Detailed Study Notes for Unit IV

Unit-IV: Passing of Property, Nemo Dat, Unpaid Seller & Remedies

1. Passing of Property (Ownership vs. Possession)

A. Significance of Passing of Property (Section 19)

Fundamental Rule: Risk prima facie passes with ownership (Res perit domino — the loss falls on the owner). Determining the exact moment when ownership passes from the seller to the buyer is crucial to ascertain who bears the loss if goods are damaged, stolen, or destroyed.
Intention of Parties: Property in goods passes when the parties intend it to pass, determined by the terms of the contract, conduct of parties, and statutory rules.

B. Rules for Transfer of Property (Sections 20 to 25)

Specific or Ascertained Goods:
- Unconditional Contract in Deliverable State (Section 20): Property passes when the contract is made, even if time of payment or delivery is postponed.
- Goods to be Put into Deliverable State (Section 21): Property passes only when the seller does the necessary act and the buyer has notice thereof.
- Goods to be Weighed or Measured (Section 22): Property passes when the seller weighs/measures the goods and gives notice to the buyer.
Unascertained or Future Goods (Section 23): Property passes to the buyer only when goods of that description and in a deliverable state are unconditionally appropriated to the contract (with the assent of both parties).
Sale on Approval or Return (Section 24): Property passes when the buyer signifies approval, adopts the transaction, or retains the goods beyond a reasonable time without giving notice of rejection.

2. Transfer of Title by Non-Owners: The Maxim Nemo Dat Quod Non Habet

A. General Rule (Section 27)

Latin Maxim: Nemo dat quod non habet — “No one can give what they do not have.” If a seller sells goods without the authority or ownership of the owner, the buyer acquires no better title than the seller had.

B. Statutory Exceptions to Nemo Dat (Valid Sale by Non-Owners)

To protect commercial security and bona fide purchasers, Indian law recognizes several exceptions where a non-owner can pass a good title:

Sale by a Mercantile Agent (Proviso to Sec. 27): If a mercantile agent is in possession of goods or documents of title with the owner’s consent acting in the ordinary course of business, a sale made by them binds the owner.
Sale by One of Joint Owners (Section 28): If one of several joint owners is in sole possession with the consent of others, a buyer purchasing in good faith acquires good title.
Sale by Person in Possession under Voidable Contract (Section 29): If goods are acquired under a voidable contract (fraud/coercion) and sold before the contract is rescinded, the bona fide buyer gets good title.
Seller in Possession after Sale (Section 30(1)): If a seller who has already sold goods continues in possession, a second sale by them to a buyer in good faith passes good title.
Buyer in Possession before Sale (Section 30(2)): If a buyer obtains possession of goods with the seller’s consent before ownership passes, a subsequent sale/pledge by them passes good title.

3. Performance of the Contract of Sale (Delivery of Goods)

Definition of Delivery (Section 2(2)): Voluntary transfer of possession from one person to another.
Rules as to Delivery (Sections 31 to 44):
- It is the duty of the seller to deliver the goods and the buyer to accept and pay for them.
- Delivery can be actual, symbolic, or constructive.
- Delivery of Wrong Quantity (Section 37): If the seller delivers a lesser quantity, the buyer may reject; if a larger quantity, the buyer may accept the whole or reject the excess (or reject all).
- Installment Deliveries (Section 38): Buyers are not bound to accept delivery by installments unless agreed.

4. Rights of an Unpaid Seller (Sections 45 to 54)

A. Who is an Unpaid Seller? (Section 45)

The seller of goods is deemed to be “unpaid” when the whole of the price has not been paid or tendered, or when a bill of exchange or negotiable instrument has been received as conditional payment and dishonored.

B. Rights of an Unpaid Seller against the Goods

Right of Lien (Section 47): Right to retain possession of goods until payment of the price when goods are sold without credit, or credit has expired, or the buyer becomes insolvent.
Right of Stoppage in Transit (Section 50): If the buyer becomes insolvent while goods are in transit, the unpaid seller has the right to resume possession of goods while they are on their way to the buyer.
Right of Resale (Section 54): The unpaid seller can resell perishable goods immediately, or non-perishable goods after giving notice to the buyer.

C. Rights of an Unpaid Seller against the Buyer Personally

Suit for price (Section 55).
Suit for damages for non-acceptance (Section 56).
Suit for repudiation before due date and suit for interest.

5. Remedies for Breach of Contract (Buyer and Seller)

Buyer’s Remedies:
- Suit for price (if seller fails to deliver).
- Suit for damages for non-delivery or breach of warranty.
- Suit for specific performance (Section 58) in case of specific or ascertained goods.
- Suit for breach of warranty (diminution of price or rejection).
Seller’s Remedies: Suit for price and suit for damages for non-acceptance.

6. In-Depth Landmark Case Studies

Case Study 1: Sale by Non-Owner and Mercantile Agent Exception

Case Title: Inglis v. Robertson
Citation & Court: [1898] AC 616 (House of Lords)
Related Statutory Sections: Section 27 of the Sale of Goods Act (Nemo Dat rule).
The Story & Real-Life Background: A whiskey owner stored goods in a warehouse and transferred delivery orders to a party as security. Later, the owner pledged the same goods to a bank using another delivery order. The bank claimed priority over the prior pledgee, invoking mercantile agent protection.
Legal Issues Involved: Whether a person holding delivery orders without statutory mercantile agent status can pass good title against the true owner.
Final Judgement & Ratio Decidendi:
- Ruling: The House of Lords held that the statutory exceptions to nemo dat must be strictly construed. Since the borrower was not acting as a mercantile agent in the ordinary course of business at the time of pledge, the bank acquired no better title than the borrower possessed.
- Ratio: The fundamental rule that a non-owner cannot pass a better title applies unless the transaction falls strictly within recognized statutory exceptions.

Case Study 2: Unpaid Seller’s Right of Stoppage in Transit

Case Title: Berndtson v. Strang
Citation & Court: (1868) L.R. 3 Ch. App. 588
Related Statutory Sections: Sections 50, 51, and 52 of the Sale of Goods Act (Stoppage in transit).
The Story & Real-Life Background: A seller shipped timber to a buyer overseas under a bill of lading. While the timber was on board the ship, the buyer became insolvent. The unpaid seller gave notice to the master of the ship to stop delivery. The shipowner resisted, arguing transit had ended.
Legal Issues Involved: When transit ends and what constitutes valid exercise of an unpaid seller’s right of stoppage in transit.
Final Judgement & Ratio Decidendi:
- Ruling: The court held that transit continues as long as the goods are in the custody of a carrier or intermediary for the purpose of transmission, before arriving at the buyer’s possession. The unpaid seller’s notice to stop delivery before actual delivery to the insolvent buyer was valid.
- Ratio: An unpaid seller can lawfully intercept goods in transit upon buyer insolvency to protect their unpaid price.

Quick Reference Guide: Unit-IV Sale of Goods Act

Unit Number	Topic / Concept Name	Relevant Sections Range	Core Description / Subject Matter
Unit-IV	Passing of Property	Sections 19 to 25	Transfer of ownership, risk follows ownership, unascertained goods, and appropriation.
Unit-IV	Nemo Dat Quod Non Habet	Sections 27 to 30	General rule of non-owner title transfer, along with mercantile agent and voidable contract exceptions.
Unit-IV	Unpaid Seller Remedies	Sections 45 to 54	Definition of unpaid seller, right of lien, stoppage in transit, resale, and buyer/seller suits.