In case of sale or an agreement to sell the major question faced is about the passing of risk.
Section 30 of Sale of Goods Act,1930 lays down the rule for the passing of risk. As per this section the risk prima facie passes with the ownership. It means that the party i.e. either the seller or the buyer who is the owner of the goods is the risk bearer.
Till the time the ownership is not transferred the risk is borne by the seller.
Once the ownership is transferred the risk is borne by the buyer.
This rule is discussed in the following illustrations.
Seller is the owner and seller is in the possession of goods. Eg. the goods are lying in the seller's shop.
Here the seller bears the risk.
Buyer is the owner and buyer is in the possession of goods. Eg. The goods lying in the seller's shop are purchased by the buyer.
Here buyer bears the risk
Seller is the owner and the buyer is in the possession of goods. Eg. goods sent by the seller on sale and return basis.
Here sellers bears the risk
Buyer is the owner and seller is in the possession of goods. Eg. After purchase, the buyer leaves the goods in the seller's shop for some time.
Here buyer bears the risk.
Hence, from the above illustrations, it is clear that risk travels with ownership.
Delivery and payment of price are immaterial factors in determining who is the risk bearer.
If the parties enter into a contrary contract
If the person was only having the possession of goods and not the ownership and goods are destroyed because of his default, then he has to bear the risk in the form of damages.
Ownership has been transferred but there is a default in delivery by the seller then the loss of such default will be borne by the seller.
Case law: RUTTER vs PALMER
The next important point is to find out when the ownership is transferred. The general rule regarding the transfer of ownership is contained under Section 19 of the Act.
Section 19(1) provides that the ownership in goods is transferred when the parties intend it to be transferred.
How to find out the intention of the parties?
As per section 19 (2), there are three ways to find out the intention of the parties
Terms of contract
Facts and circumstances
Conduct of parties
In case the intention of the parties is not clear by any of the above-mentioned ways then as per section 19(3), the intention can be gathered by applying the rules contained in Section 20 to Section 24 of Sale of Goods Act, 1930.
Here it is also important that the goods must be specific and not unascertained goods. If the goods are unascertained or future then for the transfer of ownership it is essential to convert them into specific or existing goods as the case may be.
How to convert the goods.
Conversion of future goods into existing goods.
When the future goods are finally produced, manufactured or acquired by the seller it becomes existing goods.
Conversion of unascertained goods into specific goods
In this case, there are two important rules.
When appropriation meets consent
When consent means appropriation
This means that when the goods are appropriated by one party and then consented to be sold by the other then the goods are converted into specific goods. Now the transfer of ownership can take place.
Name: Vinny Sharma
University: Guru Nanak Dev University