Begin with contract, title and incident times
Section 26 of the Sale of Goods Act, 1930 generally places accidental loss on the seller before ownership passes and on the buyer after ownership passes, even if delivery has not yet occurred. Parties can agree a different risk rule. The section separately addresses loss attributable to delivery delay through fault and preserves obligations where a party holds the other's goods as bailee.
Read the applicable text: Sale of Goods Act, 1930, sections 18–26 and 39–40.
Build a transaction timeline
Record the contract and amendments, identification of the affected goods, the title event, tender or collection date, physical delivery, and incident time. Apply sections 18–25 to the particular goods. Property in unascertained goods cannot pass before they are ascertained. For specific or ascertained goods, determine the parties’ intention from the contract, conduct and circumstances; sections 20–24 provide default rules where applicable. Do not treat an invoice, possession, carrier handoff, payment or ledger entry as conclusive by itself. A reserved right of disposal can affect title even where goods are already in transit.
Read the risk clause independently
A destination risk clause may keep risk with the seller after title passed. Identify the agreed handover event and any incorporated terms. Check whether clauses for different shipments or instalments use different triggers. Compare the facts against the actual trigger, such as delivery at a named place, rather than a label used by a dispatch team. If the seller sends goods, check section 39 for when carrier handover counts as delivery and for its separate carriage and sea insurance rules. If delivery is agreed at a distant place at the seller’s risk, section 40 leaves deterioration necessarily incident to transit with the buyer unless agreed otherwise.
Isolate the effect of fault in delay
The first proviso applies where the fault of buyer or seller delayed delivery, to the loss that might not have occurred but for that fault. Compare the affected goods and the counterfactual timely delivery. Preserve tender notices, refusal reasons, transport windows, condition reports and evidence of where the goods would have been. An unrelated loss does not shift simply because a delay occurred.
Keep custody and recovery separate
Section 26 leaves bailee duties and liabilities intact. Identify the capacity in which a party held the goods and document storage, handling and incident response. Maintain separate columns for risk allocation, possible custody breach and insurance or carrier recoveries. A risk allocation is not itself a damages award or a decision about insurance coverage.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Damage before transfer
Of 100 items, 20 worth ₹3,000 each are accidentally destroyed before ownership passes. There is no contrary term or fault. The default risk allocates ₹60,000 to the seller.
Illustrative example 2: Title before physical delivery
Ownership has passed on the facts, but the seller still holds the items. Accidental damage to 12 items at ₹4,000 each gives ₹48,000 on the buyer's default risk, subject to any distinct custody claim.
Illustrative example 3: Contractual destination risk
Title passes at dispatch, but agreed risk passes only at delivery at the buyer's depot. Transit damage to 8 units at ₹5,500 gives ₹44,000 on the seller's risk under the agreed term. Assume the damage is accidental and the destination clause governs it. Any claim against the carrier is a separate question.
Illustrative example 4: Seller fault causes incremental damage
Title passed. The seller's culpable delay is established. Of ₹90,000 of physical damage, the evidence isolates ₹55,000 that might not have arisen on timely delivery. Assume the balance would have occurred anyway. The proviso puts the ₹55,000 on the seller, leaving ₹35,000 on the ordinary risk allocation.
Illustrative example 5: Buyer fails to collect
Title has not passed, but the buyer wrongfully fails to collect at the agreed time. A later flood destroys 25 units worth ₹2,000 each. On timely collection, 19 would have been removed to a location unaffected by the flood and the other six would still have been destroyed. On these stipulated facts ₹38,000 is attributable to delay; the remaining ₹12,000 stays with the seller under the default rule.
Illustrative example 6: Separate insurer proceeds
A ₹72,000 incident falls on the buyer's agreed risk. The insurer pays ₹50,000 under its policy. The buyer's cash shortfall before any other recovery is ₹22,000. The payment does not alter who bore risk at the incident.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Collect operative terms | Signed order, standard terms and amendments. |
| 2 | Identify the damaged goods | Serial numbers, segregated stock and packing list. |
| 3 | Find the property transfer point | Appropriation, approval or reservation evidence. |
| 4 | Determine the risk trigger | Contractual clause or statutory default. |
| 5 | Establish the physical handover time | Carrier record, delivery receipt or warehouse log. |
| 6 | Test who caused any delay | Tender, collection instructions and refusal correspondence. |
| 7 | Link particular losses to delay | Survey, location history and timely-delivery comparison. |
| 8 | Check custody separately | Handling records and any bailment terms. |
| 9 | Quantify damage and credit recoveries separately | Survey valuation, salvage and insurer statements. |
| 10 | Approve the risk and claims file | Signed legal and operations reconciliation. |
Sixteen practitioner FAQs
1. Is section 26 limited to goods in transit?
No. It can apply to loss before dispatch or while goods await handover.
2. Does possession equal ownership?
No. Determine the property transfer event independently.
3. Does title always fix risk?
It is the default, subject to the agreement and applicable provisos.
4. Does advance payment fix ownership?
Payment is evidence of the transaction, but the property rules and terms control.
5. What if title is reserved until a condition is met?
Check whether the condition was met when loss occurred.
6. Can risk pass at delivery while title passes earlier?
Yes, if the parties agreed that allocation.
7. Should an invoice date drive the incident log?
Record it, but separately capture the contractual and actual event times.
8. Does any late delivery shift all loss?
No. Establish fault and identify loss that might not have occurred without the delay.
9. Can a buyer bear delay loss before acquiring title?
Yes, where the statutory fault and causal conditions are satisfied.
10. Does a storm excuse all responsibility for delay-related loss?
The weather event does not answer whether timely delivery would have avoided the damage.
11. What if no one caused delay through fault?
Apply the contract or ordinary risk rule, absent other relevant facts.
12. Does seller custody keep risk with the seller automatically?
No. Analyse risk and any bailee obligations separately.
13. Can the buyer assert mishandling after risk passed?
Passing of risk does not remove a separate bailee duty or liability.
14. Who pursues the insurer?
Determine rights under the relevant policy and any assignments; section 26 does not decide that.
15. What if different shipments have different delivery terms?
Reconcile the particular damaged lot against its own terms.
16. Does the risk worksheet determine damages payable?
No. Assess breach, remedies and available recoveries on their own facts.