On February 1, 1974, A sold 100 bags of wheat out of a bulk in godown to B. Delivery was postponed till March 1, 1974. Remaining bags in that godown were sold to C on February 3, 1974, and C took delivery on the same day. The goods in the godown were destroyed in a fire on February 20, 1974. A filed a suit against B for the recovery of the price of wheat sold. B resisted on the plea that the goods were unascertained, and property had not passed to him. Decide giving reasons.

The Nature of the Original Transaction

When A sold 100 bags of wheat "out of a bulk" lying in the godown on February 1, 1974, this was, at that moment, a sale of unascertained goods, since the specific 100 bags belonging to B had not yet been identified or separated from the larger mass. Section 18 makes this position explicit: where there is a contract for the sale of unascertained goods, no property in the goods passes to the buyer unless and until the goods are ascertained. Until such ascertainment occurs, there is merely an agreement to sell, not a completed sale — the mere fact that the goods are to come out of a specified stock does not by itself make them ascertained or transfer property to the buyer. At the moment of contracting with B, therefore, B did not yet own any specific 100 bags; he merely had a contractual right against A.

How Goods Become Ascertained: The Doctrine of Ascertainment by Exhaustion

The crucial event that transforms this agreement to sell into a completed sale is the sale and removal of the remaining bags by C on February 3, 1974. Once C purchased the balance of the stock in the godown and physically took delivery of it the same day, only B's 100 bags remained in the godown — meaning those 100 bags became identified with certainty by a process of elimination, since nothing else was left with which they could be confused. This is the well-recognised doctrine of "ascertainment by exhaustion": where a bulk consists of a larger quantity out of which a certain portion has been sold to one buyer, and the remainder is subsequently sold off or removed such that only the buyer's portion is left, the goods sold to that buyer become ascertained the moment the rest of the bulk is separated out, even though no physical act of setting aside was performed specifically with regard to the buyer's own portion. This principle flows naturally from Sections 18 and 23 — ascertainment simply means the goods have become identified and distinguished from all other goods, and this can happen either by a deliberate act of appropriation or, as here, by the removal of everything else from the bulk, leaving only one identifiable parcel behind.

Application of Section 23 — Unconditional Appropriation

Section 23(1) provides that where there is a contract for the sale of unascertained goods by description, and goods of that description in a deliverable state are unconditionally appropriated to the contract, property passes to the buyer. By February 3, 1974, the wheat remaining in the godown corresponded exactly and exclusively to the quantity contracted for with B — 100 bags, in a deliverable state, with nothing else remaining that could be diverted to any other buyer or contract. There is no indication on the facts that A reserved any right of disposal over these bags or intended to treat them as available for resale to some other purchaser; to the contrary, A had already contracted specifically to sell 100 bags to B, and by allowing C to take away everything else, A effectively and finally identified the remaining 100 bags as B's. This amounts to an appropriation that has become final and irrevocable, since A no longer had any other stock from which he could supply a different lot to B, or divert the identified 100 bags to anyone else.

Passing of Risk Follows Passing of Property

Since property in the 100 bags had already passed to B by February 3, 1974 — a full seventeen days before the fire — the risk in those goods had likewise passed to B under Section 26, which lays down the general rule that risk prima facie follows property: the goods remain at the seller's risk until property is transferred, but once property passes to the buyer, the goods are at the buyer's risk whether or not delivery has actually been made. This is precisely the situation contemplated by Section 26 — B had not yet taken physical delivery of his 100 bags (delivery having been expressly postponed to March 1, 1974), but this postponement of delivery does not prevent property, and consequently risk, from passing earlier. The destruction of the wheat by fire on February 20, 1974, therefore falls squarely on B, not on A, since by that date B was already the legal owner of those specific 100 bags.

B's Defence Must Fail

B's plea that the goods were unascertained and that property had not passed to him cannot succeed, because this argument overlooks the critical intervening event — the sale and removal of the remaining stock by C on February 3, 1974 — which had the legal effect of ascertaining B's 100 bags well before the fire occurred. Had C's purchase never taken place, or had the remaining bulk still been intermingled with B's bags at the time of the fire, B's defence would have considerable force, since in that scenario the goods sold to B would indeed still have been unascertained, and under Section 8 read with the general principle that unascertained goods perishing does not relieve the seller of his obligation (since the loss of a portion of an undifferentiated bulk does not, without more, identify which portion was destroyed), the loss would ordinarily have continued to rest on A as owner of the unseparated bulk. But that is not the position here — the ascertainment was complete, and property had passed, well in advance of the fire.

Decision

A is entitled to succeed in his suit against B for recovery of the price of the 100 bags of wheat. Since C's purchase and removal of the balance stock on February 3, 1974, ascertained B's bags by exhaustion, property in those bags passed to B under Section 23 at that point, notwithstanding that delivery had been postponed to March 1, 1974. Risk having passed with property under Section 26, the destruction of B's wheat by fire on February 20, 1974, is a loss that falls on B as owner, not on A, and B remains liable to pay the full price notwithstanding that he never actually received the goods.

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