Transfer of ownership refers to the process by which the legal ownership of goods passes from the seller to the buyer. It determines who holds the title to the goods and who bears the risk associated with them. Once ownership is transferred, the buyer becomes the owner and assumes responsibility for the goods, including risks like damage or loss.
The rules for the transfer of ownership are outlined under the Sale of Goods Act, 1930. The conditions for the transfer of ownership depend on the type of goods and the specific terms of the contract.
Conditions for Transfer of Ownership of Goods
1. For Specific or Ascertained Goods
These are goods that are identified and agreed upon at the time of the contract.
- Ownership is transferred when the seller and buyer intend it to pass.
- If no intention is stated, the following rules apply:
- Goods must be in a deliverable state.
- The buyer is informed if further actions (e.g., weighing, packaging) are required.
- Delivery conditions are fulfilled.
2. For Unascertained Goods
These are goods not specifically identified at the time of the contract. Ownership is transferred only when:
- The goods are specified or appropriated (e.g., selected, separated) for the buyer.
- The buyer’s assent to the specification is obtained.
3. For Goods to be Manufactured or Acquired
In cases where goods are to be made or acquired, ownership is transferred when:
- The goods are ready, identified, and approved by the buyer.
- All contractual conditions are satisfied.
4. Conditional Sale
If goods are sold on a condition (e.g., payment in installments, delivery after a trial period):
- Ownership transfers only when the conditions are met.
5. Delivery of Goods
- If goods are delivered to the buyer or a carrier for transmission to the buyer without conditions, ownership passes.
- If the delivery is conditional (e.g., payment on delivery), ownership does not pass until the condition is satisfied.
Importance of Transfer of Ownership
Risk and Responsibility: Ownership determines who bears the risk if goods are damaged or lost.
Rights to Sell: Only the owner has the legal right to resell or pledge goods.
Legal Obligations: Ownership transfer affects legal obligations like taxes or damages.
By understanding these conditions, both buyers and sellers can clearly determine their rights and responsibilities, minimizing disputes in commercial transactions.
These are goods that are identified and agreed upon at the time of the contract.