Delivery, Deliverable State, Mercantile Agent, Price, Property, Quality of Goods and Insolvent under Section 2 of the Sale of Goods Act, 1930, and the Contract of Sale Compared with a General Contract

The remaining definitions in Section 2 each do specific work later in the Act. Delivery and deliverable state govern performance and the passing of property. Mercantile agent unlocks one of the exceptions to the rule that only an owner can pass title. Price and property are two of the four elements of a sale. Quality and insolvent feed into the implied conditions and the unpaid seller's rights. Underneath them all runs one distinction that the Act treats with care: property, which is ownership, and possession, which is control. The two often part company, and many of the Act's hardest rules exist to deal with that.

Property and possession can sit with different people, and the Act has a rule for each case

1. The Definitions

Section 2, Sale of Goods Act, 1930, clauses (2), (3), (7A), (8), (10), (11) and (12)

(2) “Delivery” means voluntary transfer of possession from one person to another.

(3) Goods are said to be in a “deliverable state” when they are in such state that the buyer would under the contract be bound to take delivery of them.

(7A) A person is said to be “insolvent” who has ceased to pay his debts in the ordinary course of business, or cannot pay his debts as they become due, whether he has committed an act of insolvency or not.

(8) “Mercantile agent” means a mercantile agent having in the customary course of business as such agent authority either to sell goods, or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods.

(10) “Price” means the money consideration for a sale of goods.

(11) “Property” means the general property in goods, and not merely a special property.

(12) “Quality of goods” includes their state or condition.

2. Delivery and Deliverable State

Delivery is voluntary. Goods taken without the transferor's consent, or seized, are not delivered.
It transfers possession, not ownership. Delivery may happen before property passes, as on a sale on approval, or after it, as where the buyer owns the goods but has not collected them.
It may be actual, symbolic or constructive. Section 33 allows delivery by anything the parties agree shall be treated as delivery, or which has the effect of putting the goods in the buyer's possession: handing over the goods, handing over the key to the store, or a warehouse keeper attorning to the buyer.
Deliverable state refers to the condition in which the buyer is bound to accept the goods. Goods that the seller must still weigh, measure, pack or repair are not yet in a deliverable state, and under Sections 21 and 22 property in them does not pass until that is done and the buyer has notice.

3. Mercantile Agent

A mercantile agent is a professional intermediary who, in the customary course of his business, has authority to sell goods, consign them for sale, buy them, or raise money on their security. The definition matters because of the proviso to Section 27: a sale by a mercantile agent in possession of goods or documents of title with the owner's consent, acting in the ordinary course of business, is as valid as if he were expressly authorised, provided the buyer acts in good faith without notice of the lack of authority.

📖 Folkes v. King, [1923] 1 KB 282 (CA)

Facts: The owner of a car handed it to a mercantile agent for sale, instructing him not to sell below a stated price. The agent, who from the outset intended to defraud him, sold it well below that price to a buyer who acted in good faith, and kept the money. The owner sued the eventual purchaser to recover the car.

Held: The purchaser obtained a good title. The owner had consented to the agent having possession in his capacity as a mercantile agent, and the agent sold in the ordinary course of business to a buyer in good faith. It made no difference that the agent's consent had been obtained by a fraudulent intention, since the owner had in fact consented to his possession.

Ratio: Consent to a mercantile agent's possession is enough to bring the exception into operation, even if that consent was induced by the agent's fraud. The owner bears the risk of the agent he chose.

4. Price, Property and Possession

Price must be money. Property means the general property, which is ownership, and not a special property such as a pledgee's or bailee's limited interest. Possession is not defined, but means physical control, which is acquired by delivery.

Risk follows property. Under Section 26, unless otherwise agreed, goods remain at the seller's risk until property passes, whether or not delivery has been made.
The unpaid seller's lien depends on possession. Under Section 47 the seller may retain goods in his possession until paid, even though property has passed to the buyer.
Title may pass from the one in possession. Section 30(1) lets a seller who remains in possession after a sale pass a good title to a second buyer in good faith, and Section 30(2) lets a buyer in possession before property passes do the same.

5. Quality of Goods and Insolvent

Quality includes state or condition. The definition widens the implied conditions of merchantable quality and fitness in Section 16, so that goods may fail them because of their state, such as damage or contamination, and not merely because of their grade.
Insolvent has a commercial meaning, not a technical bankruptcy one. A buyer who has ceased to pay his debts in the ordinary course of business, or cannot pay them as they fall due, is insolvent for the purposes of the Act, whether or not he has been adjudicated. The definition matters for the unpaid seller's lien under Section 47 and stoppage in transit under Section 50.

6. The Contract of Sale Compared with a General Contract

Point	General contract, Contract Act	Contract of sale, Sale of Goods Act
Subject matter	Any lawful act or forbearance	Goods, for a money price
Effect	Creates rights in personam only	May also transfer ownership, a right in rem
Terms	No classification into conditions and warranties	Conditions and warranties, ss. 11 to 13, with implied terms, ss. 14 to 17
Third parties	Generally unaffected	Good faith buyers may acquire title from non-owners, ss. 27 to 30
Security	Lien only in limited cases, Contract Act ss. 170, 171	Unpaid seller's lien, stoppage in transit and resale, ss. 45 to 54

7. The Position Stated Shortly

Delivery is the voluntary transfer of possession, and may be actual, symbolic or constructive.
Goods are in a deliverable state when the buyer is bound to accept them.
A mercantile agent customarily has authority to sell, consign, buy or raise money on goods.
Folkes v. King: consent to a mercantile agent's possession suffices even if obtained by his fraud.
Price is the money consideration; property is the general property, not a special property.
Property and possession often part, and the Act has rules on risk, lien and title for each case.
Quality includes state or condition; insolvent has a commercial meaning.
A contract of sale differs from a general contract chiefly in transferring ownership and binding third parties.