Goods Sent on Approval or on Sale or Return under Section 24 of the Sale of Goods Act, 1930: Approval, Acts Adopting the Transaction, Retention Beyond Time, and a Contrary Intention

Goods are often delivered to a prospective buyer before he has decided to buy: a customer takes clothes home on approval, a retailer takes stock on sale or return, a dealer takes a car to show to his own customers. In each case the recipient has possession and an option, but not yet ownership. Section 24 fixes the moments at which the option is treated as exercised and property passes: when he approves or accepts, when he does an act adopting the transaction, or when he keeps the goods too long without rejecting them. Like the other rules in Sections 20 to 24, it yields to a contrary intention.

Four ways property passes on approval or sale or return, and the effect of a contrary term

1. The Section

Section 24, Sale of Goods Act, 1930

When goods are delivered to the buyer on approval or on sale or return or other similar terms, the property therein passes to the buyer:

(a) when he signifies his approval or acceptance to the seller or does any other act adopting the transaction;

(b) if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time, and, if no time has been fixed, on the expiration of a reasonable time.

2. Approval and Acts Adopting the Transaction

Signifying approval or acceptance is the straightforward case: the recipient tells the seller he will keep the goods.
An act adopting the transaction is conduct inconsistent with his freedom to return the goods, that is, an act only an owner or a buyer would do. Selling them, pledging them, or using them in a way that prevents their return are examples.
The effect is that property passes to the recipient, and through him a third party who took the goods from him may acquire a good title.

📖 Kirkham v. Attenborough, [1897] 1 QB 201 (CA)

Facts: A jeweller delivered jewellery to a customer on sale or return. The customer pledged it with a pawnbroker and did not pay for it or return it. The jeweller sued the pawnbroker to recover the jewellery.

Held: The Court of Appeal held that the pledge was an act adopting the transaction, since by pledging the jewellery the customer had put it out of his power to return it. Property had passed to him, and the pawnbroker took a good title. The jeweller's remedy was against the customer for the price.

Ratio: Pledging or reselling goods held on sale or return is an act adopting the transaction; property passes to the recipient, and a third party dealing with him may obtain title.

3. A Contrary Intention

📖 Weiner v. Gill, [1906] 2 KB 574 (CA)

Facts: A jeweller delivered jewellery to a dealer on terms stating that goods on approval or on sale or return remained the jeweller's property until settled for or charged. The dealer handed the jewellery to another person, who pledged it.

Held: The Court of Appeal held that property had not passed. The express terms showed a different intention from the statutory rule: the goods were to remain the jeweller's until paid for or charged. The dealer never became owner, the pledge passed nothing, and the jeweller recovered the goods.

Ratio: Section 24 applies only in the absence of a contrary intention. A term that property remains with the seller until payment prevents an act of adoption from passing property.

4. Retention Beyond the Time Allowed

Where a time is fixed for return, property passes when it expires, if the recipient has neither returned the goods nor given notice of rejection.
Where no time is fixed, property passes at the end of a reasonable time, which is a question of fact depending on the goods and the circumstances. Perishable or seasonal goods call for a short time.
Notice of rejection within time prevents property passing, even if the goods are not physically returned at once, though the recipient must make them available for collection.
An English illustration is Poole v. Smith's Car Sales (Balham) Ltd., [1962] 1 WLR 744, where a car left with a dealer on sale or return was kept for some three months, well beyond a reasonable time, and property was held to have passed, making the dealer liable for the price.

5. Sale or Return and an Ordinary Sale

	Sale or return, or on approval	Ordinary sale
Is the recipient bound to buy?	No; he has an option	Yes, from the contract
His position before property passes	A bailee with an option to purchase	A buyer, or owner if property has passed
When property passes	On approval, adoption, or expiry of the time allowed	When the parties intend, under ss. 19 to 23
Risk before then	With the seller, unless otherwise agreed	Follows property under s. 26

6. The Position Stated Shortly

Goods on approval or sale or return are held by a recipient with possession and an option.
Property passes when he approves or accepts, or does an act adopting the transaction.
Kirkham v. Attenborough: pledging the goods is an act of adoption, and the pledgee takes title.
Property also passes if he keeps the goods beyond the fixed time, or a reasonable time, without rejecting them.
Weiner v. Gill: a term that property remains with the seller until paid prevents the rule applying.
Until property passes the recipient is a bailee, and the risk remains with the seller.