FOURTH RULE. Unless a different intention appears "(1) where there is a contract to sell 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 expressed or implied and may be given either before or after the appropriation is made. (2) Where in pursuance of a contract to sell, 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 or holding for the buyer, he is presumed to have unconditionally appropriated the goods to the contract, except in the cases provided for in the next rule and in section 20. This presumption is applicable although by the terms of the contract, the buyer is to pay the price before receiving delivery of the goods, and the goods are marked with the words collect on delivery or their equivalents." 59
(a) Title passes upon appropriation of contract.
Where the goods are unascertained, the title, as has been already noted, cannot pass. Upon ascertainment title passes according to the intention of the parties. Where pursuant to this contract to sell goods at present unascertained, certain goods in a deliverable state are set aside or designated or in any way appropriated to the contract, it is presumed, rebuttally, that the intention of the parties is to pass title upon such appropriation, subject to the other rules as to deliverable shape, goods to be put on cars by seller, etc.
59. Uniform Sales Act, SEC. 19. Rule 4. "Section 20" relates to reservation of title. See herein SEC. 60.
(b) Delivery to carrier or other bailee by seller.
If the seller pursuant to the contract delivers goods to a carrier for transportation to the buyer, the delivery is presumed to be an appropriation and title passes then, if it has not passed before. The goods are while in transit the property of the buyer and not of the seller. We shall hereafter notice that if the seller undertakes, as a part of his contract, to make the delivery, title remains in him until such delivery is complete. That, however, means that the seller undertakes to pay the expense of the delivery and assumes the burden of its success. In the ordinary cases where the goods are at the seller's place of business, the seller assumes the task of putting the goods in the possession of a carrier, and such carrier is the agent of the buyer, and the risk of loss is upon the buyer and title has passed.61
Even though goods are appropriated to the contract, still so long as there remains something to be done by the seller to put them in a deliverable shape, title has not passed. In cases of shipment made by the seller, title is usually held not to pass until delivery to the carrier though necessarily before that time the goods had to be segregated; this is because where a number of things were to be done by the seller in the process of appropriating unascertained goods, it is presumed the intention of the parties was to defer transition of title until the last act.
61. Belz v. McMorrow, 173 Mass. 8.
Example 24. A at Philadelphia sells ale to B in Boston, A to ship the goods to B at B's expense. A sues B for the price of the goods. B defends that a sale of ale in Boston without a license was illegal. Held, that the defense is not good, as title passed at Philadelphia62
(c) Goods shipped "C. O. D."
Where goods are shipped "Collect on Delivery," this has no effect upon the passing of title. If by the rules discussed where goods are not so shipped title would pass, it will still pass notwithstanding such provision that the carrier must collect before delivery.63 Thus the carrier might be the buyer's agent to transport the goods and the seller's agent to maintain the lien for the price and collect the charges.
Example 25. S, in Carthage, Illinois, ordered liquor from D, a dealer at Burlington, Iowa, to be shipped to
S, "C. O. D." Held, a sale in Iowa, and not in Carthage.64
FIFTH RULE. Unless a different intention appears "if a contract to sell requires the seller to deliver the goods to the buyer, or at a particular place, or to pay the freight or cost of transportation to the buyer, or to a particular place, the property does not pass
62. Belz v. McMorrow, 173 Mass. 8.
63. Carthage v. Duvall, 202 111. 234.
64. Carthage v. Duvall, 202 111. 234. until the goods have been delivered to the buyer or reached the place agreed upon."65
Delivery to carrier is ordinarily delivery to buyer and if it was understood from the express terms of the contract or from the circumstances that the seller was to deliver to the carrier, the seller would be under the obligation so to do and having done so, title would thereupon pass. But if the seller takes upon himself the more onerous contract of seeing that the goods reach a certain place, as where he undertakes to pay the freight, title does not pass in such case until the carriage to such place is complete.
In this connection the initials "f. o. b." standing for the words "free on board," are often used, and are of importance in determining the intention. Thus if M. at A., agrees to ship goods to N. at C, " f. o. b." at B, a point intermediate between A and C, title will presumably pass at B.66 If terms are "f. o. b." at A, or "f. o. b." at C, title will pass in the first case at A, the point of shipment, or in the second case at C, the point of destination. This is but a rule of construction and not final. Evidence may show that the parties meant the title to pass otherwise. Thus, if on final settlement the buyer is to add the cost of shipment to re-imburse the seller, that would seem to indicate that title was to pass on delivery of goods to the carrier.
The seller by the form of his contract with the carrier may reserve title in himself notwithstanding delivery to such carrier.
If the shipper has the bill of lading made out to himself or his agent, this effects a retention of title in himself. A bill of lading is the evidence of title and by its form may indicate that though the seller made delivery to the carrier, yet he did not by that act finally appropriate the goods to the contract, but intended until a future time to reserve title in himself. This is sometimes referred to as the retention of the jus disponendi. One mode of retaining title by means of the bill of lading is to send the bill to some third person, usually a banker, with draft attached, which must be accepted, or, if a sight draft, paid, before the bill of lading can be secured. This reserves title even though the bill of lading names the buyer as consignee.67
65. Uniform Sales Act, Rule 19, SEC. 15.
66. Deutzel v. Island Park Ass'n, 229 Pa. 403.
Bills of lading are made out in two forms: the "straight" bill and the "order" bill. The first form is a bill made to some certain person. The second form is one made to the order of a certain person, or to a certain person or his order. As has been seen in the discussion of Documents of Title, straight bills of lading are made non-negotiable; order bills are made negotiable, and where such distinction prevails the carrier is not protected in delivering the goods where an "order" form was used except upon presentment of the bill of lading properly endorsed; otherwise it is. To insure a valid retention of title, the shipper should therefore use the order form of bill of lading, unless he makes himself the consignee. See the subject of Documents of Title, supra, in this volume.
Unless there is an agreement to the contrary risk of loss attends the title.68
The risk of loss is usually upon the owner. The parties might indeed agree otherwise, but that is seldom
67. Greenwood Groc. Co. v. Canadian, etc. Co., 72 S. C. 450. See also subject of Documents of Title, supra in this Volume.
68. Uniform Sales Act, SEC. 22.
done. This statement of risk does not include cases of loss on account of negligence of a seller or buyer having possession and not title. If title has passed while goods are in possession of the seller or his agent in that behalf, the seller would then be a bailee of the goods and liable as such to use due care for their safety. Assuming there is no question of negligence, it is almost always true that risk follows the title. Indeed the important reason in many cases for raising the question of transition of title is to decide upon whom the loss must fall.
If, then, a specific article has been bought and title has really passed, the loss is on the buyer regardless of the fact that he may never have had possession. Thus, if pursuant to a contract of sale goods are shipped to A under such circumstances that title passed upon delivery to the carrier, the loss as between buyer and seller, is upon the buyer, but if by shipment "f. o. b." destination, or by retention of title by bill of lading, title is still in the shipper, then loss is upon him as between him and the buyer. In these cases, whether there is any recourse against the carrier is a different question and would depend on the nature of the cause of loss and the contract with the carrier.
Cases have made exceptions to this rule in the cases in which title is reserved solely for purposes of security, possession and ownership for all other purposes being vested in the buyer. There are two classes of cases within this exception. There is also an exception where delivery has been delayed by the fault of either part. Risk is upon the party in fault.
(1) Cases of conditional sales in which buyer is given possession but seller retains contract for purposes of security.
In this case the risk of loss is on the buyer.
Example 26. A sells books to B, delivering B the books under a contract whereby A is to have title until the last installment is paid. The risk is on B. He must pay although the goods are destroyed before the last installment.69
(2) Cases in which title is reserved during transit for purposes of security where except for such reservation title would have passed.
The law is not as clear as desirable on this point. Supporting this view see Farmers & Mechanics Bank v. Logan;70 and against it Willman Mercantile Co. v. Fussy.71 The Sales Act adopts the former view.
69. Tufts v. Griffin, 107 N. C. 47.
70. 4 N. Y. 568
71. 15 Mont. 511. See Williston on Sales, SEC. 305.