Risk follows property. Explain this concept and state the exceptions.
Property in goods means ownership or proprietory right over the goods. According to Section 26 of Sale of Goods Act, goods are at the risk of the person in whom the property in the goods vests. In other words, the loss is to-be borne by the owner. It means that whether the delivery of goods has been made or not is not the deciding factor when the loss to the goods occurs.
It is the ownership of the goods which will be the deciding factor when the loss to the goods occurs. Section 26 of Sale of Goods Act reads “Unless otherwise agreed the goods remain at the seller risk until the property therein is transferred to the buyer, but when the properly therein is transferred to buyer, the goods are at the buyer’s risk whether delivery has been made or not.”
Section 26 of Sale of Goods Act lays down the general rule that risk and property generally go together. However, there are certain exceptions to the general rule and have been mentioned in the Section 26. It means that under following cases, the loss may have to be borne by the person other than owner.
According to Section 26, the parties to the contract may express their intention which is contrary to the above stated concept. The parties may agree that though the property has not passed and seller is still the owner of goods, but the loss or damage to goods, if any will have to be borne by the buyer or vice-versa. For example, the motor of a car deposited the same with the keeper of a garage for sale on commission basis.
One of the terms of the agreement was that the same was to be on customer’s risk. The car was damaged by the garage-keeper’s servant, but the keeper would not bear the loss due to clause in the agreements.
Sometimes “risk” and property may be separated by a trade custom. For example, certain clothes were delivered to a buyer on approval basis. The custom of the cloth trade was that the goods were at the risk of the person ordering them on approval. Clothes were stolen before the time of approval expired. The loss shall be borne by the buyer although the property has not yet passed.
Delay in Delivery of Goods:
The first proviso to Section 26 provides that “if the delivery of goods has been delayed due to the fault of either the buyer or seller and there has occurred some loss to the goods due to such a delay the party at fault has to bear the loss.” Here fault means default or wrongful act. To make a party liable under this proviso it has to be shown that the delay in delivery of goods was due to his fault and also three was a casual connection between the fault and loss to the goods.
Seller or Buyer as Bailee of the Goods:
The second proviso to Section 26 provides that “the seller or buyer may not be the owner of goods, but if he is in their possession, he may be responsible in his capacity as the bailee. Thus, if the seller negligently allows the goods to be lost damaged or stolen, he will be liable for the loss even though the buyer is owner of such goods.”