RISK PASEES WITH THE PROPERTY UNDER SALE OF GOODS ACT

Submitted by:

ARYAN ASTHANA

Batch 2021-26, BBA LLB.

PRN: 21010224143

Symbiosis Law School, NOIDA

Symbiosis International (Deemed University), Pune

In
March 2022

Under the Guidance of

Ms Pallavi Mishra

Assistant Professor

Symbiosis Law School NOIDA

CERTIFICATE
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The project entitled “Risk passes with the property under Sale of Goods Act” submitted to the
Symbiosis Law School, NOIDA for Special Contracts as part of Internal Continuous Evaluation is
based on my original work carried out under the guidance of Ms. Pallavi Mishra. The material
borrowed from other sources and incorporated in the research has been duly acknowledged.

I understand that I myself could be held responsible and accountable for plagiarism, if any,
detected later on.

ACKNOWLEDGEMENT

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First of all, I would like to extend my heartfelt gratitude towards Ms. Pallavi Mishra for helping me
and being my guiding light for this project. They provided me with valuable insight which aided me
in understanding all the basics of this project, and also helped me with any doubts I had regarding
the project.

I would also like to thank the library department and academic support of Symbiosis Law School,
Noida for providing me with different research sources and materials to help make my project with
the best of originality.

I would also like to thank Symbiosis Law School, Noida for providing me with this project so that I
could understand the basic information regarding the Sale of Goods Act easily and satisfactorily and
with full detail.

INDEX

Sl. No. Particulars Pg. No.

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 1. Certificate 2
2. Acknowledgement 3
3. Introduction 5
4. Research Question 5
5. Research Objective 5
6. Brief History 6
7. What are the exceptions to the general rule of risk prima 7
facie passing with the property?
8. Illustrations on the exception to the general rule of risk prima 8
facie passing with the property.
9. Analysis 9
10. Conclusion 10

INTRODUCTION

The Sale of Goods Act, 1930 was earlier under the The Indian Contract Act, 1872 but later it was
repealed from there and it was made a separate act altogether in 1930.

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The Section 26 of The Sale of Goods Act, 1930 deals with the passing of the risk prima facie with
the passing of the property. Section 26 of the Sale of Goods Act, 1930 is comparable and quite
similar to the English Sale of Goods Act, 1893. The verbatim of the Section Section 26 has been
given below -

‘Section 26. Risk prima facie passes with the property - Unless otherwise agreed, the goods
remain at the seller’s risk until the property therein is transferred to the buyer, but when the property
therein is transferred to the buyer, the goods are at the buyer’s risk whether delivery has been made
or not:

Provided that, where delivery has been delayed through the fault of either buyer or seller, the goods
are at the risk of the party in fault as regards any loss which might not have occurred but for such
fault:

Provided also that nothing in this section shall affect the duties or liabilities of either seller or buyer
as a bailee of the goods of the other party.1’

RESEARCH QUESTIONS

1. What are the exceptions to the general rule of risk prima facie passing with the property?

RESEARCH OBJECTIVE
The objective of this research is to further gain more knowledge about the different exceptions to
the general rule of risk passing with the property.

BRIEF HISTORY

The risk associated with the passing of property was covered in the Section 86 of the Indian
Contract Act, 1872 prior to its repeal from the act on 1st July, 1930. The Sale of Goods Act, 1930
also came into force on 1st July, 1930.

1
56 Ind Cas 978
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Even though the repealed Section 86 of the Indian Contract Act, 1873 and the Section 26 Sale of
Goods Act, 1872 both dealt with the risk associated with the passing of the property, they were very
different.

The repealed Section 86 of the Indian Contract Act, 1872 stated the buyer had to bear the loss after
the goods have become his property but the Section 26 describes that the risk prima facie passes
with the property and the risk can be passed on to even the seller if there is a prior agreement of the
buyer and seller.

Justice Blackburn in a report of the special committee had said that the “Section 86 of the Indian
Act seems to lay down an inflexible rule of law that risk follows the property. According to the
English common law it is only a prima facie rule.” He had said that there was nothing in the laws of
England that would prevent the buyers and sellers from reaching an agreement where, if it pleases
them, then the risk shall pass at some time or on some condition which is not necessarily
simultaneously with the passing of the property2.

Under the General rule of the Section 26 of the Sale of Goods Act, 1930 the risk prima facie passes
with the property but this section gives a scope to the parties of the contract to do it contrary,
through which the risk might pass even before the title in the property passes.

WHAT ARE THE EXCEPTIONS TO THE GENERAL RULE OF RISK

PRIMA FACIE PASSING WITH THE PROPERTY?

The general rule under Section 26 of the Sale of Goods Act, 1930 states that risk prima facie passes
with the property. However the section provides scope for many exceptions to the general rule. The
starting words in the section are “Unless otherwise agreed…has been made or not:” which itself
provides us with the information that the parties to a contract of sale of goods may be able to

2
Demby Hamilton & Co, Ltd. v. Burden (Endeavour Wires) Ltd. (1949) 1 AII ER 435
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separate the risk from the property if they both agree to the separation of the risk from the
ownership of the property.

For example - The seller and buyer may both agree that the goods have to be prepaid and the risk
would remain with the seller from the time when the goods have been sent to be delivered and are
in transit. Here, the risk has already passed to the buyer even though the goods have not been
delivered yet and the property in goods has not been passed to the buyer.

Another example is that if the goods are to be supplied over a very long distance then the seller
might not want to take the risk of the goods on his shoulder and might want to transfer the risk of
the property over to the seller even though the property might not have passed or reached the buyer.

The next lines under Section 26 of the Sale of Goods, 1930 are that “Provided that where
goods….but for such fault:”. These lines provide that the goods would be at the risk of the party due
to whom there is a fault in the delivery of any loss which might not have occurred otherwise but for
that fault.

In Demby Hamilton & Co, Ltd. v. Burden (Endeavour Wires) Ltd. 3, the contract was made for the
purchasing of 30 tons of apple juice by the defendant from the plaintiff. For the delivery of the
apple juice, the apples were crushed and their juice was put into casks for their delivery to the
defendant. Due to the defendant’s delay in taking the delivery of the apple juice, it went bad and
had to be thrown. In this case, it was held that the defendant would be held liable for the loss as it
was the fault on the defendant's side that led to apple juice going bad.

The next lines in the section “Provided also that…of the other party” convey that nothing in this
section will affect the duties and liabilities of the either parties as bailee of the goods of the other
party. These duties and liabilities of either parties as a bailee of the goods are mentioned from
Section 151 to 181 in the Indian Contract Act, 1872.

ILLUSTRATIONS ON THE EXCEPTION TO THE GENERAL RULE OF

RISK PRIMA FACIE PASSING WITH THE PROPERTY

1. According to the customs of the Fur Trade, the goods are at the risk of the person who is
ordering them on approval. The Furs were delivered “on approval” to the person with the
invoice. They get stolen by some robbers. In this case, the sender can recover the price
mentioned in the invoice from the person ordering the furs “on approval”4.
2. A sale of 120,000 gallons of some white spirit happened out of the 200,000 in a tank on the
wharf. After the sale even though no contract was made, a delivery warrant was issued to the
3
The Sale of Goods Act, 1930, No.3, 1930
4
Bevington v. Dale, (1902) 2 KB 78 (CA)
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 buyer of the 120,000 gallons of spirit. The buyer did not act and take the delivery of the
spirit for some months, and in the meantime the spirit deteriorated. The loss for this fell on
the buyer5.
3. A car was given to a garage to get it sold at the risk of the customer. The car suffered some
damage due to the negligence of the garage-keeper’s servant. The garage-keeper would not
be held liable in this case6.

ANALYSIS

It can be very well analysed that even though the general rule might be that the risk prima facie
passes with the property, there are many exceptions to it. The exceptions to the general rule of risk
passing prima facie with the property can be seen in the Section 26 of the Sale of Goods Act, 1930
and can be interpreted easily.

From the above research it can be analysed that how much the Section 26 of the Sale of Goods Act,
1930 differs from the now repealed Section 86 of the Indian Contract Act, 1872. The new section
involves exceptions to the general rule whereas the earlier Section 86 was rigid and inflexible.

5
Sterns v. Vickers, (1923) 1 KB 78 (CA)
6
Rutter v. Palmer, (1922) 2 KB 87 (CA)
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CONCLUSION

It can be concluded that there are many exceptions to the general rule of risk passing away with the
property and this research project helps in understanding those different exceptions. These
exceptions provide some liberties to the parties where they can decide the passing of the risk as per
their individual needs with agreement.

Understanding of these exceptions helps in betterment of the knowledge on the subject and better
understanding of the relationship of Risk with the property and the parties involved.

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