Transfer of ownership and risk of goods from seller to buyer, governed by Sections 19–26 of the Sale of Goods Act 1930, covering when title passes and how goods are delivered.
## Core concept
Transfer of title (ownership) and transfer of risk are two separate events in a sale of goods contract.
- Title = ownership right; passes when parties intend it to pass (often before physical delivery).
- Risk = responsibility for loss/damage; generally follows title, but can be separated by agreement.
- The Act presumes when title passes unless parties agree otherwise (Sections 19–20).
- Once title passes, the buyer becomes the owner even if goods are not yet received.
### Key distinction: Title vs. Risk | Aspect | Title | Risk | |--------|-------|------| | What is it? | Ownership; legal right to use/sell goods | Responsibility for loss/damage | | When? | As per Section 19–20 (unless agreed) | Follows title (unless agreed) | | Effect | Buyer can sue on title; has ownership rights | Buyer bears financial loss if goods lost/damaged |
## Formula / rule
Section 19: Title passes when parties intend it to pass. Intention is determined from: 1. Contract terms (explicit agreement). 2. Conduct of parties. 3. Circumstances of case.
Section 20: When no intention is declared, title passes:
- Specific goods in deliverable state → title passes when contract is made (before delivery).
- Specific goods requiring work/testing → title passes when work/testing is done and buyer notified.
- Goods sent on approval or "sale or return" → title passes when buyer:
- - Signifies approval, OR
- - Retains goods beyond agreed time (or reasonable time if none agreed), OR
- - Does any act adopting the transaction.
- Unascertained/future goods → title passes when goods are unconditionally appropriated to the contract with buyer's consent (express or implied).
Section 21: Risk passes with title (risk follows title), unless otherwise agreed.
## Common exam applications
Scenario 1: A buyer orders 100 sacks of sugar from a seller. The sugar is identified and set aside. Title passes when the contract is made (Section 20(1)). If the warehouse burns down before delivery, the buyer must still pay because they now bear the risk.
Scenario 2: A seller delivers goods on "approval." The buyer keeps them for 2 weeks without approval/return. Title passes by operation of time (Section 20(3)(c)). Buyer is now responsible for any loss.
Scenario 3: Raw materials are ordered. The seller must process and test them before dispatch. Title passes only after testing is complete and buyer is notified (Section 20(2)).
## Common mistakes
- Confusing delivery with transfer of title. Goods can be delivered to a carrier; title may have already passed. Buyer then bears risk during transit.
- Assuming risk always passes with title. Section 21 allows parties to agree that seller retains risk even after title passes (e.g., "risk remains with seller until goods reach your warehouse").
- Forgetting "unconditional appropriation." For unascertained goods, title doesn't pass just because goods are selected; they must be appropriated unconditionally (Section 20(4)).
- Misunderstanding "approval" sales. If buyer retains goods beyond reasonable time, title passes even without explicit approval (Section 20(3)(c)).
## Related section checklist
- Section 18: General rules (presumptions about transfer).
- Section 22: Effect of lien on title (unpaid seller retains lien but not title).
- Section 24–26: Rights of unpaid seller (stoppage in transit, resale).