Special Contracts · Sale of Goods

Passing of Property and Risk

Find the exact moment ownership and risk pass by applying intention, ascertainment, deliverable state, appropriation and reservation of disposal.

7 min readReviewed by Advocate Aditya Sharma
Sections 18 to 26Sections 27 to 30

In one line

Ownership passes when the parties intend, but unascertained goods must first be identified and unconditionally appropriated.

After this note, you should be able to

  • Apply the rules for specific and unascertained goods.
  • Separate ownership, possession and risk.
  • Recognize reservation of disposal and basic nemo dat issues.

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.

Work through the facts

Illustration

Facts

A contracts to sell B 50 bags from an undivided stock of 500 identical bags. No bags are separated, marked or otherwise appropriated before the warehouse is damaged.

Likely result

Ownership in the 50 bags has not passed because the goods remain unascertained. Risk therefore does not shift merely because the contract exists.

What to learn

For bulk goods, identify the act that irrevocably connects specific goods to the contract.

Cases with a purpose

Landmark judgments

Learn the rule and where to use it. A case name without its legal function adds little to an answer.

Re Wait

Further reading

[1927] 1 Ch 606

Principle: A buyer of an unseparated portion of a larger bulk acquires no proprietary title before ascertainment or appropriation.

Use in an answer: Use it when a quantity is sold out of an undivided bulk.

Jute and Gunny Brokers Ltd. v. Union of India

Further reading

AIR 1961 SC 1214

Principle: Property in unascertained goods does not pass until goods are ascertained and appropriated to the contract with the required assent.

Use in an answer: Use it for the Indian application of Sections 18 and 23.

For a 10-mark answer

Answer structure

  1. Classify the goods as specific, ascertained, unascertained or future.
  2. Read the contract for intention and retained control.
  3. Apply the relevant rule in Sections 20 to 25.
  4. State separately when ownership, possession and risk pass.

Common mistakes

  • Treating possession and ownership as identical.
  • Skipping ascertainment for bulk goods.
  • Saying risk always passes on delivery.

Before you close the tab

Quick revision

  • 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.

Test yourself

  1. Why can no property pass in unascertained goods?
  2. What constitutes unconditional appropriation?
  3. Can risk and possession pass at different times?

Short answers

Frequently asked questions

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.

Primary sources

This is an educational study note. Read the bare provision and full judgment before relying on a proposition in research or practice.