Delivery to a Carrier and Risk in Transit under Sections 39 and 40 of the Sale of Goods Act, 1930: The Carrier as the Buyer's Agent, a Reasonable Contract of Carriage, Notice to Insure, and Deterioration Incident to Transit

Where the seller is to send the goods, the question arises whether handing them to a carrier counts as delivery to the buyer. Section 39 says that, prima facie, it does: the carrier receives the goods on the buyer's behalf. But the seller must make a reasonable contract of carriage, and on a sea route where insurance is usual, he must give the buyer notice enabling him to insure. Section 40 deals with the opposite arrangement, where the seller agrees to deliver at a distant place at his own risk: the buyer still bears the deterioration necessarily incident to the journey.

1. Delivery to a Carrier or Wharfinger: Section 39(1)

Section 39(1), Sale of Goods Act, 1930

Where, in pursuance of a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer, or delivery of the goods to a wharfinger for safe custody, is prima facie deemed to be a delivery of the goods to the buyer.

The carrier is treated as the buyer's agent to receive the goods, whether or not the buyer named him.
It is only prima facie. The contract may provide that delivery takes place only at the destination, as in many consumer sales and in contracts on delivered terms.
It links to Section 23(2), under which delivery to a carrier without reserving the right of disposal is an unconditional appropriation, so property and, under Section 26, risk usually pass at the same point.
A seller who takes the bill of lading to his own order reserves the right of disposal under Section 25(2), and property does not pass on shipment even though delivery to the carrier has been made.

The prima facie rule, the seller's two duties when sending goods, and Section 40

2. A Reasonable Contract of Carriage: Section 39(2)

Section 39(2), Sale of Goods Act, 1930

Unless otherwise authorised by the buyer, the seller shall make such contract with the carrier or wharfinger on behalf of the buyer as may be reasonable having regard to the nature of the goods and the other circumstances of the case. If the seller omits so to do, and the goods are lost or damaged in course of transit or whilst in the custody of the wharfinger, the buyer may decline to treat the delivery to the carrier or wharfinger as a delivery to himself, or may hold the seller responsible in damages.

📖 Thomas Young & Sons Ltd. v. Hobson & Partner, (1949) 65 TLR 365 (CA)

Facts: Sellers sent electric engines by rail. They arranged carriage at owner's risk rather than at the railway's risk, although the railway's risk terms were available at little extra cost, and the engines were not properly secured in the wagons. The engines arrived damaged.

Held: The Court of Appeal held that the sellers had not made a reasonable contract of carriage having regard to the nature of the goods. The buyers were entitled to decline to treat the delivery to the railway as delivery to themselves, and so could reject the damaged goods.

Ratio: A seller who sends goods must make a contract of carriage that is reasonable for goods of that kind; if he does not and the goods are damaged, the buyer may refuse to treat delivery to the carrier as delivery to him.

3. Notice to Insure on a Sea Route: Section 39(3)

Section 39(3), Sale of Goods Act, 1930

Unless otherwise agreed, where goods are sent by the seller to the buyer by a route involving sea transit, in circumstances in which it is usual to insure, the seller shall give such notice to the buyer as may enable him to insure them during their sea transit, and if the seller fails to do so, the goods shall be deemed to be at his risk during such sea transit.

📖 Wimble, Sons & Co. v. Rosenberg & Sons, [1913] 3 KB 743 (CA)

Facts: Goods were sold on free on board terms. The seller shipped them without giving the buyer specific notice of the ship, and they were lost at sea. The buyer argued that the goods were at the seller's risk for want of notice.

Held: The majority of the Court of Appeal held that the seller was not liable. The buyer already had sufficient information to insure, so no further notice was required. The purpose of the provision is to enable the buyer to insure, and it is not broken where he is already able to do so.

Ratio: The notice required is such as will enable the buyer to insure; where he already has enough information, the seller's omission does not shift the risk to the seller.

4. Delivery at a Distant Place: Section 40

Section 40, Sale of Goods Act, 1930

Where the seller of goods agrees to deliver them at his own risk at a place other than that where they are when sold, the buyer shall, nevertheless, unless otherwise agreed, take any risk of deterioration in the goods necessarily incident to the course of transit.

Section 40 distinguishes two kinds of loss. Accidents in transit, such as theft, fire or a collision, are at the seller's risk because he agreed to deliver at his own risk. But deterioration that is an unavoidable consequence of the journey itself, such as the natural evaporation of some liquids or the slight ripening of fruit, is borne by the buyer. The seller remains liable for deterioration caused by his own failure to pack or dispatch the goods properly.

5. The Position Stated Shortly

Section 39(1): delivery to a carrier or wharfinger is prima facie delivery to the buyer.
The rule yields to the contract and to a reservation of the right of disposal.
Section 39(2): the seller must make a reasonable contract of carriage, or the buyer may refuse to treat delivery as made, or claim damages.
Young v. Hobson: sending engines at owner's risk and unsecured was not a reasonable contract.
Section 39(3): on a sea route where insurance is usual, the seller must give notice enabling the buyer to insure, or bear the risk at sea.
Wimble v. Rosenberg: no notice is needed where the buyer already knows enough to insure.
Section 40: where the seller delivers at a distant place at his risk, the buyer still bears deterioration necessarily incident to transit.