Dispatch can precede transfer of property
Section 25 of the Sale of Goods Act, 1930 allows a seller to reserve the right of disposal until stated conditions are met, by the terms of a contract for specific goods or the terms on which goods are subsequently appropriated. Section 23’s carrier-delivery rule on deemed appropriation applies where the seller does not reserve that right. Where the right is reserved, delivery to a buyer, carrier or other bailee for transmission does not of itself transfer property before fulfilment. The inquiry concerns ownership of the identified goods; contractual risk, accounting control, collection rights and remedies must be assessed separately.
Read the applicable text: Sale of Goods Act, 1930, sections 23–26.
Identify the goods and the operative condition
Trace the signed contract and the terms of appropriation to the exact serials, lots or containers shipped. Identify what releases title: for example cleared payment, or acceptance of a bill where the agreement expressly makes acceptance sufficient. A payment promise, unallocated receipt or scanned document is insufficient evidence of a different stipulated condition. Review amendments and subsequent conduct for any waiver or variation.
Read the transport document under subsection (2)
A bill of lading or railway receipt made deliverable to the order of the seller or the seller’s agent gives prima facie evidence that disposal was reserved. Preserve the document, consignee and endorsement chain. The inference is rebuttable and does not settle third-party rights. A buyer-named document does not itself rule out reservation established by contract under subsection (1).
Follow the bill and document trail under subsection (3)
Where the seller draws on the buyer and sends the bill of exchange with the bill of lading or railway receipt to secure acceptance or payment, a buyer who does not honour the bill must return the transport document. If the buyer wrongfully keeps it, property does not pass on that basis. Retain the bank collection instruction, presentation and dishonour advice and document-return trail.
Reconcile in batches before closing
For each shipment record the condition, its scope, money credited, release authorisation, and title conclusion. A partly paid invoice does not produce a pro rata transfer unless the operative terms support lot-by-lot release. Where a third party acquired a document or claims competing rights, get a separate title and priority assessment before seeking recovery.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Entire lot conditional on cleared payment
A seller ships 80 machines at ₹12,000 each, with title reserved for the entire shipment until ₹9,60,000 clears. ₹7,20,000 clears by cut-off. The shortfall is ₹2,40,000; on the stated terms title remains reserved over all 80.
Illustrative example 2: Documented lot-by-lot release
Lot A is 30 units at ₹8,000 and Lot B is 20 at ₹9,000. Only the separately allocated ₹2,40,000 for A clears. Under the independent lot conditions A is released; the ₹1,80,000 B lot stays reserved.
Illustrative example 3: No double count of deposit
An invoice totals ₹6,00,000. A ₹1,50,000 credited deposit and ₹4,00,000 cleared later settlement are the only credits. ₹50,000 remains due and the full-payment title condition remains unmet.
Illustrative example 4: Acceptance is the stipulated condition
A ₹7,50,000 lot is dispatched against a bill whose valid acceptance is stipulated to release title. The buyer validly accepts it; ₹7,50,000 remains unpaid until maturity, but the agreed title condition has been met, assuming no other restriction.
Illustrative example 5: Dishonour and retained document
A bill for ₹8,40,000 secures payment under a full-payment reservation. A ₹40,000 cleared credit allocated to the trade balance, not to the bill, reduces the trade balance to ₹8,00,000; it does not honour the bill. The buyer wrongfully keeps the bill of lading after dishonour. On these facts there is no transfer of property under section 25(3).
Illustrative example 6: Clearance after cut-off
For 45 units at ₹15,000, ₹6,75,000 is required in cleared funds. Transfer is initiated on 31 March and clears on 2 April. Clearance occurs two calendar days after initiation. Initiation does not establish title passage on 31 March; the full ₹6,75,000 lot remains reserved at that cut-off.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the signed terms | Contract and subsequent amendments. |
| 2 | Identify the goods affected | Serials, batch IDs and appropriation evidence. |
| 3 | Read scope and trigger of reservation | Whole order or separate lot terms. |
| 4 | Verify physical handover | Dispatch and delivery documents. |
| 5 | Inspect transport document wording | Consignee, order wording and endorsements. |
| 6 | Review any documentary collection | Bill, collection instructions and bank evidence. |
| 7 | Test fulfilment at cut-off | Cleared credits or accepted bill as required. |
| 8 | Quantify affected lots and unpaid amounts | Cash and goods reconciliation by shipment. |
| 9 | Record risk, accounting and third-party issues separately | Contract and specialist review. |
| 10 | Archive the release or unresolved exception | Dated authorisation and document control. |
Sixteen practitioner FAQs
1. Does section 25 apply only to goods identified at signing?
No. It can also apply to goods later appropriated to the contract.
2. Does carrier delivery transfer title despite an operative reservation?
No. Check whether the reserved condition was fulfilled.
3. Is a reservation clause the same as a risk clause?
No. Assess the agreed risk position separately.
4. Must a bill of lading be to the seller’s order to reserve title?
No. The contract or appropriation can also establish reservation.
5. What is the effect of a seller-order document?
It supports a prima facie inference under subsection (2).
6. Does a buyer-named document prove title passed?
No. Read the contract and other evidence.
7. Does partial payment release a proportional number of goods?
Only if the governing terms and allocation support separate release.
8. What if acceptance rather than payment releases title?
Test whether acceptance occurred and whether any other condition applies.
9. What if the buyer retains the transport document after dishonour?
Subsection (3) requires return and addresses wrongful retention without passage of property.
10. Can a bank transfer screenshot prove cleared payment?
Verify actual value and allocation with the bank.
11. How should a credited deposit be handled?
Apply it once against the supported balance.
12. Can the ledger recognition date prove ownership?
No. Establish the contractual and statutory facts separately.
13. Can a title reservation resolve all third-party claims?
No. Competing rights and documents require separate review.
14. Does later clearance change the prior cut-off evidence?
Retain both dates and use the condition applicable at the earlier cut-off.
15. Can an emailed release vary the result?
Review authority, operative terms and the effect of the communication.
16. What should be retained if transport documents are held by a bank?
Keep copies, bank instructions, presentation records and evidence of release or return.