Sale of Goods Act Section 25 — Reservation of right of disposal
CHAPTER III EFFECTS OF THE CONTRACT — Transfer of property as between seller and buyer
Commercial / Corporate
Summary
Sub-section (1) covers a situation where there is a contract for selling specific goods, or where goods are later set aside for the contract. In such cases, the seller can, through the terms of the contract or the act of setting aside the goods, keep the right to control the goods until certain conditions are met. Even if the goods are handed over to the buyer, or to a carrier or other person holding them for delivery to the buyer, ownership of the goods does not transfer to the buyer until those conditions are fulfilled.
Sub-section (2) deals with goods sent by ship or handed to a railway administration for transport by rail. If the bill of lading or railway receipt states that the goods are to be delivered only on the order of the seller or the seller's agent, then the seller is presumed to have kept the right to control the goods, unless there is evidence to the contrary.
Sub-section (3) addresses a situation where the seller draws a bill of exchange on the buyer for the price and sends that bill along with the bill of lading or railway receipt, asking the buyer to accept or pay the bill. If the buyer does not honour the bill of exchange, the buyer must return the bill of lading or railway receipt. If the buyer wrongly keeps these documents, ownership of the goods does not pass to the buyer.
The explanation clarifies that, for this section, the terms railway and railway administration carry the same meanings as given in the Indian Railways Act, 1890.
Official Text
(1) Where there is a contract for the sale of specific goods or where goods are subsequently appropriated to the contract, the seller may, by the terms of the contract or appropriation, reserve the right of disposal of the goods until certain conditions are fulfilled. In such case, notwithstanding the delivery of the goods to a buyer or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled. 1[
(2) Where goods are shipped or delivered to a railway administration for carriage by railway and by the bill of lading or railway receipt, as the case may be, the goods are deliverable to the order of the seller or his agent, the seller is prima facie deemed to reserve the right of disposal.
(3) Where the seller of goods draws on the buyer for the price and transmits to the buyer the bill of exchange together with the bill of lading or, as the case may be, the railway receipt, to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading or the railway receipt if he does not honour the bill of exchange; and, if he wrongfully retains the bill of lading or the railway receipt, the property in the goods does not pass to him.
Explanation. —In this section, the expressions “railway” and “railway administration” shall have the meanings respectively assigned to them under the Indian Railways Act, 1890 (9 of 1890).]