Business Laws and Ethics · Sale of Goods Act, 1930

Transfer of Property and Risk under the Sale of Goods Act

Updated 10 October 2026 · Fact-checked

Transfer of property means ownership passing from seller to buyer. For specific goods it passes when the parties intend (Section 19), usually at the contract if goods are deliverable (Section 20). For unascertained goods it needs ascertainment and unconditional appropriation (Sections 18, 23). Risk follows property unless agreed otherwise (Section 26).

Understand Transfer of Property and Risk

A contract of sale is about transferring the property in goods, meaning ownership, not just handing over possession. When property passes, the contract becomes a sale. Until then it is an agreement to sell (Section 4). So the question "when does property pass?" decides who owns the goods, and who bears the loss if they are destroyed.

The starting point is the intention of the parties (Section 19). For specific or ascertained goods, property passes when the parties intend it to pass. You find that intention from the terms of the contract, the conduct of the parties and the circumstances. Sections 20 to 24 are rules to find that intention, and they apply unless a different intention appears.

Split goods into two groups. Specific goods are identified and agreed upon at the time of the contract. Unascertained goods are described only by kind or quantity, such as 100 bags of rice from a godown. For unascertained goods, no property passes until the goods are ascertained (Section 18). Then, under Section 23, property passes when goods of that description, in a deliverable state, are unconditionally appropriated to the contract with the assent of the other party. Assent may be express or implied, and may be given before or after appropriation. If the seller delivers the goods to the buyer, or to a carrier or other bailee for transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated them.

For specific goods, Section 20 says that in an unconditional contract for goods in a deliverable state, property passes when the contract is made. It does not matter if payment or delivery is postponed. Section 21 delays this if the seller must do something to put the goods in a deliverable state: property passes only when it is done and the buyer has notice. Section 22 delays it if the seller must weigh, measure or test the goods to ascertain the price: property passes only when this is done and the buyer has notice.

Goods sent on approval or on sale or return are covered by Section 24. Property passes to the buyer when he signifies approval or acceptance, or does any other act adopting the transaction. It also passes if he keeps the goods without giving notice of rejection once the fixed time ends, or, if no time was fixed, once a reasonable time ends. Finally, risk follows property (Section 26). Unless otherwise agreed, the goods are at the seller's risk until property passes, and at the buyer's risk after that, whether or not delivery has been made.

Key rules to remember

Intention rule (Section 19): Specific or ascertained goods: property passes when the parties intend it to pass; Intention is read from the contract terms, conduct and circumstances. Sections 20 to 24 apply unless a different intention appears.
Unascertained goods (Section 18): No ascertainment = no transfer of property; The goods must be identified before any property can pass.
Appropriation (Section 23): Unascertained or future goods by description + deliverable state + unconditional appropriation + assent = property passes; Assent may be express or implied, before or after appropriation. Delivery to a carrier without reserving the right of disposal is deemed unconditional appropriation.
Specific goods in deliverable state (Section 20): Unconditional contract + specific goods + deliverable state = property passes when the contract is made; Postponed payment or delivery does not matter.
Seller must do something (Sections 21 and 22): Property passes only when the act is done and the buyer has notice; Section 21: putting goods in a deliverable state. Section 22: weighing, measuring or testing to fix the price.
Sale or return (Section 24): Property passes on (a) approval, acceptance or adopting act, or (b) retention without notice of rejection beyond the fixed or reasonable time; Use the fixed time if one is given, otherwise a reasonable time.
Risk (Section 26): Risk follows property unless otherwise agreed; If delivery is delayed by the fault of a party, that party bears loss that would not have occurred but for the fault.
Perishing before risk passes (Section 8): Specific goods perish without fault, before risk passes = agreement avoided; Applies to an agreement to sell specific goods.

How to solve Transfer of Property and Risk questions

Use the same sequence for every problem question on passing of property and risk. It stops you from jumping to the wrong section.

1Read the facts and note what the goods are: specific, or unascertained (described by kind or quantity).
2Check for any agreed intention about when ownership passes. If the contract states it, that governs under Section 19, unless the facts show otherwise.
3If the goods are unascertained, ask whether they have been ascertained and unconditionally appropriated with assent (Sections 18 and 23). Check for delivery to a carrier with no right of disposal reserved.
4If the goods are specific, check if they are in a deliverable state and the contract is unconditional (Section 20). Then check whether the seller still has to do something (Section 21) or weigh, measure or test (Section 22), and whether the buyer has notice.
5If the goods are on approval or sale or return, apply Section 24: approval, an adopting act, or retention beyond the fixed or a reasonable time.
6Fix the moment property passes, then apply Section 26: risk goes with property unless otherwise agreed. Check for delay caused by someone's fault.
7Write the conclusion naming who owns the goods and who bears the loss, with the section numbers.

Quickest way: Three-question shortcut

When to use it: Use it for MCQs and for short case-lets where you have only a few minutes.

Question 1: Are the goods specific or unascertained? Unascertained means you need appropriation (Section 23).
Question 2: Is something pending, such as the seller preparing the goods, weighing them, or the buyer's approval? If yes, property has not passed yet.
Question 3: Who owns the goods at the time of loss? That person bears the risk, unless the parties agreed otherwise or a delay was someone's fault.

Common mistakes in Transfer of Property and Risk

Treating delivery of possession as the same as passing of property.
In daily life, handing over the goods feels like completing the sale.
Fix: Remember that property is ownership. Section 26 says risk follows property whether delivery has been made or not.
Saying property passes in unascertained goods when the contract is signed.
Students apply Section 20, which is meant for specific goods.
Fix: For unascertained goods, first ask whether the goods are ascertained (Section 18) and unconditionally appropriated (Section 23).
Ignoring the buyer's notice under Sections 21 and 22.
Students remember that the seller must do the act but forget the second condition.
Fix: Write both parts: the act is done and the buyer has notice.
Applying Section 24 only when the buyer says yes.
Students overlook the second limb about retaining goods without rejecting them.
Fix: Check the time fixed for return. If none was fixed, use a reasonable time. Silence beyond that time passes property.
Applying Section 26 as an absolute rule.
The rule is memorised in short form as risk follows ownership.
Fix: Add the exceptions: an agreement otherwise, and the provisos for delay through the fault of either party and for duties as a bailee.

Worked examples

Example 1

Ramesh Traders agrees to sell to Kavita Stores 200 bags of wheat out of a godown holding 1,000 bags of the same quality. Nothing has been set apart. A fire destroys the whole godown stock. Who bears the loss, and has property passed?

Show the solution

The goods are unascertained, as the 200 bags are not yet identified out of 1,000.
Section 18 says no property passes unless and until the goods are ascertained.
There is no unconditional appropriation under Section 23, as no bags were set apart or delivered.
So property has not passed. Under Section 26, the goods remain at the seller's risk until property passes.

Answer: Property has not passed to Kavita Stores. Ramesh Traders bears the loss.

Example 2

Meera sends a sewing machine to Arjun on approval for 7 days. Arjun does nothing for 7 days and keeps the machine. On the 9th day the machine is stolen from Arjun's house without his fault. Who bears the loss?

Show the solution

The goods are delivered on approval, so Section 24 applies.
Arjun did not signify approval or any adopting act, and he did not give notice of rejection.
A time was fixed (7 days). Under Section 24(b), property passes on expiry of that time, so it passed to Arjun at the end of day 7.
Under Section 26, once property has passed, the goods are at the buyer's risk, whether or not delivery was made. The theft on day 9 happened after property passed.

Answer: Arjun bears the loss, because property passed to him when the 7 days expired without notice of rejection.

Exam tips

Case-let questions usually turn on one fact: appropriation, a pending act by the seller, or silence after goods sent on approval. Find that fact first.
Always write the section number and the rule in plain words. Step marks go to the rule, the application and the conclusion.
In MCQs, watch the words unascertained, specific, deliverable state and notice. They decide which section applies.
Always end with who owns the goods and who bears the risk. Examiners look for both.

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

What is the difference between transfer of property and delivery of goods?

Transfer of property is the passing of ownership. Delivery is the handing over of possession. Under Section 26, risk follows property, so the goods are at the buyer's risk once property passes, even if delivery has not been made.

When does property pass in unascertained goods?

No property passes until the goods are ascertained (Section 18). After that, property passes when goods of that description in a deliverable state are unconditionally appropriated to the contract with the assent of the other party (Section 23).

When does property pass in goods sent on approval or sale or return?

It passes when the buyer signifies approval or acceptance, or does any other act adopting the transaction. It also passes if he keeps the goods without notice of rejection beyond the fixed time, or beyond a reasonable time if none was fixed (Section 24).

Does risk always pass with ownership?

Not always. Section 26 says risk goes with property unless otherwise agreed. If delivery is delayed by the fault of either party, that party bears the loss that would not have occurred but for the fault.