Passing of Property in Unascertained and Future Goods under Section 23 of the Sale of Goods Act, 1930: Unconditional Appropriation, Assent of the Parties, and Delivery to a Carrier

Most commercial sales are of goods described by kind and quantity rather than identified items: so many tonnes of steel of a stated grade, so many cartons of a product, a machine to be built. Section 18 prevents property in such goods from passing until they are ascertained. Section 23 then says how and when it does pass: when goods of the contract description, in a deliverable state, are unconditionally appropriated to the contract by one party with the assent of the other. Delivery to a carrier for transmission to the buyer, without reserving the right of disposal, is the most common form of appropriation.

1. The Section

Section 23, Sale of Goods Act, 1930

(1) Where there is a contract for the sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made.

(2) Delivery to carrier. Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee, whether named by the buyer or not, for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract.

2. The Requirements

Goods of the contract description. Appropriating goods that do not match the description does not pass property; the buyer may reject them.
In a deliverable state. Goods still to be finished, packed or put into condition cannot be appropriated.
Unconditional appropriation. The goods must be irrevocably attached to the particular contract, so that the seller can no longer substitute other goods. Merely setting goods aside, or marking them, may not be enough if the seller remains free to change his mind.
Assent of the other party. It may be express, as where the buyer approves a selection, or implied, as where the buyer has authorised the seller in advance to choose and dispatch goods. It may precede or follow the appropriation.

What appropriation requires, the carrier rule, and the line between the two leading cases

📖 Carlos Federspiel & Co. S.A. v. Charles Twigg & Co. Ltd., [1957] 1 Lloyd's Rep 240

Facts: A buyer paid in advance for bicycles to be shipped to it. The seller packed the bicycles, marked the cases with the buyer's name, and booked shipping space. Before shipment the seller went into receivership, and the buyer claimed that the bicycles already belonged to it.

Held: The court held that property had not passed. The contract contemplated that the goods would be appropriated by shipment, and until they were shipped the seller could still have used them for another customer. Packing and marking were preparatory acts, not an unconditional appropriation.

Ratio: Appropriation must be unconditional and irrevocable. Setting goods aside and labelling them is not enough while the seller remains free to deal with them otherwise, particularly where the contract contemplates a later act such as shipment.

📖 Wardar's (Import & Export) Co. Ltd. v. W. Norwood & Sons Ltd., [1968] 2 QB 663 (CA)

Facts: A buyer bought 600 cartons of frozen kidneys out of a larger quantity in a cold store, and sent its own carrier to collect them with a delivery note. The cartons were brought out and loaded over several hours, and the vehicle's refrigeration was not working. The kidneys arrived in poor condition.

Held: The Court of Appeal held that property and risk passed when the 600 cartons were separated and loaded onto the buyer's carrier, which was an unconditional appropriation with the buyer's assent. Any deterioration afterwards was at the buyer's risk.

Ratio: Delivery of the contract goods to the buyer's carrier, with the buyer's assent, appropriates them to the contract and passes property and risk.

3. Delivery to a Carrier

Section 23(2) deems delivery to a carrier or other bailee, for transmission to the buyer, to be an unconditional appropriation, provided the seller does not reserve the right of disposal.
Section 39(1) adds that delivery to a carrier is prima facie delivery to the buyer.
A reservation of the right of disposal, for example by taking the bill of lading or railway receipt in the seller's own name under Section 25(2), prevents the delivery from passing property.
Goods shipped in bulk for several buyers are not appropriated to any one of them until they are separated.

4. Future Goods

Future goods, which the seller is to manufacture, produce or acquire, can only be the subject of an agreement to sell under Section 6(3). Property passes under Section 23 once the goods exist, are in a deliverable state, and are unconditionally appropriated to the contract with the other party's assent. In manufacturing contracts, appropriation commonly takes place on completion and inspection or on dispatch.

5. The Position Stated Shortly

Section 23 governs the passing of property in unascertained and future goods sold by description.
Property passes when goods of the description, in a deliverable state, are unconditionally appropriated with the other party's assent.
Assent may be express or implied, and given before or after the appropriation.
Carlos Federspiel: packing and marking goods was not an unconditional appropriation.
Wardar's: loading goods onto the buyer's carrier with his assent passed property and risk.
Delivery to a carrier without reserving the right of disposal is deemed an unconditional appropriation under Section 23(2).