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Transfer of ownership in case of sale of goods on approval

The term ‘sale on approval’ may be defined as the sale in which the buyer may return the goods within a reasonable time, if the goods do not serve his purpose. In this case, the ownership is transferred to the buyer in any of the following ways:
  • Acceptance of goods: When the buyer signifies his acceptance to the seller, the ownership is transferred to the buyer. It is called express acceptance.
Example

Ram, a shopkeeper, delivered a watch to Shyam on sale or return basis. Later, Shyam informed Ram that he had accepted the watch. In this case, there is an express approval of the watch and the ownership is transferred to Shyam on his approval.

  • Adoption of transaction: The buyer may adopt the transaction by doing some act in respect of the goods, like subsequent sale of goods, consumption of goods, pledge of goods, etc. In this case, the ownership is transferred to the buyer on his act of adoption. It is known as an implied acceptance.
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  • Retention of goods: It is a case when the buyer does not signify his approval or acceptance, but retains the goods beyond the time fixed for the return of the goods, or beyond a reasonable time, if no time is fixed. As a matter of fact, it also amounts to implied acceptance of goods and the ownership is transferred to the buyer.
    • In case the time is fixed for the return of goods, the ownership is transferred to the buyer on the expiry of such time
    • In case no time is fixed for the return of goods, the ownership is transferred to the buyer on the expiry of reasonable time. The term ‘reasonable time’ depends upon the case

Note: Till the expiry of the fixed time or reasonable time, the property of the goods remains with the seller.





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