Liquidated

Liquidated

Commercial law 4 Sale of goods:
contract, property and risk page 63

Typically, future goods will be unascertained. If the buyer agrees to buy a new Bentley from a dealer, who does not have what is required in stock, this is a sale of future and unascertained goods. However, goods that exist and are identified in the contract, but are owned by a third party, are both future goods (because the seller has not acquired them) and specific goods (because they are identified at the time of the contract) (Varley v Whipp [1900] 1 QB 513): for example, the sale by Jake to Pugwash of the Bentley, which is at the time of the contract owned by Mary from whom Jake intends to acquire it, is a sale of future, specific goods.

Ascertained goods Where there is a contract for the sale of unascertained goods, once the goods are identified and connected by consent of the parties to the contract (‘appropriated’: section 4.4.6 below), they become ascertained goods. The significance of this is that while goods are unascertained no property in them can pass to the buyer and the buyer has, therefore, only a contractual right against the seller and has no rights in any goods (see section 4.4.1). Property can only pass when the goods become ascertained. The rules on passing of property are discussed below (see 4.4). For the moment it is worth noting one of the problems with the rule that property cannot pass in unascertained goods. In Re Wait [1927] 1 Ch 606 (Sealy and Hooley, p.246), 500 tons of wheat were sold from a cargo of 1000 tons that was on board a ship, Challenger. When the seller went into liquidation, the court held that the sale was of unascertained goods and so under s.16 property had not passed to
the buyer at the time of the contract. The buyer could not, therefore, claim the goods and merely joined the other general creditors. Similarly, in Re Goldcorp Exchange Ltd (in receivership) [1995] 1 AC 74, customers of a company purchased bullion for future delivery on terms that they were buying ‘non-allocated metal’, which meant it was not set aside but was stored as part of the company’s general stock. Under the agreement, an investor had the right to take physical delivery of bullion from that stock. The company became insolvent.

The Privy Council held that the goods were unascertained and property had not passed because the company was free to decide what bullion to allocate to a particular investor.
Useful further reading
Bridge, M. Personal property law. (Oxford: Oxford University Press, 2002)
[ISBN 0199254761] particularly, pp.12–15, 26–27, 28–31, 80–93.
Goode (2004), pp.31–45.

Summary
The passing of property is determined, in part, by the categorisation of the goods as either existing or future and as either specific or unascertained. Into which categories goods fall depends on the situation at the time of the contract. Existing goods are owned by the seller, while future goods are not. Specific goods are identified at the time of the contract, while unascertained goods are not. Unascertained goods become ascertained when they are appropriated to the contract with the consent of both parties. These rules are important because, normally, property will not pass in unascertained goods (subject to an various exceptions).

Article Courtesy: http://www.londoninternational.ac.uk/current_students/programme_resources/laws/subject_guides/commercial/commercial_ch4.pdf
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