Special Contracts and Commercial Law
Passing of Property and Risk
Find the exact moment ownership and risk pass by applying intention, ascertainment, deliverable state, appropriation and reservation of disposal.
The short answer
Ownership passes when the parties intend, but unascertained goods must first be identified and unconditionally appropriated.
Rules for passing property
Start with the type and state of the goods, then examine intention.
Unascertained goods
No ownership passes until the goods are ascertained under Section 18.
Intention controls
For specific or ascertained goods, Section 19 directs attention to contract terms, conduct and surrounding circumstances.
Specific goods ready for delivery
Under an unconditional contract, ownership ordinarily passes when the contract is made, even if payment or delivery is postponed.
Work or price calculation pending
If the seller must make goods deliverable, or weigh, measure or test them to fix price, property waits until the act is done and the buyer has notice.
Appropriation
Unascertained goods pass when conforming goods in a deliverable state are unconditionally appropriated with the other party's assent.
Risk, approval and retained control
Ownership and physical custody can move at different times.
Sale on approval
Property passes on approval, an act adopting the transaction, or retention beyond the fixed or reasonable return period.
Right of disposal
A seller may reserve ownership until stated conditions, often payment against shipping documents, are fulfilled.
Risk
Risk generally follows property under Section 26, unless the parties agree otherwise. Delay caused by one party places attributable loss on that party.
Nemo dat
A buyer ordinarily receives no better title than the seller had, subject to statutory exceptions such as estoppel, mercantile agent and certain seller or buyer in possession cases.
Specific goods: Sections 19 to 22 in sequence
For specific goods, intention governs, while Sections 20 to 22 provide default rules based on deliverable state and unfinished seller acts.
Under Section 20, an unconditional contract for specific goods in a deliverable state ordinarily transfers property when the contract is made, even if payment or delivery is postponed. If the seller must do something to put the goods into a deliverable state, Section 21 postpones transfer until the act is done and the buyer has notice.
Section 22 separately covers weighing, measuring, testing or another act needed to ascertain price for specific goods already in a deliverable state. Property waits until the act is completed and notice is given. These are default rules, so contrary intention shown by terms, conduct or circumstances remains controlling under Section 19.
Ascertainment, appropriation and reservation of disposal
A sale out of an unidentified bulk needs an irrevocable connection between conforming goods and the particular contract before title can pass.
Ascertain the goods
Section 18 prevents property passing in unascertained goods. Separation, identification or exhaustion of the bulk may ascertain the subject matter depending on the facts.
Unconditional appropriation
Section 23 requires goods of the contractual description in a deliverable state to be unconditionally appropriated with assent of the other party. Assent may precede or follow appropriation and may be express or implied.
Delivery to carrier
Delivery to a carrier without reserving disposal may amount to unconditional appropriation, but shipping instructions, documents and payment conditions can show a different intention.
Reserve the right of disposal
Section 25 allows the seller to retain title until specified conditions are fulfilled, often through control of the bill of lading or delivery documents.
Risk, title and the nemo dat exceptions
Risk and ownership usually move together, but the contract, delay and third-party title rules can separate them.
Section 26 states the default that goods remain at the seller's risk until property transfers and then at the buyer's risk, whether delivery has occurred or not. The parties may agree differently. Loss caused by either party's delay falls on the party at fault to the extent stated by the section, and bailee duties can continue independently.
Under Section 27, a non-owner ordinarily cannot give better title than possessed. The statutory exceptions must be applied narrowly, including owner estoppel, sale by a mercantile agent, one joint owner in sole possession with permission, a seller under a voidable contract not yet rescinded, and seller or buyer continuing in possession under Section 30. Forgery and theft should not be collapsed into these exceptions.
Leading cases and what they establish
Read each authority for the proposition it proves, the legal question it answers and the reasoning that supports the result.
Re Wait
[1927] 1 Ch 606
Held: A buyer of an unseparated portion of a larger bulk acquires no proprietary title before ascertainment or appropriation.
Why it matters: Use it when a quantity is sold out of an undivided bulk.
Jute and Gunny Brokers Ltd. v. Union of India
AIR 1961 SC 1214
Held: Property in unascertained goods does not pass until goods are ascertained and appropriated to the contract with the required assent.
Why it matters: Use it for the Indian application of Sections 18 and 23.
Using this topic in a legal answer
A clear answer sequence
- Classify the goods as specific, ascertained, unascertained or future.
- Read the contract for intention and retained control.
- Apply the relevant rule in Sections 20 to 25.
- State separately when ownership, possession and risk pass.
Points that are often confused
- Treating possession and ownership as identical.
- Skipping ascertainment for bulk goods.
- Saying risk always passes on delivery.
Open the revision and self-check sheet
Rules to retain
- Unascertained goods cannot pass before ascertainment.
- Intention governs specific or ascertained goods.
- Appropriation requires identified conforming goods and assent.
- A seller may reserve disposal.
- Risk generally follows property.
Questions to test understanding
- Why can no property pass in unascertained goods?
- What constitutes unconditional appropriation?
- Can risk and possession pass at different times?
Questions students ask
Does ownership pass when goods are delivered to a carrier?
It may amount to appropriation if the seller does not reserve disposal, but the contract and surrounding facts remain important.
Does risk always follow possession?
No. Unless otherwise agreed, risk generally follows ownership, with a separate rule for loss caused by a party's delay.
Can ownership pass before delivery or payment?
Yes. For specific goods in a deliverable state, Section 20 may pass property when the unconditional contract is made, unless a contrary intention appears.
What is unconditional appropriation?
It is the final allocation of conforming goods in a deliverable state to the contract with the other party's assent and without retaining a right to substitute or dispose of them inconsistently.
Primary sources and further reading
- Sale of Goods Act, 1930 on India Code
- Supreme Court discussion of sale and passing of title
- Sale of Goods Act, 1930 on India Code
This article is written for legal education. Verify the governing provision, applicable amendments and complete judgment before relying on a proposition in practice.