Under the Sale of Goods Act, 1930, the terms transfer of property and transfer of risk play a pivotal role in determining rights and liabilities of the buyer and seller.
Meaning of Transfer of Property
Transfer of property refers to the transfer of ownership (legal title) of goods from the seller to the buyer.
It is distinct from mere possession.
Importance of Transfer of Property
- Determines who bears the risk of loss or damage.
- Affects the remedies available to parties (e.g., right to sue for price or damages).
- Influences insurable interest in goods.
- Crucial for taxation purposes and legal title issues.
Rules Regarding Transfer of Property
Specific or Ascertained Goods
Property in specific or ascertained goods passes to the buyer when parties intend it to pass (Section 19). To determine intention, regard is had to:
- Terms of contract
- Conduct of parties
- Circumstances of the case
Statutory presumptions (Sections 20–24):
- Section 20: Where there’s an unconditional contract for sale of specific goods in deliverable state, property passes at the time of contract.
- Section 21: If the seller has to do something (e.g., packaging, weighing), property passes only after it’s done.
- Section 22: If goods are in deliverable state but the seller must ascertain the price by weight/measure, property passes only after the act is done and buyer is notified.
- Section 23: In the case of unascertained/future goods, property passes only after ascertainment and appropriation.
- Section 24: In delivery to a carrier without reservation of disposal right, property passes when goods are handed over.
Unascertained and Future Goods
Property doesn’t pass until goods are ascertained and unconditionally appropriated to the contract (Section 23). This usually requires mutual consent.
Transfer of Risk
Risk follows ownership, unless otherwise agreed (Section 26). This means:
- Risk passes with property, not possession.
- Even if goods are in possession of seller, if ownership has passed to the buyer, buyer bears the risk.
Exceptions:
- If delivery is delayed due to fault of a party, the party at fault bears the risk.
- Where parties agree otherwise.
Goods Damaged or Destroyed
- If goods perish before contract, the contract is void (Section 7).
- If goods perish after agreement but before delivery and without fault, and property hasn’t passed, seller bears loss (Section 8).
- If property has passed, buyer bears loss.
Reservation of Right of Disposal (Section 25)
- Seller may reserve the right to dispose of goods until certain conditions are fulfilled (like payment).
- In such cases, property doesn’t pass until those conditions are met, even if goods are delivered.
Legal Cases
- Rowland v. Divall (1923): Ownership cannot pass from a seller who has no title.
- Niblett Ltd. v. Confectioners’ Materials Co. Ltd. (1921): Transfer of property implies transfer of full legal rights, not just physical possession.
- Kursell v. Timber Operators & Contractors Ltd. (1927): If subject matter perishes before transfer, contract becomes void.
Mind Map (Text Form)
Transfer of Property and Risk in Sale of Goods Act
→ Property = Ownership transfer
→ Risk = Responsibility for loss
→ Key Factors:
→ Type of goods (specific, unascertained, future)
→ Intention of parties
→ Appropriation
→ Sections 19–26
→ Risk follows property (Section 26)
→ Exceptions: Delay, agreement
→ Reservation of right of disposal → delays transfer of ownership
→ Legal consequences: Liability, insurable interest, remedies
→ Important cases: Rowland v. Divall, Niblett v. Confectioners, Kursell v. Timber Operators
Situation-Based Questions
Q1. If A agrees to sell 100 bags of rice to B and the bags are destroyed in a flood before delivery, who bears the loss?
Ans: If the property had already passed to B, he bears the risk. If not, A bears the risk (Section 26).
Q2. A agrees to sell B 10 litres of oil out of a 100-litre tank. Before segregation, the tank leaks. Who bears the loss?
Ans: Since goods are unascertained and not appropriated, A bears the loss.
Q3. A ships goods to B but reserves the right of disposal until payment. Who owns the goods?
Ans: A retains ownership until payment; B only gains possession.
FAQs
Q. Does possession mean ownership?
No. Possession is physical control. Ownership (property) gives legal rights and may pass later.
Q. Can risk pass before property?
Generally, no. But parties can contractually agree otherwise.
Q. What happens if goods perish before ownership passes?
The seller bears the risk and loss; the contract may become void.
