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Summary Sale of Goods- Passing of property and risk
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Summary of 6 pages for the course Commercial Law at QMUL
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Passing of property and riskThe main purpose of a contract of sale of goods is to transfer property in the goods from the
seller to the buyer.
The parties to a contract of sale of goods are, subject to certain rules, free to agree the
terms as to the transfer of property and of risk.
The SGA is concerned with ownership not with possession. Two different concepts.
Sometimes a transfer of ownership in the goods will occur at the same time as their physical
delivery but this is not necessary.
Why is it important to know when the property in the goods passes?
1) Payment: unless otherwise agreed, the seller may only sue the buyer for the price
once property in the goods has passed to the buyer. S.49 SGA
2) Insolvency: If either the seller or the buyer becomes insolvent, then the rights of the
non-insolvent party may depend on whether or not the property in the goods has
passed to the buyer.
3) Subsequent transfer of ownership: unless the buyer has acquired ownership in the
goods he cannot transfer that ownership to another party. (Subject to exceptions)
4) Risk: unless otherwise agreed, risk is borne by the owner of the goods. S.20 SGA
Risk means the risk of theft, loss, or damage to the goods, but not risk of non-
payment.
Crucial to know whether the goods in question are specific or unascertained because the
point at which property passes will depend on the distinction.
S.16: no property in the goods can be transferred to a buyer unless and until the goods are
ascertained.
The transfer of property in specific goods
s.17(1) SGA provides that property in specific or ascertained goods will transfer to the buyer
when the parties to the contract intend it to pass.
For the purpose of ascertaining the intention of the parties, regard shall be had to the terms
of the contract, the conduct of the parties, and the circumstances of the case s17(2).
- Re Anchor Line (Henderson Bros) Ltd [1937]: held: s18 applies only ‘unless a
different intention appeared’ and on a proper construction of the contract a
different intention did appear, that property in the crane should not pass until the
purchase was completed by payment of the entire price. Consequently, Liquidator
was bound to pay the balance of the price due to the seller.
- It is the intention of the parties at the time of making the contract that is important,
not their subsequent intention.
- Where the parties fail to make clear their intentions as to when the property in the
goods will be transferred to the buyer, it is necessary to consider the rules in s.18.
The Statutory presumptions — (s 18)
These are no more than prima facie presumptions of the intentions of the parties which may
be rebutted by evidence; they are not rules of law.
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