Digamber Pershad Kirti Prasad v. State of Uttar Pradesh & Ors.
AIR 1996 All 1
(Section 2o and 26 of Sale of Goods Act)
Digambar Pershad, D got the contract of felling trees and collecting timber through an agreement to sell. D commenced the work of felling trees. All the trees were felled, sawn and timber was collected at a central point for transportations. D claimed that all precautions had been taken to avoid inflammatory material around the storage area, and watchmen were also appointed to keep vigil. Fire broke out and destroyed the timber. The state (S), however, demanded the amount due under the sale. D filed a writ petition against the State of UP.
ISSUE: Whether the title of the goods, actually pass to D at the time of signing of the contract?
- Title to the goods had not passed to D as the stage of removing timber had not reached.
- There was no completed sale but only an agreement to sell as the payment was yet to be made.
- Before the sale was completed, the subject-matter of the contract was destroyed by fire and, therefore, the contract stood frustrated and hence D was not liable to pay.
- The sale of the lot in question was completed the moment it was approved. D is liable to pay as the fire had taken place after the contract had been concluded.
- The conditions in the contract clearly mentioned that the property and the risk in the goods both passed to D at the time of signing of the contract.
HELD (Petition DISMISSED)
- (w.r.t 1st issue) Just because the payment had not been made in full and timber was not actually removed does not mean that transfer of property had not taken place. Transfer of property in the goods depends on the facts and circumstances and intention of the parties to the contract. The agreement was not subject to any future condition of the full payment, but the agreement became a concluded contract when the auction was accepted by the competent authority and the possession of the trees was transferred to D. Thus, Section 20 of SOGA would be applicable.
- (w.r.t 2nd contention of S) S. 26 of SOGA is applicable. The condition (21) clearly provided that after 30 days from the date of acceptance of the contract or from the date of commencement of work, (whichever is earlier) the buyer will be fully responsible for the damage caused to the goods. Since this time had passed the risk was with the buyer.
To pass property in the goods actual delivery is not necessary, but if the goods are ascertained and in deliverable state, then the property will pass in the goods immediately upon the contract having been made, notwithstanding the time of payment of the price or the time of delivery of goods, or both, having been postponed.
 Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment of the price or the time of delivery of the goods, or both, is postponed.
 Unless otherwise agreed, the goods remain at the seller’s risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer’s risk whether delivery has been made or not: