First Principles of Business Law

3. Property rights in chattels

3.3.4. The sale of goods that are not already owned by the seller

Albert agrees to purchase a computer-controlled jig-saw for $15,000 from an Australian supplier of industrial woodworking equipment, to be delivered and paid for within two weeks. The kind of saw in question is manufactured in Korea. The supplier, who has none of these machines in stock, tells Albert that he will acquire one from the manufacturer in order to fulfil the contract with Albert.

In these circumstances, which of the following statements is correct?

(a) A seller cannot validly sell anything that they do not yet own because they will not be able to transfer ownership rights to the buyer that the buyer is paying for.

(b) A seller can validly sell a thing they do not own, provided that they acquire the necessary rights of ownership by the time that ownership rights are due to be transferred to the buyer.