The moment property passes is the pivot of the Act. It determines who bears the risk of loss, who may sue third parties, what happens on insolvency, and whether the seller's remedy is for the price or for damages. Sections 18 to 26 supply rules of presumed intention, all of which yield to a contrary agreement.
Legal Framework
| Provision | Subject | Key Rule |
|---|---|---|
| S.18 | Goods must be ascertained | In a sale of unascertained goods no property passes unless and until the goods are ascertained |
| S.19 | Property passes when intended to pass | Property passes when the parties intend it to pass; intention is gathered from the terms, the conduct of the parties, and the circumstances |
| S.20 | Specific goods in a deliverable state | Property passes when the contract is made, irrespective of the time of payment or delivery |
| S.21 | Specific goods to be put into a deliverable state | Property does not pass until that is done and the buyer has notice |
| S.22 | Specific goods to be weighed or measured to fix the price | Property does not pass until that is done and the buyer has notice |
| S.23 | Sale of unascertained goods and appropriation | Property passes on unconditional appropriation of the goods to the contract by one party with the other's assent |
| S.24 | Goods sent on approval or on sale or return | Property passes on signification of approval, adoption of the transaction, or retention beyond the stated or a reasonable time |
| S.25 | Reservation of the right of disposal | The seller may reserve a right of disposal until conditions are fulfilled, in which case property does not pass |
| S.26 | Risk prima facie passes with property | Unless otherwise agreed, goods remain at the seller's risk until property passes, after which they are at the buyer's risk whether delivery has been made or not |
The Governing Principle (S.19)
Property in specific or ascertained goods passes at the time the parties intend it to pass. Sections 20 to 24 are aids to ascertaining that intention where the contract is silent; they do not override an express agreement.
Why intention governs rather than delivery or payment: Commercial parties structure transactions in many ways. Goods are often paid for before shipment, or delivered long before payment. Fixing property to any single physical event would frustrate arrangements the parties deliberately chose. S.19 therefore makes intention paramount and treats delivery and payment as evidence of intention rather than as determinants.
Specific Goods
In a Deliverable State (S.20)
Where there is an unconditional contract for the sale of specific goods in a deliverable state, property passes to the buyer when the contract is made. It is immaterial whether the time of payment or the time of delivery, or both, is postponed.
Deliverable state means such a state that the buyer would, under the contract, be bound to take delivery of them.
Not Yet in a Deliverable State (S.21)
Where the seller is bound to do something to the goods to put them into a deliverable state, property does not pass until that thing is done and the buyer has notice of it.
Facts: A condensing engine was sold, bolted to and embedded in a concrete floor. The seller was to detach it and load it on rail. While being loaded it was damaged.
Issue: Had property passed to the buyer at the time of the damage?
Held: No. The engine was not in a deliverable state while fixed to the floor, and the seller had yet to detach and load it. Property could not pass until the seller had done what he was bound to do, so the loss fell on the seller.
Relevance: The leading illustration of S.21. Cite where the seller has outstanding work to make the goods deliverable.
To Be Weighed or Measured (S.22)
Where the seller is bound to weigh, measure, test or do some other act with reference to the goods for the purpose of ascertaining the price, property does not pass until that act is done and the buyer has notice.
Important limitation: S.22 applies only where the act is to be done by the seller and for the purpose of fixing the price. Where the buyer is to weigh the goods, or where weighing is merely for the buyer's own satisfaction, property may already have passed.
Unascertained Goods
Ascertainment is a Precondition (S.18)
Where there is a contract for the sale of unascertained goods, no property is transferred unless and until the goods are ascertained.
Appropriation (S.23)
Property passes when goods answering the contract description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the buyer's assent, or by the buyer with the seller's assent. Assent may be express or implied, and may be given before or after the appropriation.
| Mode of appropriation | Example |
|---|---|
| Setting aside and earmarking | Separating 50 bags from bulk stock and labelling them for the buyer |
| Delivery to the buyer or his agent | Handing over the goods |
| Delivery to a carrier for transmission to the buyer (S.23(2)) | Handing goods to a railway or shipping line without reserving the right of disposal |
| Exhaustion of the bulk | Where the remaining goods in a larger consignment can only answer this contract |
Facts: A sale of 140 bags of rice. The seller set aside 15 bags and sent the buyer a delivery order telling him where to collect them. The buyer did not collect for about a month, during which the bags were stolen.
Issue: Had property in the 15 bags passed, so that the buyer bore the loss?
Held: Yes. The seller had appropriated the specific bags to the contract and communicated this. The buyer's silence and failure to object amounted to implied assent. Property had passed and, risk following property under S.26, the loss fell on the buyer.
Relevance: The standard authority on implied assent to appropriation. Note the practical lesson that a buyer who delays collection assumes the risk.
Goods Sent on Approval or Sale or Return (S.24)
Where goods are delivered to the buyer on approval, or on sale or return, property passes:
| Trigger | Explanation |
|---|---|
| Signification of approval or acceptance | The buyer communicates acceptance |
| Adoption of the transaction | The buyer does an act adopting the transaction, such as reselling or pledging the goods |
| Retention beyond the fixed time | Where a time was fixed for return and it expires without notice of rejection |
| Retention beyond a reasonable time | Where no time was fixed |
Reservation of the Right of Disposal (S.25)
The seller may, by the terms of the contract or of the appropriation, reserve the right of disposal until certain conditions are fulfilled. Property then does not pass until those conditions are met, even though the goods have been delivered to a carrier.
| Common devices | Effect |
|---|---|
| Bill of lading made out to the seller's order | Seller retains control and property |
| Documents forwarded through a bank against payment | Property passes on payment or acceptance of the bill |
| Express retention of title clause | Property withheld until price paid |
Risk Follows Property (S.26)
Unless otherwise agreed, the goods remain at the seller's risk until the property is transferred to the buyer, but when the property is transferred the goods are at the buyer's risk whether delivery has been made or not.
| Qualification | Effect |
|---|---|
| Delay in delivery through the fault of either party | The goods are at the risk of the party in fault as regards any loss which might not have occurred but for that fault |
| Duties of a bailee | Nothing in S.26 affects the duties or liabilities of either party as bailee of the other's goods |
| Contrary agreement | The parties may separate risk from property |
Why risk is tied to property rather than possession: Ownership carries the benefit of any appreciation and the fruits of the goods, so it should also carry the burden of loss. Possession is an unreliable indicator because goods are routinely owned by one party while held by a warehouseman, carrier or the seller pending collection. Tying risk to property produces a single consistent answer.
Illustrations
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Specific goods in a deliverable state: A agrees to sell B a specific tractor standing ready in his yard, payment and delivery next week. The tractor is destroyed by lightning two days later. Property passed when the contract was made under S.20, and risk followed under S.26, so B bears the loss and must pay the price.
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Seller's outstanding work prevents passing: A sells B a machine bolted into a concrete floor, agreeing to detach and load it. It is damaged during loading. Applying Underwood Ltd v Burgh Castle Brick and Cement Syndicate (1922) and S.21, the goods were not in a deliverable state and property had not passed, so A bears the loss.
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Weighing to fix the price: A sells B a heap of scrap at Rs. 40 per kilogram, A to weigh it. Before weighing, part is washed away in a flood. Under S.22 property had not passed and A bears the loss.
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Weighing by the buyer does not postpone passing: On similar facts, if the contract required B to weigh the scrap and the price was otherwise agreed as a lump sum, S.22 does not apply and property may already have passed.
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Implied assent to appropriation: A sets aside 15 bags of rice for B and sends a delivery order. B does not collect for a month and the bags are stolen. Applying Pignataro v Gilroy (1919), B's silence was implied assent, property had passed, and B bears the loss.
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Delivery to a carrier: A hands goods to a transporter for delivery to B without reserving any right of disposal. Under S.23(2) this is an unconditional appropriation and property passes on delivery to the carrier.
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Reservation of the right of disposal: A ships goods to B taking the bill of lading to his own order and forwards it to a bank to be released against payment. Under S.25 property does not pass until B pays, notwithstanding that the goods are in transit to him.
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Sale or return, adoption: A sends jewellery to B on sale or return. B pledges a piece to raise money. That is an act adopting the transaction, so property in that piece passes to B under S.24 and B must pay for it.
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Fault in delay shifts risk: A is ready to deliver on the agreed date but B fails to collect for three weeks, during which the goods deteriorate through no one's active fault. Under the first proviso to S.26 the loss falls on B, the party in fault for the delay.
Recall Check
- Why does S.19 make intention rather than delivery the test for passing of property?
- What two conditions must be satisfied under S.21 and S.22 before property passes?
- How may a seller retain property in goods already handed to a carrier?
Key Cases
Underwood Ltd v Burgh Castle Brick and Cement Syndicate (1922) Underwood v Burgh Castle Brick and Cement 1922
Issue: Whether property passed in a machine still bolted to the seller's floor which the seller was to detach and load.
Rule: Where the seller must do something to put the goods into a deliverable state, property does not pass until that is done and the buyer has notice (S.21).
Held: Property had not passed and the seller bore the loss occurring during loading.
Pignataro v Gilroy (1919) Pignataro v Gilroy 1919
Issue: Whether property in bags of rice appropriated by the seller passed where the buyer delayed collection.
Rule: Appropriation with the other party's assent, which may be implied from silence, passes property under S.23.
Held: Property had passed and, risk following property, the buyer bore the loss of the stolen bags.
Distinctions
| Basis | Specific Goods | Unascertained Goods |
|---|---|---|
| Identification | Identified and agreed at the time of contracting | Described only; identified later |
| When property may pass | On the making of the contract (S.20), subject to S.21 and S.22 | Only on ascertainment and appropriation (S.18, S.23) |
| Availability of specific performance | May be available (S.58) | Ordinarily not |
| Effect of perishing | S.7 and S.8 may void or avoid the contract | Seller must supply from another source |
| Basis | S.21 (deliverable state) | S.22 (weighing to fix price) |
|---|---|---|
| Act required | Putting the goods into a deliverable state | Weighing, measuring or testing |
| Purpose of the act | To make the goods ready for delivery | To ascertain the price |
| Who must do it | The seller | The seller |
| Requirement of notice | Yes | Yes |
| Basis | Property | Risk |
|---|---|---|
| Meaning | Ownership in the goods | Liability for loss or damage |
| Governing rule | S.19 to S.25 | S.26 |
| Relationship | Risk prima facie follows property | May be separated by agreement |
| Effect of delivery | Not determinative | Not determinative |
Flashcards
State the governing rule on passing of property in specific goods.
Under S.19 property passes when the parties intend it to pass, ascertained from the terms of the contract, the conduct of the parties and the circumstances.
When does property pass in specific goods in a deliverable state?
When the contract is made, irrespective of the time of payment or delivery (S.20).
What is a deliverable state?
Such a state that the buyer would, under the contract, be bound to take delivery of the goods.
Can property pass in unascertained goods?
No. Under S.18 no property passes unless and until the goods are ascertained.
What is required for property to pass in unascertained goods?
Unconditional appropriation of goods answering the description and in a deliverable state, by one party with the other's assent (S.23).
Can assent to appropriation be implied?
Yes. In Pignataro v Gilroy (1919) the buyer's silence and failure to object amounted to assent.
State the rule in S.26 on risk.
Unless otherwise agreed, goods remain at the seller's risk until property passes, after which they are at the buyer's risk whether delivery has been made or not.
How does delay in delivery affect risk?
Under the proviso to S.26, goods are at the risk of the party in fault for the delay as regards loss which might not have occurred but for that fault.
When does property pass in goods sent on sale or return?
On approval, on adoption of the transaction, or on retention beyond the fixed or a reasonable time (S.24).
Exam Scenario
Problem: On 3 May Anand agrees to sell Bharti: (a) a specific lathe standing ready in his workshop, price paid at once, Bharti to collect on 10 May; (b) 40 quintals of coir from his bulk stock of 200 quintals, Anand to weigh out the 40 quintals to fix the price; and (c) a generator which Anand must first dismantle from its mounting and crate for transport. On 6 May a fire in Anand's premises destroys the lathe, the entire coir stock, and the generator, which was at that time still bolted to its mounting. Bharti has paid for the lathe only. Advise both parties on who bears each loss.
Step 1: Take the lathe first, property passed on contract
Apply S.20. This is an unconditional contract for specific goods in a deliverable state, standing ready in the workshop.
Property passed when the contract was made on 3 May, and it is immaterial that collection was fixed for 10 May. Applying S.26, risk followed property, so Bharti bears the loss.
She cannot recover the price she has paid, and had she not paid she would still be liable for it.
Step 2: Test the coir under S.18 and S.22 together
The goods were unascertained, being 40 quintals out of a bulk of 200, so no property could pass until ascertainment (S.18).
Anand was also bound to weigh out the quantity for the purpose of fixing the price, and under S.22 property does not pass until that is done and the buyer has notice. Neither had occurred.
Property remained with Anand and, risk following property, Anand bears the loss. As the goods were generic his obligation would ordinarily be to supply from another source, but the contract was tied to his bulk stock, so its total destruction may excuse him depending on construction.
Step 3: Test the generator under S.21
Apply S.21 and Underwood Ltd v Burgh Castle Brick and Cement Syndicate (1922). Anand was bound to dismantle and crate the generator to put it into a deliverable state.
He had not done so at the time of the fire, nor had Bharti received notice of completion. Property had not passed and Anand bears the loss.
Step 4: State the organising principle
| Item | Governing provision | Property passed? | Loss falls on |
|---|---|---|---|
| Lathe, specific and in a deliverable state | S.20 with S.26 | Yes, on 3 May | Bharti |
| Coir, 40 quintals from a bulk of 200 | S.18 and S.22 | No, unascertained and unweighed | Anand |
| Generator, still bolted to its mounting | S.21, Underwood (1922) | No, not in a deliverable state | Anand |
The same fire on the same premises produces different outcomes because property had passed in one item and not in the others, and under S.26 risk tracks property rather than possession.
Payment and collection dates are irrelevant to S.20. Bharti paid and collection was fixed for 10 May, but S.20 passes property on the making of the contract irrespective of the time of payment or delivery.
S.22 requires both the act and notice. Property stays with the seller until the weighing is done and the buyer has notice of it. Do not stop at the weighing.
S.22 applies only where the seller must do the act to fix the price. Weighing by the buyer, or weighing for the buyer's own satisfaction, does not postpone passing.
S.21 also requires notice. Dismantling alone would not be enough; Bharti must have notice that the goods are in a deliverable state.
Risk does not follow possession. All three items were on Anand's premises, yet Bharti bears one of the losses because S.26 ties risk to property.
Conclusion. Bharti bears the loss of the lathe, property and risk having passed to her on 3 May. Anand bears the loss of the coir and the generator, property in neither having passed.
See Also
- Sale of Goods: Formation and Subject Matter : the classification of goods as specific, ascertained or unascertained on which these rules depend.
- Delivery of Goods : the separate question of transfer of possession, which does not determine property.
- Rights of Unpaid Seller : the remedies that depend on whether property has passed.