Management Notes

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Rules regarding Transfer of Ownership – Ownership Transfer | Business Law

Rules regarding Transfer of Ownership

The transfer of ownership means the passing of property in goods from seller to the buyer. When such property is regarded as transfer or when the ownership is shifted from seller to the buyer. These are the important question. If it is mentioned in the contract, both the parties should follow it. In absence of such terms, the parties should follow the rules regarding transfer of ownership which lay down under law. There are some rules, in this respect, under sections 48 to 53 of Contract Act, 2056 and under sections 18 to 23 of Indian Sales of Goods Act 1930. They are as follows

Transfer of ownership of specific or ascertained goods

The goods which are ascertained at the very moment of formulating of contract of sale are known as specific or ascertained goods. Under such contract, both the parties agree upon the questions like when, how, and where the ownership of goods is to be transferred.

Transfer of ownership of unascertained goods

The goods which have not been particularized but described only by name they are called unascertained goods. This kind of sale is not actual sale. It is an agreement to sale. When goods are ascertained after the act of deliverable stage or a necessary measurement then the ownership will be taken place as an actual transfer.

When goods are in a deliverable state

The term ‘deliverable state’ denotes such state of goods where the seller does not have to do anything more for delivery. The goods can be immediately delivered to the buyer and the buyer is also bound to take delivery of such goods. Section 48(2) of the NCA has made the provision that ‘Unless otherwise provided for in the contract if some definite goods are in a deliverable state and can be dispatched immediately, the ownership of such goods is supposed to be transferred from seller to the buyer after concluding the contract or their price.’

Right of the buyer to inspect the goods

The buyer has right to inspect the goods to ascertain whether the goods correspond to the mentioned terms in the contract or not. Until the goods are inspected and accepted by the buyer, the ownership is not transferred to him.

Goods sent on approval or sale or return basis

The goods may be sent to the buyer on approval or on sale or return basis. If the goods are sent on approval basis, the ownership in goods will be passed on to the buyer when he gets delivery and signifies his approval. In this case, only delivery of goods is not sufficient to transfer the ownership. Similarly, if the goods are sent to the buyer on ‘sale or return’ basis, the ownership will pass on to the buyer only after the buyer sells the goods sent. If he cannot sell goods, he has to return the goods to the seller in time.

When seller has something to do

When the seller has something to do to make the goods in a deliverable stage, the ownership will be transferred to the buyer only after making them (goods) deliverable. Making proper packing, affixed the trademark and such work may be required before the delivery. If the seller has taken sometime for making goods deliverable, he has to inform to the buyer as soon as they become deliverable. This provision is stipulated under section 21 of Indian Sale of Goods Act, 1930.

Source : Ramesh Prasad Yadav

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