Reservation of Right of Disposal of Goods

Introduction:

The meaning of passing if the goods or property is basically the transferring of ownership from the one who sells it to the one who is willing to buy it which is regulated by the rules of sales of goods Act 1930. In order to understand the concept of reservation of the right of disposal of goods, one must understand the basic concepts of the sale of goods Act and the right and liabilities of the buyers and sellers. This article will specifically try to deal with the different areas of the reservation of the right of disposal of goods. The sales of goods act deal with the contracts related to buying and selling of goods. Before the existence of the sales of goods act the contracts related to buying and selling of good were dealt with by the Indian contract Act

Important Terms of Sales of Goods Act

Buyer

According to sec 2(1), a buyer is a person who buys or agreed to buy goods from the seller. Since the buying and selling of goods constitutes a contract between two parties, a buyer is one of the parties to the contract.

Seller

According to sec 2(13) of the Sales of Goods Act, a seller is a person who sale or agreed to sale goods from the selling of goods the contract is made and the seller is the other party to contact.

Types of Goods

The goods are the most important term to understand and the definition of goods is given under sec 2(7) of the sale of goods Act as “all types of movable property” this excluded actionable claims and money and includes stock and shares, growing crops, grass etc.

  The various types of goods that are defined under the sale of goods Act are:

1. Existing Goods
2. Future Goods
3. Contingent Goods

1. Existing Goods: According to section 6 of the Sale of Goods Act the goods which are existence and were present at the time when the contract was made are known as existing Goods.

The existing Goods can be further divided into three types

• Specific goods: the goods which are especially specified by the buyer which he intends to buy at the time of drawing of the contract. For reference: A issued an Ad in the newspaper to sell his old bicycle B contacted him to buy that bicycle, here the bicycle is the specific good
• Ascertained goods: The sale of goods Act does not specify the definition of the ascertained goods but this means the goods which are specifically selected from the large set of goods like when we go to buy a smart television from an electronic shop and especially decides to buy the Samsung smart television.
• Unascertained goods: The goods which were not specifically elaborated by the person who wants to buy it at the time of the drawing of the particular contract.

2. Future Goods: According to section 2(6) of the Sale of Goods Act, 1930 the goods which are either in the process of manufacturing or are being produced or obtained by the buyer at the time of drawing of the contract are described as future Goods.

3. Contingent Goods:  The contingent goods are in similar to future goods of a lot of contingent goods, the sale of such goods does not happen immediately and the guarantee of the fulfilment of the contract is uncertain for reference: the selling of crops which are yet to grow and those crops may or may not grow so they are contingent goods.

Reservation of Right of Disposal (Section 25 of Sales of Goods Act)

The logic behind the reservation of the right to disposal is to ensure that the payment of the goods is transferred from the one party to the other party of the contract before the transfer of right to ownership of goods and same is described under the VPP system which stands for value pre-paid that means the payment of goods shall be paid before transferring of ownership.

Section 25(1) states that:

According to the contract law of the selling of specific goods,

• The seller can reserve the right of disposal of goods until certain requirements are accepted by the buyer

• During such condition even when goods are reached to the buyer or the person responsible for transferring of this particular good the buyer could not acquire the possession over the goods until the condition specified by the supplier are taken care of by the buyer.

For example, A transfer some goods to X by a truck which will reach to X in few hours but A instructs the truck driver to not to hand over the possession the goods to X until he signs certain agreement pages for payment and when the goods reached to X and then if X refuses to sign those papers here the truck driver can cancel the agreement to hand over the goods to X and A can enjoy the reservation of the right of disposal.

When the following situation arises, the supplier is believed to reserve the right of disposal

• Section 25 (2) of Sales of Goods Act: By taking an official paper of tittle in own name or his agent’s name: the time where goods are dispatched by the railways for carriage but the document of title that is railway receipts or the bill of lading in the case where the goods are shipped for carriage by the sea are taken by the seller in his own name or his agent’s name than the seller has reserved the right of disposal of the goods and the possession of those goods will be pass on purchaser on only one condition when the purchaser made the complete payment in the exchange of the railway receipts or the bill of goods sent by the ship. Illustration: A sold some glass sheets to B which are supposed to pass on to B by the railways. A buys the railways receipt in official title name of B and sent it to his agent and instruct the agent to pass on the receipt to B on the complete clearance of price the receipts of railways here A has reserved his right to disposal.

• Section 25(3) the Sales of Goods Act: When the bill of exchange is transferred to the purchaser alongside with the railway’s receipt or the bill of list of the goods supposed to be shipped by the sea. When the particular goods are passed on or shipped by the railways or the shipping company or the carrier by the sea and the purchaser or the seller takes the railways receipt ( in transferability by railways) or the bill of lading ( in a carrier by sea) in the name of the buyer but he sends that along with the bill of exchange in the name of the buyer for the payment of the goods then till the time purchaser agrees to pay the amount of the exchange of bill the pass on of ownership of goods should not take place.

Case Laws

• General papers limited v. V.P Mohideen & Bros AIR 1958 Madras 482: In following case the company General paper limited sold certain bales of papers to the other party which were to send to the other party by railway. The general paper’s limited took the Railways receipt in the name of VP Mohideen and sent them to his banker to deliver the receipt on the fulfilment of the price by Mohideen but before the payment, the goods got destroyed in a fire the court ruled out that because the seller has reserved the right to the disposal of goods he was the owner of the goods at the time when the goods were destroyed so the buyer is not responsible for the payment of loss occurred because ownership was not passed on to the purchaser.
• Multanauk Chempalal v. CP shah & co AIR 1970 Kant 106: Section 25 of the Sales of the goods was held and the court rules out that the risk to the property is transferred only after the ownership of the property concerned is transferred.

Conclusion

The Sales of Goods Act, 1930 gives serval right and liabilities to the parties who enter into a contract for sales of goods which are given under section 18 to 25 of the Act. This act provides protection to both the parties to the contract. It also gives the clarification on the transfer of ownership and when the other party becomes an absolute owner of the goods. Reservation of right of Disposal is one such protection given to the seller of unpaid goods to ensure the payment of the goods before the transfer of ownership of the goods

References:

• General papers limited v. V.P Mohideen & Bros AIR 1958 Madras 482
• Multanmal chempalal v. CP shah & co: AIR 1970 kant 106
• Vishwas Chitwar, Transfer of property under sales of goods Act 1930, ipleaders,

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