FORMALITIES NECESSARY FOR THE COMPLETION OF A SALE.—The Sales Act provides in section 3, subject to a few provisions, that "a contract to sell or a sale may be made in writing (either with or without seal), or by word of mouth, or partly in writing and partly by word of mouth, or may be inferred from the conduct of the parties." The main qualification of the right to make an oral sale or contract to sell is found in the next section (Section 4) which is virtually a copy of a similar provision in the English Statute of Frauds in regard to the sale of personal property. Section 4 reads as follows:
"(1) A contract to sell or a sale of any goods or choses in action of the value of five hundred dollars or upwards shall not be enforceable by action unless the buyer shall accept part of the goods or choses in action so contracted to be sold, and actually receive the same, or give something in earnest to bind the contract, or in part payment, or unless some note or memorandum in writing of the contract or sale be signed by the party to be charged or his agent in that behalf.
"(2) The provisions of this section apply to every such contract or sale, notwithstanding that the goods may be intended to be delivered at some future time or may not at the time of such contract or sale be actually made, procured, or provided, or fit or ready for delivery, or some act may be requisite for the making or completing thereof, or rendering the same fit for delivery; but if the goods are to be manufactured by the seller especially for the buyer and are not suitable for sale to others in the ordinary course of the seller's business, the provisions of this section shall not apply.
"(3) There is an acceptance of goods within the meaning of this section when the buyer, either before or after delivery of the goods, expresses by words or conduct his assent to becoming the owner of those specific goods."
THE CAPACITY OF PARTIES.—The Sales Act provides in section 2 that "capacity to buy and sell is regulated by the general law concerning capacity to contract, and transfer and acquire property. Where necessaries are sold and delivered to an infant, or to a person who by reason of mental incapacity or drunkenness is incompetent to contract, he must pay a reasonable price therefor. Necessaries in this section mean goods suitable to the condition in life of such infant or other person, and to his actual requirements at the time of delivery."
IMPORTANCE OF DISTINGUISHING SALE AND CONTRACT TO SELL.—Why is it important to distinguish between a contract to sell and a sale; what difference does it make whether title has passed or not? The primary reason that it makes a difference is because as soon as the title has been transferred from the seller to the buyer the seller is entitled to the price. Prior to the transfer of title, if the buyer refused to take the goods, the seller would be entitled only to damages, which would be the difference between the value of the goods which the seller still retained and the price which was promised. If the goods were worth as much or more than the amount of the price promised, the seller would not be entitled to any substantial damages. But after title has passed the buyer must pay the full price, and the seller may recover it if the buyer refuses to accept delivery. Another consequence flowing from the transfer of title is that the goods are thereafter at the risk of the buyer. If they are destroyed by accident the buyer must nevertheless pay the price, for the right to the price accrued before the goods were destroyed, and when they were destroyed they were at the buyer's risk. Bankruptcy is another circumstance which makes it important to determine who holds title to the goods. If the buyer becomes bankrupt, after title to the goods has passed to him, his trustee in bankruptcy takes the goods for his creditors, but if he becomes bankrupt before title has passed that would not be true. The bankruptcy of the seller would make a similar difference.
WHEN TITLE IS PRESUMED TO PASS.—There are several presumptions in the law as to when title will be presumed to pass if there was no specific agreement between the parties as to when it should pass. If they simply bargain for the goods without saying anything about the time when the buyer is to become the owner, the first presumption is that title passes as soon as the goods are specified and the parties are agreed on the terms of the bargain, even though no part of the price has been paid and though the goods have not been delivered. It is often assumed that delivery is essential to transfer title to goods, but that is not so, though delivery is strong evidence of intent to transfer title. If the parties have made their bargain, and definitely agreed on the terms of the bargain, title passes even though possession of the goods still remains in the hands of the seller. The seller, however, has a lien for the price though he has parted with title. As long as the goods are in his possession he may refuse to surrender until he is paid the price, unless he agreed to sell on credit.
TITLE PASSES WHEN PARTIES AGREE.—It is only a presumption that, where the terms of a bargain are fixed and the goods are specified, title passes at once, for if the parties agree that title shall not pass at once it will pass when and as they agree. Their intention in regard to the transfer of title may not be stated in express terms, and it may be gathered only from the acts or words of the parties. If something remains to be done to the goods by the seller, to put them in a deliverable condition, that indicates an intent that title shall not pass until they are in the condition agreed upon. If the parties provide that the goods shall be stored at the expense of the seller, for a time or at the risk of the seller, that indicates title is not intended to pass, for if they are at the seller's expense and risk, presumably they are still his goods. On the other hand, delivery of the goods indicates an intent to pass title, although it is possible, if the parties so agree, that title does not pass even though the goods are delivered. Again, payment of the price is evidence tending to show an intent to pass title, for buyers do not ordinarily pay the price in advance. It is not uncommon for credit to be given by the seller, but it is uncommon for the buyer to pay first; but even that is not impossible, and therefore, though payment of the price is evidence of an intent to transfer title immediately, it is not conclusive evidence.
TRANSFER OF TITLE BY SUBSEQUENT APPROPRIATION.—Suppose title does not pass immediately, which may be due to the fact that the parties so agreed, or to the fact that the goods were not specified at the time the bargain was made. That is a common case. A and B contract for the sale of 100 cases of shoes to be made by A. At the time the parties make their bargain the shoes have not yet been made, but the parties expect that they will be made later, and appropriated to the bargain, as the legal phrase is. Or title may not pass at the time the bargain is made, although the goods are specified. The parties may have expressly agreed that title should not pass; or though the goods are specified, something may remain to be done to them by the seller to put them in a deliverable condition. Now, if title for any of these reasons does not pass when the bargain is made, it may pass by an express agreement of the parties, made later, that the buyer shall take title and that the seller shall give title; or frequently it may pass by what is called an appropriation of the goods by the seller to the buyer, without any express later assent of the buyer, by virtue of an implied assent of the buyer given in the original agreement that the seller should appropriate the goods. What is meant will be understood by one or two illustrations.
APPROPRIATIONS BY DELIVERY TO A CARRIER.—Suppose A contracts to sell and ship to the buyer 100 cases of shoes, and B contracts to receive and pay for them. That shipment to the buyer is an appropriation of the goods. The very 100 cases with which the seller intends to fulfill the bargain are indicated by the delivery of them to the carrier, and the buyer, since he agreed in the first place that they should be shipped, has assented to the appropriation. Therefore, in such a case, as soon as the goods are delivered to the carrier the presumption is that title passes to the buyer. This is by far the commonest case of appropriation by the seller in accordance with authority given by the buyer in his original agreement, and it is so common that it deserves a little further treatment.