P.S.N.S. Ambalavana Chettiar v. Express Newspapers Ltd.

Facts of the Case

This case hinges on the determination of when the property in goods passes from the seller to the buyer, a critical point that dictates the seller's remedies upon the buyer's breach.

• Original Contract (Nov 13, 1951):

  • Respondent (Express Newspapers) agreed to buy 500 tons of Russian newsprint in reels.

  • Appellants (Ambalavana Chettiar) agreed to buy 415 tons of Russian newsprint in sheets.

  • This was a sale of specific goods (identified at the time of contract).

• Oral Variation (Nov 26, 1951): The parties orally agreed to reduce the quantity of goods for both sides to 300 tons each.

• The Breach: The respondent delivered 300 tons of newsprint in reels, but the appellants refused to take delivery of the contracted 300 tons of newsprint in sheets.

• The Resale: The respondent, treating the appellants as having breached the contract, resold the remaining newsprint (547501 lbs) to a third party on April 21, 1952, and sued for the loss incurred on the resale.

Issue

1. Whether the oral variation of the contract altered the legal nature of the transaction regarding the passing of property.

2. Whether the property in the goods had passed to the appellants before the resale.

3. Whether the respondent had the statutory right to resell the goods under Section 54(2) of the Sale of Goods Act, 1930.

Judgment

The Supreme Court held that the respondent did not have the statutory right to resell the goods under Section 54(2) because the property in the goods had not passed to the buyer (appellants) after the contract was orally varied. The respondent was entitled to claim damages based on the difference between the contract price and the market price, not the loss from the resale.

Legal Analysis

The Court analyzed the effect of the contract alteration on the crucial moment when property passes, drawing heavily upon Sections 18 and 54 of the SOGA.

1. Effect of Oral Variation: From Specific to Unascertained Goods

• Original Intent: The original contract for 415 tons of specific newsprint in sheets might have constituted an unconditional sale of specific goods, potentially passing the property immediately (Section 20).

• The Change: The oral agreement to reduce the quantity to 300 tons out of the 415 tons changed the legal character of the sale:

  • It converted the transaction from a sale of specific or ascertained goods to a sale of unascertained goods (or a portion of a larger bulk that still needed to be separated and identified).

2. Passing of Property (Section 18, SOGA)

• Mandatory Rule: The Court relied on Section 18 of the SOGA, which unequivocally states that "Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained."

• Conclusion: Since the 300 tons to be sold to the appellants had not been separated, appropriated, or otherwise definitively identified from the larger bulk after the oral variation, the goods remained unascertained. Therefore, the property in the newsprint sheets did not pass to the appellants.

3. Right of Resale (Section 54(2), SOGA)

• Statutory Requirement: Section 54(2) provides the unpaid seller with a right of resale (and the right to recover the loss on such resale) only if the property in the goods has passed to the buyer (subject to the seller's lien).

• The Verdict: Since the property had not passed, the statutory right of resale under Section 54(2) did not accrue to the respondent.

• Damages Remedy: Consequently, the respondent's remedy was not to claim the difference between the contract price and the resale price, but to claim the general measure of damages for non-acceptance under Section 56 (damages based on the difference between the contract price and the market price on the date of the breach). The Court awarded damages based on this principle.

Commentary: Strict Interpretation of Passing of Property

This case provides a powerful illustration of the strictness of the rules governing the passing of property under the Sale of Goods Act. It establishes that even a small, consensual variation that requires an act of ascertainment (like separating a quantity from a bulk) can fundamentally change the legal character of the contract, preventing the property from passing and severely limiting the seller's statutory remedies (like the right of resale under Section 54(2)). The decision emphasizes that the key to statutory resale is the prior passing of title to the buyer.