Section 1. CHAPTER II TRANSFER OF TITLE IN CONTRACTS TO SELL Introduction. 2. Acts of Unconditional Appropriation. 3. Acts of Unconditional Appropriation with Respect to Only a Portion of the Goods. 4. Acts of Unconditional Appropriation Not Necessary in Sales of Fungible Goods. 5. Passing of Title to Goods Which at the Date of the Contract are Not in Existence. 6. Passing of Title to Property Contracted to be Sold upon Its Delivery to a Carrier or Other Bailee. 7. Effect of the Form of the Bill of Lading upon the Passing of Title. SECTION 1.-INTRODUCTION The great majority of transactions in modern business which ultimately result in transfers of title to personal property have their origin in executory contracts to sell goods which at the date of the execution of the contract were unascertained. The farmer may contract to sell his cattle and his grain before the subject of the contract can be identified. The manufacturer and wholesaler send out their salesmen, who enter into contracts with the dealer or consumer under circumstances where the subject of the sale is not capable of actual identification at the time. The contracts will simply call for goods of a specified description or of an agreed quality, but until some act be done, either by the seller. or by the buyer, the effect of which will be to segregate the goods corresponding to the description and quality, the goods cannot be said to be ascertained. In the natural course of events, and upon the performance of certain specified acts, the goods will become ascertained, and title will pass. The problem in this chapter is to discover the circumstances under which title will pass to the buyer in contracts of this character. Of course, in the great majority of cases, it is unimportant to know at what moment title passed to the buyer, because the entire transaction will be closed just as the parties intended. But accidents occur. The goods are lost or damaged. Some of the numerous parties through whose hands the goods pass on their journey to the purchaser may find themselves plunged into bankruptcy. Dishonesty still finds an occasional fertile field in which to involve the parties in difficulties. Speed invites opportunity for misunderstanding; misunderstanding breeds controversy. Before the era of the industrial revolution, buyer and seller more frequently dealt face to face. The transaction was simple, and quickly terminated. The most casual observation upon the elaborate mechanism of modern exchange reveals countless chances for the unforeseen to occur. When it does occur, some of the eddies from the stream of business pour into the lawyer's offices and the courtrooms. The balance sheets register a loss, even for the successful litigant. When will goods be unascertained? (1) When they are not in existence at the date of the contract; (2) when they are to be manufactured; (3) when the goods are in existence, but are so mixed up with other goods that it is not certain what particular goods will finally be delivered to the buyer-when will title pass under such a contract? Sales Act, Section 19, Rule 4 (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. There are several matters here which require separate consideration, (1) This rule is but a rule of presumption, for the first sentence of section 19 qualifies rule 4, just as it qualifies rules 1, 2, and 3, by declaring that unless a different intention appears, the following rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. (2) The section applies to unascertained and future goods. Future goods are also unascertained goods; but, for reasons appearing in section 4, it is apparent that title will not pass at the moment when the goods are put in a deliverable state, but that, in addition to the act of putting the goods in a deliverable state, the goods must be unconditionally appropriated to the contract. It is of great importance to note that title will not pass at so early a moment under contracts to sell unascertained goods. When goods are ascertained, we found that title presumptively passes just as soon as they are put in a deliverable state. But we note here that, while presumptively title will not pass until the goods are put in a deliverable state, we observe that presumptively title will not pass, even at the time the goods are put in a deliverable state. because the act requires something else before title is deemed to pass; that is, the goods must be unconditionally appropriated to the contract. When are goods unconditionally appropriated to the contract? The determination of this question is the most important part of this chapter. The law might just as well have provided-i. e., it would not be illogical to so provide that title would pass presumptively just as soon as the goods were put in a deliverable state. But the law did not take this turn, for the additional act of unconditionally appropriating the goods to the contract is required before title presumptively passes. It is possible for the parties by express agreement to make title pass just as soon as the goods are in a deliverable condition and without any act of unconditional appropriation, but it requires exceptionally strong evidence to overcome the presumption that an act of unconditional appropriation is necessary. There are very few such cases. (3) There is one situation where the circumstances of the case uniformly are construed as doing away with an act of unconditional appropriation-i. e., sale of a specified quantity of goods. called fungible goods, such as grain or oil. In all other cases. goods must be unconditionally appropriated before title passes. Quite frequently the courts employ the expression "an act of subsequent appropriation." Where this term is used, it has the same meaning as the phrase found in the Sales Act. (4) It must be noticed that the act of unconditional appropriation must be assented to by both seller and buyer. On final analysis, therefore, there are two main problems presented in the next section: (1) What kinds of acts constitute acts of unconditional appropriation? (2) What circumstances will show assent by both parties to this act of unconditional appropriation? SECTION 2.-ACTS OF UNCONDITIONAL APPRO PRIATION PROCTOR & GAMBLE CO. v. PETERS, WHITE & CO. (Supreme Court of New York, Appellate Division, 1919. 187 App. Div. 376, 176 N. Y. Supp. 169.) Action by the Proctor & Gamble Company against Peters, White & Co. On motion by plaintiff for a new trial on a direction of a verdict in favor of defendant. SMITH, J. (dissenting in part). In January, 1914, the plaintiff made a contract with the Atlantic Phosphate & Oil Corporation, a manufacturer of fish oil, for its entire product for the year 1914, with the exception of 6,000 barrels, or as much thereof as might be demanded, which the said oil corporation had agreed to give to Marden, Orth & Hastings Company. The contract provided that the purchaser should receive the oil in the purchaser's tank cars, to be supplied by the purchaser at the seller's said factory at Promised Land, or, at the purchaser's option, from time to time, in purchaser's barrels to be furnished by the purchaser at the said factory at Promised Land. It was further provided that the purchaser should provide enough tank cars ,or barrels at the factory as aforesaid to take and receive all said oil as and when produced by the seller, except as thereinafter provided. It was thereinafter provided that when the said oil is produced by the seller at its factory it shall be invoiced to the purchaser by Marden, Orth & Hastings Company, the agent of the seller, and provision is made for the drawing of drafts as against the purchase price. Later the contract provides: "If at any time there shall not be at the factory sufficient tank cars or barrels furnished by the purchaser to receive all the oil as fast as produced, the seller shall store the said oil in its own tanks at its factory, and Marden, Orth & Hastings Company shall invoice it so soon as stored in said tanks to the purchaser, and shall be entitled to draw on the purchaser at the same rate of 25 cents a gallon for the said oil so stored in storage tanks, as well as for oil placed in said tank cars or barrels: Provided, however, that if at any time the oil so stored in the seller's storage tanks shall reach the amount of 15,000 barrels, and there shall not be enough tank cars or barrels provided by the purchaser to take care of all excess as fast as produced, the seller may ship such excess oil to the purchaser or store the same in any way that may be possible, and the purchaser in that event shall pay to the seller any extra expenses thus incurred by the seller." The defendant was the factor under an agreement for the sale of this oil of the Atlantic Phosphate & Oil Corporation. The defendant had advanced substantial sums of money to that corporation, and in order to protect the defendant for its commissions and for the advances, the drafts drawn on the plaintiff for the oil shipped were delivered to and collected by the defendant. Thereafter, by the direction of the defendant, the Atlantic Phosphate & Oil Corporation shipped six carloads of the oil to Swift & Co., and it is for the conversion of these six carloads of oil by the defendant that this action is brought. Of these six carloads, four were taken direct from the tanks of the Atlantic Phosphate & Oil Corporation and put upon the cars of Swift & Co., and thus forwarded to Swift & Co. The other two carloads had been taken from the tanks by the Atlantic Phosphate & Oil Corporation and put upon the cars belonging to the plaintiff, and the oil in these cars belonging to the plaintiff was shipped to Swift & Co. As to the oil taken directly from the tanks of the Atlantic Phosphate & Oil Corporation and put upon the cars of Swift & Co., I do not think the defendant can be held for conversion, although it participated in a diversion of this oil. The defendant can only be held for conversion provided title had passed from the Atlantic Phosphate & Oil Corporation to the plaintiff. In the manufacture of this oil, the evidence shows that the method of manufacture was to cook the fish which were not otherwise fit for eating, and then through presses the oil was pressed out and turned into tanks, where the oil was further cooked; that thereafter the oil is turned into settling tanks and given a chance to clear, and that after it is cleared the oil is finally pumped into the storage tanks, where it stays until it is loaded upon the car, so that the placing of this oil in the storage tanks was only the last step in the process of manufacture. It would, of necessity, have been run into these storage tanks, whether or not it was sold to the plaintiff, or whether or not it was sold to any one. All of the oil was run into these storage tanks from the settling tanks, in order that the settling tanks might be used for further oil that was in process of manufacture. * * * Section 19 of the Uniform Sales Act purports to give the rules for ascertaining intention, and by rule 4 it is provided: "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." * * * In Williston on Sales at Common Law and under the Uniform Sales Act, Professor Williston, in speaking of rule 4, says, at page 380: "As an original question it might be well urged that, when a contract is made for the sale of unspecified goods, the property should pass, unless a contrary intention is manifested, as soon as the goods become specified and put in a deliverable condition by the seller. It is well settled, however, that the property does not pass at so early a moment. Some subsequent act in regard to the goods is necessary as a manifestation of the intent to transfer it. The intention alone is not enough, and certainly, unless clearly so agreed, the completion of the goods is not a sufficient manifestation of intention by outward act. There is not much authority upon the question whether the parties, if they expressly so agree, may vary the rule that the property does not pass on the mere completion of the goods. In other words, it is not clear whether the rule that the property does not pass until some subsequent act of appropriation is one of presumption, based perhaps on supposed intention, or whether it is an absolute rule of law. În theory there seems no reason why the intention of the parties should not prevail, if it is clearly manifested, and some authority supports this view. The completion of the goods itself is an outward act, which it would seem might be agreed upon as the appropriation. As a general rule, however, some act of appropriation of the goods to the buyer, other than mere completion or preparation, is essential for the transfer of the property, and it is necessary that the act of appropriation should be assented to by both parties. But as to the formation of contractual agreements generally it is immaterial that the parties express their assent at different times, nor is it material which party makes the proposition." * * * At page 161 of his work, Professor Williston, in speaking of the sale of future goods, says: "But the mere acquisition of the goods by the seller does not, it seems, in our law operate as a transfer of title to the buyer even though the parties intend that it should be so." * * * In Andrews v. Durant, 11 N. Y. 35, 62 Am. Dec. 55, Judge Denio says: "In general a contract for the building of a vessel or other thing not yet in esse, does not vest any property in the party for whom it is agreed to be constructed during the progress of the work, nor until it is finished and delivered, or at least ready for delivery and approved by such party. All the authorities agree in this [citing authorities], and the law is the same, though it be agreed that payment shall be made to the builder during the progress of the work, and such payments are made accordingly. In Mucklow v. Mangles, which arose out of a contract for building a barge, the whole price was paid in advance, the vessel was built and the name of the person who contracted for it was painted on the stern, yet it was held that the title remained in the builder." In Comfort v. Kiersted, 26 Barb. 472, it was held: "Where an article agreed to be sold is yet to be manufactured, the title does not pass. until there has been some act on the part of the vendor which amounts to a delivery, and some act on the part of the vendee which amounts to an acceptance." In writing for a unanimous court, Judge Harris there says: "In this case the parties to the contract had agreed that the shingles should be the property of the defendants as fast as they were made. Still the contract was executory. To make a sale complete, so as to vest B.& B.BUS.LAW-63 |