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Report No. 61

Passing of Property

1A.13. The position regarding passing of property.-

A treatise which deals with the practice in respect of building contracts1 states the position as to the passing of property (in the materials) in works contracts, in these words;-

"Materials brought on to the site by the contractor remains his property, in the absence of a provision to the contrary, until they become affixed to the land i.e., are built into the works,2-3 whereupon they become the property of the owner of the freehold.4 If the employer has an estate or interest less than the freehold, he enjoys the property during such estate or interest. In the case of ships the property passes when the materials are fixed, 'or, in a reasonable sense, made party of the corpus'."5

1. Keating Building Contracts, (1955), p. 96.

2. Keating Building Contracts, (1955), p. 96.

3. Tripp v. Armitage, (1839) 4 M&W 687.

4. Elwes v. Maw, (1802) 3 East 38.

5. Seath v. Moore, (1896) 11 App Cas 350 (381) (HL), for other cases on ships, see Salmon and Woods (in re:), ex parte Gould, (1885) 2 Morr Bkptcy Cas 137; Reid v. Macbeth & Gray, 1904 AC 323 (HL); Blyth Ship Building etc. Co. Ltd. (in re:), 1926 Ch 494 (CA).

1A.14. It is, however, stated in the same treatise:1 "It is common to have a clause which purports to vest materials and sometimes plant in the employer before they are fixed. The principal objects of such a clause are to provide a security to the employer for money advanced and to enable the employer to obtain the speedy completion of the works by another contractor in the event of the original contractor's default, by providing materials and plant on the site ready to use free from the claims of the original contractor, and his creditors, or his trustee in bankruptcy or liquidator. Whether or not the clause achieves its purpose depends upon the words used.2 If the formula used is "the materials shall become and be",3 or "be and become" the property of the employer, then normally "the clause means what it says, operates according to its tenor and effectively transfers the title."4:-

If, on the other hand, words like 'considered to be', are used, the clause may be ineffective to achieve its purpose, the property may remain in the contractor.5

1. Keating Building Contracts, (1955), p. 97.

2. See e.g. clause 11, R.I.B.A. form (infra).

3. Bennett etc. Ltd. v. Sugar City, 1951 AC 786 (PC).

4. See Reeves v. Barlow, (1884) 12 QBD 436 (CA).

5. (a) Bennett etc., Ltd. v. Sugar City, 1951 AC 786 (814).

(b) Winter (ex parte) Bolland (in re:), (1878) 8 Ch D 225.

1A.15. Contract form of Royal Institute of British Architects.-

Clause 11 of the form of the Royal Institute of British Architects1 may be referred to, in this connection:-

"Clause 11-Unfixed materials when taken into account to be the property of the employer.

Where in any certificate of which the Contractor, has received payment the Architect has in accordance with clause 24(b) of these conditions included the value of any unfixed materials and goods intended for, and placed on or adjacent to the Works, such materials and goods shall become the property of the Employer and shall not be removed except for use upon the Works unless the Architect has authorised in writing such removal, but the Contractor shall remain responsible for loss or damage to the same.".

1. Keating Building Contracts, (1955), p. 230.

1A.16. Provision in another form adopted by Association of sub-contractors.-

Another form (adopted by the Association of sub-contractors) has this clause1:-

1. Keating, Building Contracts, (1955), pp. 310-311.

"Vesting of Materials:

11.-All plant, materials and equipment of any kind whatsoever which are brought on to the site by the Contractor but are not intended for incorporation in the Works shall remain the property of the Contractor in any event. Any materials, fitments or other goods delivered to the site for incorporation in the Works shall remain the property of the Contractor and shall not become the property of the Employer until whichever is earlier of the following times:-

(a) When the same have been incorporated in the Works, or

(b) When the same have been paid for in full (subject only to the deduction of such sums as the Employer may be entitled to retain in accordance with the provisions of clause 12 hereof).

without prejudice to any other rights or remedies the Contractor shall have a lien on any unincorporated materials, fitments or goods which may have become the property of the Employer for the amount of any unpaid portion of the contract price due to the Contractor."

1A.17. When does property in materials pass.-

It is not always easy to determine when the property in the materials passes in a Works Contract; this is because payment is not usually made in a lump sum.

1A.18. Practice in C.P.W.D.-

Take, for example, the practice in the Central Public Works Department, which has been thus described1-2: "A Contractor is required to submit a running bill each month on or before the date fixed by the Engineer-in-charge for all works executed in the previous month and the Engineer-in-charge has to take or cause to be taken the requisite measurements for the purpose of having the bill verified and the claim, to the extent admissible, adjusted, as far as possible before the expiry of 10 days from presentation of the bill. If the contractor does not submit the bill within the time fixed, the Engineer-in-charge may depute a subordinate, within 7 days of the date fixed, to measure the work in the presence of the Contractor whose countersignature to the measurement list will be sufficient warrant and the Engineer-in-charge may prepare a bill from such a list."

1. Report of the Study Team on Central Public Works Department, (1965), p. 82.

2. As to C.P.W.D. works in general, see para. 1A.6, supra.

Certain Problems connected with Powers of the States to Levy a Tax on the Sale of Goods and with the Central Sales Tax Act, 1956 Back

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