PASSING OF PROPERTY IN UNASCERTAINED OR FUTURE GOODS CONTENTS

1.0. Introduction.

2.0. Objective.

• Main
• Property cannot pass until goods are ascertained
• Passing of property is dependent upon the intention of the parties
• How goods are ascertained?

3.4 When does property pass?

3.5. Delivery to a carrier

4.0. Conclusion

5.0. Summary

6.0. Tutor Marked Assignments (TMA)

7.0. References/Further Readings.

INTRODUCTION

The essence of sale of goods is the transfer of ownership or title in a property from the buyer to the seller. Section 16 provides that no property in good is transferred from the seller to the buyer except the goods are ascertained.

Rule 5.—(i) Where there is a contract for the sale of 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. Such assent may be express or implied, and may be given either before or after the appropriation is made.

(2) Where, in pursuance of the contract, the seller delivers  the goods to the buyer or to a carrier or other bailee or custodier (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract.

By the provision of Section 18 Rule 5, no matter what  the  parties may wish, property does not pass until the goods are ascertained.

Once the goods are ascertained, property passes when the  parties intend, if no such intention can be determined where the following conditions apply:

1. Where there is a contract for the sale of unascertained goods or future goods by description.
2. Where goods of that description and in deliverable state are unconditionally appropriated to the contract.
3. Where there is an irrevocable identification of the goods that are the subject of the contract,
4. Where both parties assent.

OBJECTIVES

The purpose of this unit is for the learner to be able to understand   the concept of passing of “unascertained” or “future goods”.

The Act does not in any way define the word “unascertained goods”, but the term will be looked at in three different areas and they are:

• Goods to be in manufactured or grown by the seller: these are necessarily future goods and are define in section 5 (1) of the Act as goods to be manufactured or acquired by the seller after making the contract of sale.

In Howell v. Coupland (1876) 1 Q.B. 258, the court held that a sale of 200 tons of potatoes to be grown on a particular piece of land was a contract of sale of future goods.

• Purely generic goods: these are goods sold by description, but which are not identified or agreed upon at the time of the contract but are included in a particular class of goods. For example where the seller promises to deliver 100 Abuja Yam tubers,. If the seller does not have enough yam tubers of the description under reference to appropriate to the contract, it must necessarily be a case of future goods.
• An unidentified portion of a specified whole: where the seller has enough quantity to appropriate to the contract, the goods may be categorised as an unidentified portion of a specified whole.  For example, a party may assert “20 cartons out of 30 cartons of beer now in my store”.

MAIN CONTENT

Property Cannot Pass Until Goods Are Ascertained

The fundamental rule in Section 16 of the Act is that   “where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained.”

The word “ascertained” was defined by Atkin, LJ in Re Wait (1927) 1 Ch 606, as “goods identified in accordance with the agreement after the time a contract of sale is made”.

An analytical illustration of Section 16 of the Act came up in the case of Healey v. Howlett and Sons (1917) 1 KB 337, where the plaintiff, a fish exporter carrying on business in Ireland, dispatched 190 boxes of mackerel by rail and ship to his customers in England and instructed the railway officials to earmark twenty boxes for the defendant and  the remaining boxes to two other consignees. The train was delayed before the defendant’s boxes were earmarked and by the time this   was done the fish had deteriorated.

The court held that the defendant was not liable because the property in the fish had not passed to the defendant before the boxes were earmarked and they were therefore still at the sellers risk when they deteriorated.

See also in a Re Goldcorp Exchange Ltd (1994) 3 W.L.R.199.

Passing of Property is Dependent upon the Intention of the Parties

Property in unascertained goods can only pass when the goods  become ascertained. It is worthy of note that whether the property in the goods will pass at the particular point in time depends on the intention of the parties as provided for in Section 17 of the Act.

Section 17 (2) states that:

“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”.

In the case of Mountbatten Investments (Pty) Ltd v. Mohamed 1989 3 (1) SA 171 at 177J178C, the court held that ordinarily, the price fixed in respect of a contract of sale is payable in money. Where the consideration is partly in money and partly in goods on which a fixed value is placed by the parties the contract may, depending upon the intention of the parties, be treated as one of sale, the price being the aggregate sum.

The provision of section 17 dealing with ascertaining the intention of parties also deals with ascertained goods. It should be noted that it also deals with ascertained goods. Section 16 of the Act states that no property will pass in ascertained goods, until fully ascertained or specified.

However, section 18 sets out five rules for ascertaining the intention  of the parties, where their intention cannot be made out  under  section 17 (2). In practice, it is important to lay a good emphasis on the usefulness of the Rules set out as parties more often than not do not have a clear intention as to the exact time at which property will pass. A contrary intention expressed subsequently  by  the  parties may be ineffective to defeat the passing of the property under the Rules. In Dennant v. Skinner and Collom (1948) 2 KB 164, the  plaintiff sold a car to B, a swindler, at an auction, he being the  highest bidder. He gave a false name and address and asked to be allowed to take the car away in return for his cheque. As a result of  the misrepresentations, the plaintiff acceded to B’s request, after obtaining his signature to a document which stated that the title of  the vehicle will not pass until the cheque was honoured.

B sold the car which was subsequently resold to the defendant, B’s cheque was dishonoured and the plaintiff sued to recover the car.

It was held that the property in the car passed on at the fall of the hammer under Rule 1 of Section 1, and that the intention of the parties as contained in the written statement was made too late after the contract had been concluded to prevent the property in the car from passing. That was to say the written statement did not divest B  of property in the car, therefore, B passed a good title to the purchaser.

It noteworthy that Rule 5 appears to be an inference that would be made, unless the circumstances suggest otherwise.

How Goods Are Ascertained

The issue is whether ascertainment of goods may be said to be  another way of saying that the goods have been unconditionally appropriated.

The most imperative and complex aspect of Rule 5 is the meaning of the term unconditionally appropriated. In spite of attempts by the courts no generic definition has been made of that phrase.

It is evident that a case of unconditional appropriation will not arise if the seller only meant to let the buyer have the goods on payment.

In Wait and James v. Midland Bank (1926) 31 Comm. Cas. 172, the plaintiff sold off their bulk leaving a balance of 850 quarters, property in the goods could not pass because the goods had not been separated.

Where an unidentified part of a bulk is sold, one cannot speak of unconditional appropriation until there is definite separation of the part sold from the remainder.

It may be stated that what will constitute unconditional appropriation will vary according to the goods under consideration and the general circumstances of the case. The following illustrations may be used as guide.

1. The issue of appropriation has arisen in a number of shipbuilding cases. In such cases, as in the case of all goods to be manufactured by the seller, the general presumption is that no property in the goods will pass until the article is completed. Moreover, the above preposition will prevail even where the price of the article is paid in installments.
2. Where goods are being grown by the seller, the property in the goods, if well designated, passes as soon as they come into existence.
3. Where an unidentified part of a specified bulk is sold the only thing required to appropriate the goods to the contract is simply to separate the part sold from the remainder, with the consent of the parties.

When Does Property Pass

Section 18 Rule 5(1) states that property in the goods passes to the buyer in a contract of unascertained or future goods only after the goods are conditionally appropriated and Rule 5 (1) provides that the assent required for the appropriation may either be express or implied assent of the other party to the contract.

In Aldridge v. Johnson (1857) 7 E and B 885, the buyer consented to the method of appropriation by providing the sacks.

On the other hand, if A sells to B 60 yams to be picked by B out of a large quantity at N10.00 each, property passes when B picks up any 60.

Thus there is an implied assent given before appropriation.

Delivery to a Carrier

From the provisions of Section 18 Rule 5 (2), it can be deduced that  by dispatching goods through post, as a carrier, the seller has unconditionally appropriated them to the contract. The sub rule does not lay down that in the circumstances, the buyers assent is deemed to have been given. The buyer of the goods must assent to the appropriation of the dispatch of the goods.

Thus in Badische Anilin and Soda Fabrik v. Basle Chemical Works (1898) A.C.200, the House of Lords held that the posting of the  ordered goods vested the property in the buyer at the moment of posting,. This, in effect, transfers the risk in the goods to the buyer while the goods is in the cause of post. It becomes clear  from this  case that the time when the property passed (when the goods are posted) depends on whose agent the carrier is.

Where the seller is required to ship the goods to the buyer, there is an assumption that the shipment is an unconditional appropriation with the consent of the buyer. Although, under Rule 5(2), delivery of goods

to a carrier for transmission to the buyer is deemed to be an appropriation of the goods to the contract and not the passage of the risk in the goods, if it does, the goods will be at the buyer’s risk  during the course of post.

CONCLUSION

The provision of Rule 5 relates to unascertained goods. Property does not pass until the goods are ascertained. Once the goods are ascertained then property passes with parties’ intention.

Although delivery of goods to a carrier for transmission to the buyer is deemed to be an appropriation of the goods to the contract in accordance with Rule 5(2).

SUMMARY

In this Unit, learners has been able to understand Section 16 of the Act which deals with unascertained goods that will not pass to the buyer except ascertained with clear intention of the parties.

Section 18 Rule 5 (1) has also been discussed. This section deals  with unascertained goods, property in the goods passes to the buyer.

Tutor Marked Assignment (TMA)

1. Evaluate the distinction between ascertained goods and unascertained or future goods, critically
2. Wendy & Co. agrees to sell to Banky Ltd 500 tons of grain to be delivered on 25th August, Wendy &Co notifies Banky Ltd of the tons of grains that have been earmarked for him at the warehouse, but before they were taken the grains were stolen from the warehouse on 12th September. What are the  implications of these .

REFERENCES/FURTHER READING

• Sale of Goods Act, 1993
• Rawlings, Commercial Law, University Of London Press,
• C.Okany, Nigerian Commercial Law, Africana .FEP Publishers Limited 1992.
• Sofowora General Principles of Business and Coop Law, Soft Associates,
• A.   M.   Agbonika   and   J.   A.   A.   Agbonika,   Sale   of   Goods (Commercial Law), 2009, Ababa Press Ltd
• J. Okoro   (2013),   Business   Law   for   Professional   Exams, MaltHouse Press Ltd.