Jewellery Pledged on Sale or Return
Section 24

Facts A delivered jewellery to B on sale or return basis. B pledged it with C.

Issue Did pledging amount to acceptance/adoption of transaction?

Held Yes. By pledging, B acted as owner. Ownership passed to B, and A could not recover jewellery from C. A could recover price from B.

Exam Memory Line Pledge/sale by buyer = adoption = ownership passes.
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Sale for Cash Only or Return
Conditional ownership

Facts A delivered jewellery to B on sale for cash only or return basis. Contract said jewellery would remain A’s property until price was paid. Before payment, B pledged it with C.

Issue Did ownership pass to B before payment?

Held No. Since ownership was expressly reserved until payment, B had no title to pledge. A could recover jewellery from C.

Exam Memory Line Sale or return passes title by adoption; cash-only return waits for payment.
07
Section 25Reservation of Right of Disposal

Reservation of right of disposal means the seller reserves ownership until certain conditions, usually payment, are fulfilled. This prevents ownership from passing even if goods have been delivered to buyer, carrier or bailee.

Section 25 Rule
If the seller reserves the right of disposal until conditions are fulfilled, property does not pass to buyer until those conditions are fulfilled.
ICAI-style Example

X sends furniture by truck and instructs the driver not to deliver it until the company pays. Property passes only when payment is made.

When Right of Disposal is Presumed

Section 23Section 25
Unconditional appropriationConditional appropriation
Seller does not reserve right of disposal.Seller reserves right until payment/condition.
Ownership passes to buyer.Ownership remains with seller.
Buyer generally bears risk.Seller generally retains risk unless agreed otherwise.
08
Section 26Risk Prima Facie Passes with Property
Section 26
Unless otherwise agreed, goods remain at the seller’s risk until property is transferred to the buyer; when property is transferred to the buyer, goods are at buyer’s risk whether delivery has been made or not.
Memory hook: Risk follows ownership, not necessarily delivery.
SituationWho bears risk?
Property not passedSeller.
Property passedBuyer, even if delivery is pending.
Delay caused by seller or buyerParty at fault bears loss which would not have occurred but for that fault.
Special agreementParties may agree that risk passes before or after ownership.
Goods held as baileeDuties/liabilities as bailee remain unaffected.
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Antique Painting at Auction
Risk before ownership passes

Facts A bid was made for an antique painting. Before acceptance was completed, the auctioneer damaged the painting.

Issue Did buyer bear the loss merely because he had bid?

Held No. Ownership had not yet passed. Seller bore the loss.

Exam Memory Line Bid alone is not ownership; risk waits for ownership.
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Cotton Bales Default by Buyer
Risk caused by default

Facts A contracted to sell 100 bales of cotton to B. B accepted part delivery but defaulted in taking remaining bales, which later became unfit.

Issue Who bears loss caused by delay in acceptance?

Held Buyer bears the loss because his default caused the risk situation.

Exam Memory Line Fault-based delay shifts risk to the party in fault.
09
Section 27Transfer of Title by Non-Owners
Nemo Dat Quod Non Habet
No one can give what he has not got.

The general rule is that a seller cannot transfer a better title than he himself has. If seller is not owner, buyer also does not become owner, even if buyer acted honestly and paid price.

ICAI-style Examples

If A sells stolen goods to B, B gets no title even if he buys in good faith. If a hirer under hire purchase sells a vehicle, the buyer gets no better title than the hirer.

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Important Distinction Nemo dat protects the true owner. Exceptions protect bona fide purchasers in commercial situations where the true owner’s conduct or law justifies passing good title.
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Sections 27–30 and Other LawExceptions to Nemo Dat
ExceptionSection / SourceConditions / Rule
Sale by mercantile agentProviso to 27Agent has possession with owner’s consent, acts in ordinary course, buyer acts in good faith without notice.
Sale by one joint owner28Joint owner has sole possession with co-owner permission; buyer buys in good faith without notice.
Sale by person under voidable contract29Seller obtained possession under voidable contract; contract not rescinded before sale; buyer in good faith.
Seller in possession after sale30(1)Seller continues in possession after sale and sells/pledges to third party who takes delivery in good faith without notice.
Buyer in possession before ownership30(2)Buyer has possession with seller’s consent before ownership passes and disposes to good faith transferee without notice.
EstoppelGeneral principleTrue owner by conduct allows buyer to believe seller has authority.
Unpaid seller resale54(3)Unpaid seller exercising lien or stoppage resells; new buyer gets good title.
Other statutory salesOther ActsOfficial receiver/liquidator, finder of goods, pawnee etc. may pass valid title in stated circumstances.
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Joint Owners’ TV and VCR
Section 28

Facts A, B and C jointly owned a TV and VCR. With consent of B and C, the goods were in A’s sole possession. A sold them to P, who bought in good faith without notice of lack of authority.

Issue Does P get good title though A was only one joint owner?

Held Yes. Section 28 protects a good faith buyer where one joint owner has sole possession with permission of co-owners.

Exam Memory Line Sole possession with co-owner consent + good faith buyer = good title.
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Diamond Ring Fraud
Section 29

Facts X fraudulently obtained a diamond ring from Y. Before Y rescinded the voidable contract, X sold the ring to Z, an innocent buyer.

Issue Can Y recover the ring from Z after rescinding the original contract?

Held No. Z gets good title because the voidable contract had not been rescinded before sale.

Exam Memory Line Voidable but not rescinded + good faith buyer = good title.
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Lee v. Butler
Buyer in possession before ownership

Facts Furniture was delivered to B under an agreement that property would pass only after second instalment. Before paying the second instalment, B sold the furniture to another buyer.

Issue Could the later buyer get good title though B was not yet owner?

Held Yes. Since B was a buyer in possession with seller’s consent, a good faith purchaser from B got good title.

Exam Memory Line Buyer in possession under agreement to buy can pass good title; mere hirer cannot.
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Horse Ownership Silence
Estoppel

Facts A told buyer B in presence of true owner C that A owned the horse. C remained silent. B bought the horse from A.

Issue Can C later deny A’s authority?

Held No. C’s silence induced B to believe A was owner. C is estopped from denying A’s authority.

Exam Memory Line True owner’s conduct can validate non-owner’s sale.
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Sections 31–32Performance of Contract and Delivery

Performance of contract of sale means seller delivers goods and buyer accepts delivery and pays price according to contract terms.

Delivery — Section 2(2)
Delivery means voluntary transfer of possession from one person to another.
Type of DeliveryMeaningExample
Actual deliveryPhysical transfer of goods.Seller hands over goods to buyer.
Symbolic deliveryDelivery of symbol or means of possession.Delivery of keys, bill of lading, railway receipt.
Constructive delivery / AttornmentPossession changes legally without physical movement.Warehouseman acknowledges he now holds goods for buyer.

Section 31 — Duties of Seller and Buyer

Seller must deliver goods, and buyer must accept and pay for them according to the terms of contract.

Section 32 — Payment and Delivery are Concurrent Conditions

Unless otherwise agreed, seller must be ready and willing to give possession in exchange for price, and buyer must be ready and willing to pay in exchange for possession.

Memory hook: Default rule = goods against payment.
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Sections 33–36Rules Regarding Delivery
RuleSectionMeaning
Delivery33Delivery may be anything agreed by parties or anything putting goods in buyer’s possession or authorised holder’s possession.
Part delivery34Part delivery in progress of whole delivery has effect of delivery of whole for passing property; part delivery with intention to sever does not.
Buyer to apply35Seller is not bound to deliver until buyer applies, unless otherwise agreed.
Place of delivery36(1)If no contract: goods sold delivered where they are at sale; goods agreed to be sold where they are at agreement; future goods where manufactured/produced.
Time of delivery36(2)If seller must send goods but no time fixed, he must send within reasonable time.
Third-party possession36(3)No delivery until third person acknowledges to buyer that he holds goods on buyer’s behalf.
Reasonable hour36(4)Demand or tender of delivery must be at reasonable hour; reasonableness is question of fact.
Expenses36(5)Seller bears expenses of putting goods into deliverable state unless otherwise agreed.
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Wharf Goods Part Delivery
Section 34

Facts Goods lying at wharf were sold in a lot. Seller instructed wharfinger to deliver goods to buyer. Buyer accepted and took away part.

Issue Was there delivery of the whole lot or only the part taken?

Held There was delivery of the whole because part delivery was made in progress of delivery of the whole.

Exam Memory Line Part delivery in progress of whole = delivery of whole.
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Sections 37–38Wrong Quantity and Instalment Deliveries

Section 37 — Delivery of Wrong Quantity

Seller deliversBuyer’s optionIf buyer accepts
Less than contracted quantityMay reject.Must pay at contract rate for goods accepted.
More than contracted quantityMay accept contract quantity and reject rest, or reject whole.If accepts whole, pay at contract rate for whole.
Contract goods mixed with other goodsMay accept contract goods and reject rest, or reject whole.Pay for accepted goods.
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Practical Point Section 37 protects buyer from being forced to accept short, excess or mixed delivery.

Section 38 — Instalment Deliveries

Unless otherwise agreed, buyer is not bound to accept delivery by instalments. Where instalment delivery and separate payment are agreed, breach in one instalment may or may not amount to repudiation of whole contract. It depends on the terms of contract and circumstances.

SituationLegal effect
No agreement for instalmentsBuyer need not accept instalment delivery.
Instalments agreed with separate paymentsDefault in one instalment may be severable or may affect whole contract depending on facts.
Serious default showing intention not to performMay justify treating whole contract as repudiated.
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Sections 39–41Carrier, Transit and Examination

Section 39 — Delivery to Carrier or Wharfinger

Delivery of goods to a carrier or wharfinger for transmission to buyer is prima facie deemed to be delivery to buyer, unless otherwise authorised. Seller must make reasonable contract with carrier on buyer’s behalf. If seller fails and goods are lost or damaged in transit, buyer may decline delivery or hold seller responsible.

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Insurance Point Unless otherwise agreed, if goods are sent by sea route in circumstances where insurance is usual, seller must give buyer notice enabling insurance. If seller fails, goods are at seller’s risk during sea transit.

Section 40 — Deterioration During Transit

Where seller agrees to deliver goods at his own risk at a distant place, buyer must take risk of deterioration necessarily incidental to course of transit, unless otherwise agreed.

Section 41 — Buyer’s Right to Examine Goods

Where goods are delivered to buyer but buyer has not previously examined them, he is not deemed to have accepted them unless he has reasonable opportunity to examine them for conformity with contract.

Memory hook: No reasonable examination = no automatic acceptance.
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Sections 42–44Acceptance of Goods

Section 42 — When Buyer is Deemed to Have Accepted Goods

Mode of AcceptanceMeaning
Express acceptanceBuyer intimates to seller that he has accepted goods.
Act inconsistent with seller’s ownershipBuyer uses, sells, alters, pledges or deals with goods as owner.
Retention beyond reasonable timeBuyer keeps goods without rejecting them after reasonable time.

Section 43 — Buyer Not Bound to Return Rejected Goods

Unless otherwise agreed, if buyer rightfully refuses to accept goods, he is not bound to return them to seller. It is enough if he intimates seller that he refuses to accept.

Section 44 — Liability for Neglecting or Refusing Delivery

If seller is ready and willing to deliver and requests buyer to take delivery, but buyer neglects or refuses within reasonable time, buyer is liable for any loss caused by neglect/refusal and reasonable charge for care and custody of goods.

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Exam Trap Rejection and acceptance are opposites. Once buyer accepts under Section 42, he generally loses right to reject, though he may still claim damages where available.
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CompactCase Study Bank
Case / ExampleTopicPrinciple
Television Home DeliverySection 20Specific goods in deliverable state pass when contract is made.
Laptop OS InstallationSection 21Ownership waits until seller makes goods deliverable and buyer has notice.
Carpet LayingSection 21/22Pending contractual act may prevent passing of property.
Book Sent by CourierSection 23(2)Delivery to carrier without reservation is unconditional appropriation.
Jewellery PledgedSection 24Pledge on sale-or-return basis amounts to adoption and passes property.
Cash-only JewellerySection 24/25Express reservation until payment prevents title passing.
Antique PaintingSection 26Risk remains with seller until ownership passes.
Stolen GoodsNemo datBuyer gets no better title than seller.
Joint Owners’ TV and VCRSection 28Good faith buyer protected if joint owner has sole possession with consent.
Diamond Ring FraudSection 29Voidable contract not rescinded before sale can pass good title.
Lee v. ButlerSection 30(2)Buyer in possession before property passes may pass good title to bona fide buyer.
Wharf Part DeliverySection 34Part delivery in progress of whole may operate as delivery of whole.
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Exam FocusQuick Revision

One-Line Revision

  • Property: Means ownership, not possession.
  • Section 18: Unascertained goods cannot pass until ascertained.
  • Section 19: Specific/ascertained goods pass when parties intend.
  • Section 20: Specific goods in deliverable state pass when contract is made.
  • Section 21: Goods to be made deliverable pass after act + notice.
  • Section 22: Goods requiring weighing/measuring/testing for price pass after act + notice.
  • Section 23: Unascertained goods pass on unconditional appropriation with assent.
  • Section 24: Sale or return passes on approval, adoption or retention beyond time.
  • Section 25: Reserved right of disposal keeps ownership with seller.
  • Section 26: Risk prima facie follows ownership.
  • Nemo Dat: No one can give better title than he has.
  • Exceptions: Mercantile agent, joint owner, voidable contract, seller/buyer in possession, estoppel, unpaid seller and statutory sales.
  • Delivery: Voluntary transfer of possession.
  • Acceptance: Express acceptance, inconsistent act or retention beyond reasonable time.

High-Frequency ICAI Traps

  • Do not say ownership passes merely because goods are delivered.
  • Do not say risk always passes only after delivery.
  • Do not forget notice requirement in Sections 21 and 22.
  • Do not confuse ascertainment with appropriation.
  • Do not confuse Section 23 unconditional appropriation with Section 25 reserved disposal.
  • Do not apply nemo dat without checking the eight exceptions.
  • Do not treat a hire-purchase hirer as a buyer in possession unless the transaction amounts to sale.
  • Do not forget buyer’s right to examine goods before acceptance.
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RevisionMind Map
Revision Mind Map

Transfer of Ownership and Delivery — One Page Recall

The chapter moves from passing of property to passing of risk, then to title by non-owner, delivery rules and acceptance.
1. Passing of Property
  • No property passes in unascertained goods until goods are ascertained.
  • Specific/ascertained goods pass when parties intend.
  • Goods must generally be in deliverable state.
  • Intention comes from terms, conduct and circumstances.
2. Passing of Risk
  • Unless otherwise agreed, risk follows ownership.
  • Seller bears risk until property passes.
  • Buyer bears risk after property passes, whether delivery is made or not.
  • Fault-based delay shifts risk to party in fault.
Core Memory: Ownership ≠ Possession. Delivery ≠ Ownership. Risk usually follows ownership.
3. Specific Goods
  • Sec 20: deliverable state → contract date.
  • Sec 21: make deliverable → act + notice.
  • Sec 22: ascertain price → act + notice.
4. Unascertained Goods
  • Sec 18: no property until ascertained.
  • Sec 23: appropriation needed.
  • Goods must match description.
  • Assent may be express or implied.
5. Approval / Return
  • Approval communicated.
  • Buyer adopts transaction.
  • Buyer retains beyond fixed/reasonable time.
  • Pledge or sale = acceptance.
6. Reservation of Disposal
  • Seller reserves ownership until condition.
  • Usually until payment.
  • Even carrier delivery may not pass title.
  • Conditional appropriation.
7. Sale by Non-Owner — Nemo Dat Exceptions
  • Mercantile agent.
  • One of joint owners.
  • Person in possession under voidable contract.
  • Seller in possession after sale.
  • Buyer in possession before property passes.
  • Effect of estoppel.
  • Unpaid seller resale.
  • Other Acts: finder of goods, pawnee, official receiver or liquidator.
8. Delivery of Goods
  • Voluntary transfer of possession.
  • Actual delivery.
  • Symbolic delivery.
  • Constructive delivery / attornment.
  • Payment and delivery are concurrent conditions.
9. Rules as to Delivery
  • Part delivery may operate as whole delivery.
  • Buyer must apply for delivery.
  • Place/time depend on contract; otherwise reasonable rules apply.
  • Third party must acknowledge buyer.
  • Seller bears cost of making goods deliverable unless agreed otherwise.
  • Wrong quantity may be accepted or rejected.
  • Buyer not bound to accept instalments unless agreed.
  • Delivery to carrier is prima facie delivery to buyer.
  • Buyer has right to examine goods.
10. Acceptance of Delivery
  • Buyer intimates acceptance.
  • Buyer acts in a manner inconsistent with seller’s ownership.
  • Buyer uses, alters, sells or pledges the goods as owner.
  • Buyer retains goods beyond reasonable time without rejection.
Last-Minute Recall: First decide ownership. Then risk. Then title. Then delivery. Then acceptance.