Fundamentals of Business Laws and Business Communication · Sale of Goods Act, 1930

Transfer of Property and Risk in the Sale of Goods Act

Updated 10 October 2026 · Fact-checked

Transfer of property means ownership of goods passes from seller to buyer. For specific goods in a deliverable state, it passes when the parties intend it to. For unascertained goods, it passes only after goods are ascertained and unconditionally appropriated. Risk prima facie passes with property.

Understand Transfer of Property and Risk

Property in goods means ownership, not possession. A seller can hand over goods and still be the owner. A buyer can be the owner while the goods sit in the seller's shop. So you must always ask one question: at what moment did ownership pass?

This moment matters because of three things. Ownership decides who bears the loss if goods are destroyed, who can sue third parties for damage, and what happens if either party becomes insolvent. The general rule is risk follows ownership (res perit domino), unless the parties agree otherwise.

The Act treats goods in two groups. Specific goods are identified and agreed upon when the contract is made, such as 'this scooter'. Property in them passes when the parties intend it to pass. If intention is not clear, the Act gives rules based on the conduct of the parties and the state of the goods: for example, whether the goods are in a deliverable state and whether anything remains to be done, such as weighing or testing, to fix the price.

Unascertained goods are defined only by description or quantity, such as '50 bags from my godown stock'. No property passes until the goods are ascertained. Under Section 23, property then passes when goods of that description, 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. The assent can be express or implied, and can be given before or after appropriation. Delivering goods to a carrier for the buyer, without reserving a right of disposal, is treated as unconditional appropriation.

Under Section 24, goods sent on approval or on sale or return pass property to the buyer in two ways: when he signifies approval or acceptance to the seller, or does any other act adopting the transaction; or, if he does not signify approval but keeps the goods beyond the time fixed (or beyond a reasonable time if none is fixed) without giving notice of rejection. Until then, the property stays with the seller.

Key formulas to remember

Basic rule on risk: Risk prima facie passes with property (res perit domino); Parties can agree otherwise. If delivery is delayed by the fault of buyer or seller, the party at fault bears loss that the fault caused.
Specific goods, deliverable state: Property passes when the parties intend it to pass; Intention is judged from the terms of the contract, conduct of the parties and the circumstances.
Unascertained goods: No property passes until goods are ascertained; Ascertainment comes first, then appropriation.
Section 23: appropriation: Unascertained goods + deliverable state + unconditional appropriation with assent = property passes; Assent may be express or implied, and may be given before or after appropriation.
Section 24: approval or sale or return: Property passes on (a) approval or adoption, or (b) retention beyond the fixed or a reasonable time without notice of rejection; Until then, property remains with the seller.

How to solve Transfer of Property and Risk questions

Use this order for any question on when ownership passes or who bears a loss.

1Read the facts and note the goods: are they specific or unascertained?
2Check for an express agreement or clear intention on when property passes. If there is one, it governs.
3If the goods are unascertained, ask whether they have been ascertained. If not, property has not passed.
4If ascertained, check for unconditional appropriation with the assent of the other party (Section 23), including delivery to a carrier.
5If goods were sent on approval or sale or return, apply Section 24: look for approval, adopting acts, or retention beyond time without notice.
6Decide who owns the goods at the time of the loss.
7Apply the risk rule: risk goes with property unless agreed otherwise or delay is someone's fault.
8State your conclusion in one line naming the owner and who bears the loss.

Quickest way: Three-question check

When to use it: For MCQs asking who owns the goods or who bears the loss.

Are the goods specific or unascertained? If unascertained and not yet separated, the answer is almost always that property has not passed.
Is it an approval or sale or return case? Look for approval, adopting act or time lapse. If none, the property is still with the seller.
Once the owner is found, the loss falls on the owner, unless the facts mention an agreement or someone's delay.
Eliminate options that confuse ownership with possession.

Common mistakes in Transfer of Property and Risk

Treating delivery of possession as passing of ownership.
In daily life, handing over an item feels like a sale completed.
Fix: Remember that property is ownership. In approval cases, the buyer has possession but not ownership until Section 24 is met.
Saying property passes in unascertained goods at the time of the contract.
Students apply the specific goods rule to every contract.
Fix: For unascertained goods, first ascertainment, then unconditional appropriation. Until then, no property passes.
Forgetting the 'unconditional' in appropriation.
Students read only 'appropriation' and stop.
Fix: If the seller keeps a right to dispose of the goods or the appropriation depends on a condition, it is not unconditional.
Thinking silence in sale or return always means acceptance.
Students remember only that retention passes property.
Fix: Retention passes property only if it goes beyond the fixed time, or a reasonable time where none is fixed, without notice of rejection.
Applying the risk rule as absolute.
The phrase 'risk follows ownership' is memorised without its conditions.
Fix: Say 'prima facie'. An agreement to the contrary, or a delay caused by one party, changes who bears the loss.

Worked examples

Example 1

Ramesh agrees to sell 100 bags of rice out of his godown stock of 500 bags to Suresh. No bags are separated. A fire destroys the whole stock. Who bears the loss?

Show the solution

The goods are 100 bags out of a larger stock, so they are unascertained goods.
The bags have not been separated, so they are not ascertained and not appropriated.
Under Section 23, property cannot pass without unconditional appropriation.
Property remains with Ramesh. Risk goes with property.

Answer: Ramesh bears the loss, because property had not passed to Suresh.

Example 2

Meera sends a laptop to Anil on approval, to be returned within 7 days if he does not like it. Anil says nothing and keeps it for 20 days. The laptop is then stolen from Anil's house without his fault. Who bears the loss?

Show the solution

This is a sale on approval, so Section 24 applies.
Anil gave no approval, but he kept the laptop beyond the fixed time of 7 days.
He gave no notice of rejection.
So property passed to Anil when the 7 days ended.
Risk follows property, and no contrary agreement is stated.

Answer: Anil bears the loss, as he became the owner after retaining the laptop beyond the time without rejecting it.

Exam tips

Look for the words 'out of a larger stock' or 'to be selected later'. They signal unascertained goods.
In approval questions, check the time limit and whether a notice of rejection was given.
If a question says the parties agreed on when ownership passes, that agreement decides the answer.
Do not pick an option based on who holds the goods. Pick the one based on who owns them.

Practice questions from Sale of Goods Act, 1930

Transfer of Property and Risk in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Transfer of Property and Risk: frequently asked questions

When does property pass in specific goods?

When the parties intend it to pass. If the intention is unclear, the Act looks at the contract terms, conduct and circumstances, including whether the goods are in a deliverable state.

What is appropriation under Section 23?

It is the act of setting goods aside for a particular contract. Property passes when unascertained goods of that description, in a deliverable state, are unconditionally appropriated with the other party's assent.

When does property pass in goods sent on approval?

It passes when the buyer signifies approval or does an act adopting the transaction. It also passes if he keeps the goods beyond the fixed or a reasonable time without giving notice of rejection.

Who bears the risk of loss of goods?

Prima facie the owner bears it, as risk passes with property. The parties can agree otherwise, and a party whose delay causes the loss bears it.