Appropriation

by bill of

documents of

title.

In YOUNG 7. MATTHEWS, L. R. 2, C. P. 127; L. J. 36 C. P. 61, there was a sale of bricks, which the seller, with the buyer's assent, appropriated to the contract before the burning was completed, and it was held that this appropriation passed the property although the manufacture was not completed.

It has also been held that, in shipbuilding contracts where payments are to be made by instalments at certain stages of the work, the property passes to the buyer. The cases on this subject will be found collected and commented on in " Benjamin on Sales," Book 2, chapter 3. It was, however, held in the ANGLO-EGYPTIAN NAVIGATION COMPANY v. RENNIE, L. R. 10, C. P. 271-571; L. J. 44, C. P. 130, that the property in new boilers to be fitted to a ship, and to be paid for by instalments as the work progressed, did not pass until the fitting was completed.

21. The appropriation of goods to an executory lading and other contract by the seller, with the buyer's authority or consent, which is necessary to change the ownership, will be effected whilst they are at sea or in the hands of a shipowner as carrier, by the transfer of the bill of lading; it will also, as a general rule, be effected by the transfer of negociable documents of title representing the goods.

Bills of lading drawn in sets.

A bill of lading for the delivery of goods to order and assigns is a negociable instrument which, by indorsement and delivery, passes the property in, and possession of the goods to the indorsee, subject only to the right of the unpaid vendor to stop them in transit. See The "MARIE JOSEPH," L. R. 1, P. C. 219; L. J. 35, P. C. 66. Also GABARRON v. KREEFT and KREEFT v. THOMPSON, L. R. 10, Ex. 274; L. J. 44, Ex. 238. The bill of lading is a living instrument as long as the engagement of the shipowner has not been completely fulfilled. BARBER v. MEYERSTEIN, L. R. 4, H. L. 317; L. J. 39, C. P. 187.

22. When bills of lading are drawn in sets, the first endorsement and delivery of one or more of the set passes the property in the goods, and subsequent transfers of the others have no effect.

See BARBER V. MEYERSTEIN ubi supra. See also GLYN,

MILLS & Co. v. EAST AND WEST INDIA DOCK CO., L. R. 7, Appeal
Cases 591; L. J. 50,Q. B. 62, and SANDERS v. MACLEAN, L. R. 11,
Q. B. D. 327. In the last-mentioned case BRETT M.R. made the
following remarks in the course of his judgment, which it will be
useful here to insert :-"
"The House of Lords, as I understand the
case of Glyn, Mills & Co. v. East and West India Dock Co.,
distinctly stated that the old law, with regard to the passing of
property by bills of lading, was not altered, and that the first copy
of the bill of lading properly endorsed for value, with an intent to
pass the property, passed the property, and that no other copy of
the bill of lading subsequently endorsed would have any effect in
passing the property at all. They held only, that although the
true owner of the goods could sue the person into whose possession
the goods had gone, because the goods were his, yet that he could
not sue the captain or the shipowner, because when he took the
property in the goods by virtue of the indorsement of the first copy
of the bill of lading, he took it subject to this contingency, that if
the goods were delivered by the captain to anybody else upon a
subsequent copy of the bill of lading fraudulently endorsed by the
consignor, he could not sue the shipowner, but he could sue any-
body else who dealt with the goods which were his property. If
that be true, could it be the meaning of this contract, which states
in terms that payment is to be made against bills of lading, that
although the bill of lading offered would pass the property and give
the right of possession, yet nevertheless the vendee had a right to
reject the cargo, because all the three copies of the bills of lading
were not delivered to him. In my opinion such is not the result
of the case of Glyn, Mills & Co. v. East and West India Dock Co.,
and it would be contrary to the practice and to the known principles
of mercantile law with regard to bills of lading."

The transfer by the seller and acceptance by the buyer of a delivery order or other document of title representing the goods, operates as an appropriation by the former with the assent of the latter, and will so operate even if no actual appropriation has taken place.

See KNIGHTS v. WIFFEN, L. R. 5, Q. B. 660; L. J. 40, Q. B. 51, in which MELLOR J. quotes and approves the following rule extracted from Lord Blackburn's “Work on Sales:”—“When parties Estoppel. have agreed to act upon an assumed state of facts, their rights between themselves are justly made to depend upon the conventional state of facts, and not upon the truth.” See cases in Appendix,

p. 64, under heading "Bill of Lading."

The various circumstances under which a change of ownership has been held to be effected by subsequent appropriation will be

Fraud.

found fully examined and discussed in "Benjamin on Sales," 3rd ed., p. 302.

As between the parties themselves, no property passes when there is fraud, but an innocent third party may under certain circumstances acquire a good title notwithstanding. For the cases on this subject see Appendix, p. 65, under the heading of "Fraud."

Bankruptcy of seller-Reputed ownership.

Effect of the Seller's Bankruptcy whilst the goods remain in his possession after change of ownership.

23. When goods have been sold and paid for, and the ownership has changed, but they still remain in the seller's possession, the buyer's right to them will be defeated by bankruptcy proceedings by or against the seller, if the goods are, at the commencement of the bankruptcy, in his possession order or disposition, in his trade or business, by the consent and permission of the buyer, under such circumstances that the seller is the reputed owner thereof.

The above rule is the effect of sec. 44 (sub-sec. iii.) of the Bankruptcy Act, 1883, which provides that the property of the Bankrupt divisible amongst his creditors shall include (amongst other property) "All goods being, at the commencement of the bankruptcy, in the possession order or disposition of the bankrupt, in his trade or business, by the consent and permission of the true owner, under such circumstances that he is the reputed owner thereof."

The consent of the buyer is requisite to the seller's possession, and if he withdraws it by demanding possession, with the bonâ fide intention of obtaining the goods before the bankruptcy, although he fail to get it, the demand is sufficient to take them out of the order and disposition of the bankrupt.

It is a question of fact as to whether the goods are, or are not, in the bankrupt's possession order or disposition, as to which there have been many decisions depending upon a variety of circumstances; it will only be useful here to state generally the following rule, and to refer the reader for further information to some work dealing exclusively with the subject of bankruptcy.

24. If the goods are so situated as to negative the reputation of ownership, the operation of the section is excluded, as for instance :-If an article be made to order and the maker is not in the habit of keeping such articles in stock for sale, as in the case of ships which are being built to order.

If a notorious custom, in a particular trade, exists, in pursuance of which goods remain in the hands of the seller.

When steps are taken to make the change of ownership notorious, by marking them with the true owner's

name.

And generally, when, from any other special circumstances, it can be made clear that the bankrupt cannot have obtained credit by reason of the reputation of ownership.

The object of the legislature in regard to reputed ownership is, to prevent traders obtaining credit on the strength of chattels in their possession which may not be their own. If the goods are so situated as, on inspection, to convey the impression that they do not belong to the person in whose possession they may be, then the operation of the section is excluded.

When reputation negatived by

of ownership

situation of

goods.

24

Introductory.

Performance

complete when

ownership has changed.

PART III.

The Performance of the Contract, and Obligations collateral to it.

THE duties of the parties with regard to performance depend upon the effect of the contract on the goods to which it relates. If it has changed the ownership it has become, as we have seen, an "executed" contract, in other words, a performed contract, subject to any warranties collateral to it, for the breach of which the vendor would be liable, independently of its express conditions, but when it is "executory " or to be performed, the respective rights and liabilities of the parties remain to be ascertained from its express terms. When one party desires to obtain a remedy for default on the part of the other, the important question therefore is, whether he can treat the contract as executory and bring an action for its breach, or whether it was on the making of it, or has since become, by the acts of the parties to it, an executed contract, in which latter case the remedy sought must be in reference to some obligation outside of, but collateral to it.

25. When, in accordance with the rules contained in Part II., the ownership has changed, the performance of the contract itself, on the seller's part, is complete, but a liability remains on the seller to answer in damages any breach of warranty; con