1. Transfer
of
Property
Udit Saboo
MBA(FA)
III sem
2. The main purpose of a contract of a sale is
to transfer property . The property in the
goods means ownership. When the goods is
sold, it is the property in the goods that is
transferred to the buyer. It should be noted
that there is a difference between ‘property
in goods’ and the ‘physical possession of
the goods’. A person may be in possession
of the goods but he may not be owner of
the goods.
3. Exceptions
There are some expections to the above rule. In other
words, there of some situations in which a person, who
is not the ownner of the goods may sell the goods and
pass a better title than he himself has.
4. Following are the exceptions-
1. Estoppel
2. Sale by a merchantile agent
3. Sale by one of joint owners
4. Sale by person in possession under voidable contract
5. Sale by seller in possession of goods after sale
6. Sale by a buyer who is in possession of goods after
sale or agreement to sell
7. Sale by an unpaid seller
5. ESTOPPEL
If the owner of the goods acts in such a manner that the
other person leads to believe that the person selling the
goods has authority to sell the goods, then he can not
refuse the seller’s authority to sell the goods.
EXAMPLE: A told B in the presence and hearing of C
that he (i.e. A) is the owner of certain goods. In fact, C
is the owner of these goods. But he did not object at that
time. Later on A sold goods to B. Here B will get good
title and C will be estopped from denying A’s right to
sell.
6. SALE BY A MERCHANTILE AGENT
Where the goods is in possession of a merchantile agent and
sales is made by him in the ordinary course of his business,
it shall be valid as if he was expressly authorised by the
owner of the goods. But the buyer should have acted in good
faith and had no notice at the time of sale, that the seller has
no authority to sell the goods.
EXAMPLE: A put his car to his mercantile agent to receive
offers and not to sell. He also delivered a signed document
to the agent. On the basis of this document, agent sold the
car to buyer. Held that the buyer has clear title and the true
owner i.e. A was estopped from denying buyer’s title.
7. SALE BY ONE OF JOINT QWNERS
If there are several joint owners of goods and any one of them,
who has the sole possession, of the goods by permission of the
other co-owners, sell goods to any person and the buyer purchase
the goods in good faith and without notice or knowledge that the
seller has no authority to sell, the ownership will be transferred to
the buyer.
EXAMPLE: A and b jointly purchased a car. A took the car to his
house with the consent of B and later on he sold it to C. The
buyer purchased the car in good faith without knowledge about
the ownership of B. He will get a good title.
It should be noted that the joint owner must be in possession with
the consent of the other joint owners, otherwise the buyer will not
acquire a good title.
8. SALE BY PERSON IN POSSESSION
UNDER VOIDABLE CONTRACT
A person who has obtained possession of goods under a
contract which is voidable on the ground of fraud,
misrepresentation, coercion or under influence and he
has sold the goods before the contract has been
rescinded, the buyer will acquire a better title.
EXAMPLE: A purchased a house from B by fraud and
sold it to C before the contract is cancelled. C bought
the house in good faith without knowing about A’s
fraud. C gets a good title
9. SALE BY SELLER IN POSSESSION OF
GOODS AFTER SALE
If a seller has sold the goods but he is still in possession
of goods or the documents of title and sold the same
goods again to a third person, then the third person will
get a good title if he has purchased the goods in the
goods faith and without any notice of previous sale.
It should be noted that the above rule does not apply
where the goods have been delivered by the seller and
subsequently the goods again come back to the seller
due to some reason.
10. SALE BY A BUYER WHO IS IN POSSESSION OF
GOODS AFTER SALE OR AGREEMENT TO
SELL
Where a person has bought or agreed to buy goods and
obtained the possession of goods with the consent of the
seller and sell it to third person, the third party will get a
good title even if there is any lien or other right of the
original seller. It should be noted that the above rule
does not apply where the buyer has got only an option
to buy the goods as in case of hire-purchase agreement.
11. SALE BY AN UNPAID SELL
Where an unpaid seller, who has exercised his right of
lien or stoppage in transit, re-sells the goods, the buyer
requires a good title to the goods against the original
buyer, even if no notice of resale is given.
