Passing of Property and Risk: Why the Moment Matters, the Rules for Specific, Unascertained and Future Goods, Appropriation, Sale on Approval, Reservation of the Right of Disposal, and Property Against Possession and Risk

The single most consequential question in a contract of sale is when ownership passes. It decides who bears an accidental loss, whether the seller may sue for the price or only for damages, whose estate the goods fall into on insolvency, who may sue a stranger who damages them, and often whether a third party can acquire a good title. Sections 18 to 26 answer it. This note draws the whole scheme together: the two master rules, the presumptions for each kind of goods, and the relationship between property, possession and risk.

Why the moment matters, the rule for each kind of goods, and the three separate concepts

1. Why the Moment Matters

Risk. Under Section 26 the goods are at the risk of whoever owns them, unless otherwise agreed, whether or not delivery has been made.
The action for the price. Under Section 55 the seller may sue for the price once property has passed; otherwise he is usually confined to damages under Section 56.
Insolvency. If the buyer fails after property has passed, the goods belong to his estate, subject to the unpaid seller's lien and right of stoppage. If the seller fails before it passes, the buyer is only a creditor.
Suits against third parties. The owner, or a person in possession, may sue a stranger who damages or converts the goods.
Title to later buyers. Sections 27 to 30 turn partly on who owned the goods and who had possession.

2. The Two Master Rules

Sections 18 and 19, Sale of Goods Act, 1930

18. Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained.

19. (1) Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties intend it to be transferred. (2) Regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. (3) Unless a different intention appears, the rules in sections 20 to 24 are rules for ascertaining that intention.

3. Specific Goods

Section 20. In an unconditional contract for specific goods in a deliverable state, property passes when the contract is made, even if payment or delivery is postponed.
Section 21. Where the seller must do something to put the goods into a deliverable state, property passes when that is done and the buyer has notice.
Section 22. Where the seller must weigh, measure or test the goods to ascertain the price, property passes when that is done and the buyer has notice.
All three are presumptions and yield to a contrary intention under Section 19(3), such as a term that property passes only on payment.

📖 Rugg v. Minett, (1809) 11 East 210

Facts: Casks of turpentine were sold by auction in lots. The seller was to fill each cask to a uniform level before delivery. He had filled some of the casks, but not all, when a fire destroyed the whole stock. The question was which casks were at the buyer's risk.

Held: Property, and so the risk, had passed in the casks that had been filled up, because nothing remained to be done to them. It had not passed in those still to be filled, since the seller still had to put them into a deliverable state. The loss was divided accordingly.

Ratio: Where the seller must still do something to the goods, property does not pass until it is done; goods already in a deliverable state pass at once. The principle underlies Sections 20 and 21.

4. Unascertained and Future Goods

Under Section 23, property in unascertained or future goods sold by description passes when goods of that description, in a deliverable state, are unconditionally appropriated to the contract by one party with the assent of the other, which may be express or implied and may be given before or after. Section 23(2) treats delivery to a carrier for transmission to the buyer, without reserving the right of disposal, as an unconditional appropriation.

📖 Aldridge v. Johnson, (1857) 7 E & B 885

Facts: A buyer agreed to buy barley out of a larger bulk, and sent his own sacks to the seller to be filled. The seller filled a number of the sacks, and then, in financial difficulty, emptied them back into the bulk and became insolvent.

Held: Property had passed in the barley that had been put into the buyer's sacks. Filling the buyer's own sacks was an unconditional appropriation to the contract, to which the buyer had assented in advance by sending them. Property had not passed in the remainder.

Ratio: Placing goods in the buyer's own containers, with his prior assent, is an unconditional appropriation that passes property in the goods so appropriated.

5. Sale on Approval, and Reservation of the Right of Disposal

Section 24. Goods delivered on approval or on sale or return become the recipient's when he signifies approval, does an act adopting the transaction, or keeps them beyond the fixed time or a reasonable time without rejecting them.
Section 25. The seller may reserve the right of disposal until his conditions are fulfilled, so that property does not pass despite delivery to the buyer or a carrier. Taking the bill of lading or railway receipt to his own order is prima facie such a reservation, and a buyer who wrongfully keeps the documents without honouring a bill of exchange acquires no property.

6. Property, Possession and Risk

	Property	Possession	Risk
What it is	The general property: ownership, s. 2(11)	Physical control, transferred by delivery	The burden of accidental loss
Governed by	Sections 18 to 25	Sections 31 to 39	Section 26
Default rule	Passes when the parties intend	Passes on delivery	Follows property, unless otherwise agreed
They may be split	The buyer may own goods he has never seen	The seller may hold goods he no longer owns	The parties may agree that risk passes at another time

Two qualifications to Section 26 complete the picture. Where delivery is delayed by the fault of either party, the goods are at the risk of the party in fault as regards loss that would not otherwise have occurred. And whoever holds the other's goods remains liable as a bailee for want of reasonable care, so the rule about accidental loss does not excuse negligence.

7. The Position Stated Shortly

The passing of property decides risk, the action for the price, insolvency, suits against third parties and often title.
Section 18: nothing passes in unascertained goods until they are ascertained.
Section 19: in specific or ascertained goods, property passes when the parties intend, and Sections 20 to 24 are presumptions of that intention.
Rugg v. Minett: property passed in the casks already filled, not in those still to be filled.
Section 23: unascertained and future goods pass on unconditional appropriation with assent.
Aldridge v. Johnson: filling the buyer's own sacks was such an appropriation.
Section 24 governs sale on approval; Section 25 allows the seller to reserve the right of disposal.
Section 26: risk follows property, subject to agreement, the fault proviso and the duties of a bailee.