CHAPTER XXV TRANSFER OF TITLE 258. Introduction. The object of a sale of, or contract to sell, goods is to transfer the title or property in them from the seller to the buyer. The time at which the transfer of property rights takes place is important as between seller and buyer, for several reasons. After the title has been transferred to the buyer he must bear any risk of loss,* and is also entitled to the benefit of any gain or increase. He may again transfer the title to another, even against the objection of the original seller, or the goods may be taken by his creditors to satisfy his debts through the medium of an execution and levy. He must also pay the price to the seller. Before the title to personal property which is the subject matter of a sale has been transferred, the goods still belong to the seller and he bears the risk of loss, receives the benefit of increase, holds the goods subject to the rights of his own creditors, and, if the buyer refuses to accept them, is limited to an action for damages for breach of contract, instead of being able to recover the contract price. Or he may transfer a valid title in the goods to a third person, which will be valid even against the original buyer, though should he do so the buyer may recover the damages which he has sustained by reason of the seller's breach of contract. While it is apparent that it is of the utmost importance to discover when the title to the goods has been transferred from the seller to the buyer, the determination is not always a simple task. A sale is the result of a contract relation, and as is true with all contracts the intention of the parties is the controlling * If after title has been transferred to the buyer, together with the risk of loss, the buyer should allow the seller to retain possession of the goods, the latter could not of course wantonly destroy them, nor could he be relieved from loss because of the transfer of title if his negligence resulted in their destruction or injury. The duty which devolves upon a custodian of another's goods is discussed under the subject of Bailments. factor. Whenever this intention is indicated, it alone will determine the time of transfer. If it is clear that the parties intended that title should pass at a certain time in the negotiations, title will be considered to have passed at that time. But if they did not intend that it should have passed, it will be deemed to remain in the seller. It is not always an easy task, however, to determine the intention of the parties from their words and conduct. In the majority of instances the parties to a sale say nothing about the time of the transfer of title, and if disputes arise in these instances the intention of the parties must be determined from their acts and conduct and the circumstances of the particular sale. Various rules 259. Ascertained and Unascertained Goods. are applied in determining the intention of the parties, and the application of these rules depends upon whether the goods which are sold, or contracted to be sold, are ascertained or unascertained. If the goods which are the subject of the sale are specific, and designated so that both the seller and buyer know exactly what goods are the subject of the sale, and no others will suffice, the sale is one of ascertained goods. On the other hand, if the goods are merely described generally and any goods of like character will suffice, or if a future act of the parties is necessary to designate them, the sale is of unascertained goods. EXAMPLES 1. Cook contracts to sell to Brown 10,000 first-class vitrified bricks, Brown agreeing to pay $40 a thousand on delivery. This is a contract to sell unascertained goods, for no particular body of bricks is within the contemplation of the parties. 2. Cook contracts to sell to Brown all the bricks in his warehouse in South Bend, being 10,000, more or less, which Brown agrees to buy at an agreed price for the lot. This is a contract to sell ascertained goods, for a particular body of goods is within the contemplation of the parties. 260. Rules in Sales of Ascertained Goods. Rule One. In case there is an unconditional contract to sell specific goods, in a deliverable state, the property in the goods passes to the buyer when the contract is made. It is immaterial whether the time of payment, or time of delivery, or both, be postponed. EXAMPLE 1. Tarling on January 4th agreed to buy a stack of hay of Baxter, to be paid for on February 4th, and to remain on Baxter's land, where it then stood, until May first, when Tarling was to remove it. On January 20th the hay was destroyed by fire, and Tarling suffered the loss, for title was deemed to have been transferred when the contract was made. The goods were specified and ascertained, although both payment and delivery were postponed. Tarling vs. Baxter, 6 B. & C. (Eng.) 360. The parties could, however, by express agreement, have postponed the time of the transfer of title, in which event the seller would have continued to bear the risk of loss. Rule Two. When the contract is to sell specific goods, if something remains to be done by the seller to put them in a deliverable state, the property in them is not transferred to the buyer until this is done and notice given. Similarly, if the seller is required to measure or weigh the goods for the purpose of ascertaining the amount due, the title is not considered to be transferred until this is done. EXAMPLES 1. Brown made a written agreement with Furniss, selling the latter a one-half interest in the steam boat Rhode Island, agreeing to fit out the boat in a suitable manner for her to proceed from New York to the Pacific. After the contract and before the boat was entirely fitted out it was destroyed by fire. Brown was compelled to suffer the loss. Decker and Brown vs. Furniss, 14 N. Y. 614. Rule Three. If ascertained goods are delivered to the buyer on trial or on approval, the property in them passes to him, (1) when he signifies his approval or (2) if he does not return them within a reasonable time. The parties may, however, make the sale a transaction known as a "sale or return," by which the goods are delivered to the buyer with the understanding that the property is to pass to him immediately, but that he may afterwards return the goods if he sees fit, in which event the title is in the buyer until he returns the goods. Such a sale is an exception to the general rule and exists only where the parties have made it clear that they intended such a result to follow. EXAMPLE 1. Fairfield made a written contract with the Madison Manufacturing Company for the purchase of a reaper, one of the terms being that the reaper should be delivered to him for a fair trial and that if he did not find the machine as represented he should return it. He tried it for two days and then notified the seller that it was unsatisfactory, and that he would return it to any place the seller designated. The seller suffered the loss caused by the destruction of the reaper. Fairfield vs. Madison Manufacturing Company, 38 Wis. 347. 261. Unascertained Goods. Rule One. When the seller purports to sell, and the buyer to buy, an undivided share in a specific mass of goods, the property in a proportionate share of the mass is deemed to have been transferred, even though the number, weight, and measure of the goods in the mass is undetermined. This is known as a sale of fungible goods, being goods such as oil, grain, or molasses, which is a uniform mass, of which a part is sold. At the making of the contract the property in a part of the mass is immediately transferred without its separation and the buyer becomes an owner in common of the mass. Rule Two. When the goods which are sold, or contracted to be sold, are unascertained, the property in them is transferred from the seller to the buyer at the time at which the goods are unconditionally appropriated to the contract. Edwards in Ohio ordered a quantity of calf and buff shoes from Smith in Massachusetts. Smith manufactured the shoes according to specification and delivered them to the railroad for transportation. In a contest between creditors it was decided that the title was transferred at the time of delivery to the railroad, Smith having then complied with the conditions of the contract. Smith vs. Edwards, 156 Mass. 221. Rule Three. If the contract of sale by its express terms requires the seller to deliver the goods to the buyer, or at a particular place, or to pay the freight or cost of transportation to the buyer, or to a particular place, the property in the goods is not transferred until the goods have been delivered to the buyer or reach the place agreed upon. EXAMPLE Brown ordered 98 tons of coal from McNeal, to be delivered at Brown's wharf at Burlington. McNeal shipped the coal by barge, the barge sinking at night while anchored alongside the wharf in Burlington before being unloaded. McNeal suffered the loss, because there had been no delivery and the title and risk of the goods were still in the seller. McNeal vs. Brown, 53 N. Y. L. 617. 262. Title to C. O. D. Shipments. No uniform rule exists regarding C. O. D. (Collect on Delivery) shipments, or shipments in which the railroad, postal department, or express company, is instructed by the seller to collect on delivery, and not to surrender the goods to the buyer until the freight charges and purchase price have been paid to the carrier. In Georgia, Iowa, Missouri, Vermont, Indiana, Massachusetts, and North Carolina, the seller retains title until the price has been paid. In the majority of the states, however, the property is considered to have been transferred to the buyer immediately upon delivery to the transportation company, even though the buyer cannot receive the goods until he has paid the price. The latter is the view adopted by the Uniform Sales Act. The law applicable in the state where delivery to the carrier is made determines the matter. 263. Necessity of Delivery. As between seller and buyer the delivery of the goods sold is not necessary to transfer the title. Even though the goods are retained by the seller the risk of loss is frequently borne by the buyer. But if no bill of sale has been given and recorded the delivery of the goods is of the utmost importance when disputes arise regarding the rights of third persons. Suppose that Ames has sold all the hay in his barn to Bates, but retains the hay. Bates bears the risk of loss, for as between him and Ames the property has been transferred, although the seller has retained possession. But if Ames, while still in possession of the goods, resells them to Call, who carries them away, or borrows money from Dale, then either Call or Dale may acquire a title which is superior to that of Bates. This is because the sale between Ames and Bates is considered fraudulent as against third parties who acquire rights under the assumption that the goods belong to Ames, the seller, relying on Ames' possession. Two rules exist to protect third parties against such acts of the buyer who, by leaving the seller in possession of the goods, creates a situation which results in damage. The first applies to subsequent purchasers of the goods in good faith, such as Call above, and the second to the rights of creditors of the seller, such as Dale above. Subsequent Purchasers. If a buyer leaves the goods purchased in the hands of a seller and the seller wrongfully sells and delivers the goods to a third party, this subsequent purchaser acquires a title in them superior to that of the first |