Risk prima facie passes with the property

The phrase "Risk prima facie passes with the property" is a fundamental rule in the law of sales, codified under Section 26 of the Sale of Goods Act, 1930. In legal terminology, "property" refers to ownership, and "risk" refers to the liability for any loss or damage to the goods.

The rule establishes that, unless otherwise agreed, the person who owns the goods bears the loss if they are damaged or destroyed, regardless of who has physical possession.

1. The General Rule (Section 26)

The goods remain at the seller’s risk until the "property" (ownership) therein is transferred to the buyer. Once ownership passes to the buyer, the goods are at the buyer's risk, whether delivery has been made or not.

• Owner bears the loss: If the goods are destroyed by an accident or act of God, the owner must suffer the financial loss.

• Possession is irrelevant: If I buy a bike and the ownership is transferred to me, but I leave it at the showroom for a day, and the showroom burns down, the loss is mine because I am the owner.

2. Two Crucial Exceptions

The rule "Risk follows Ownership" is not absolute. There are two major exceptions where risk and ownership stay separated:

A. Delay in Delivery (Proviso to Section 26)

If delivery of the goods has been delayed through the fault of either the buyer or the seller, the goods are at the risk of the party at fault regarding any loss which might not have occurred but for such fault.

• Example: A seller is ready to deliver a cake, but the buyer asks to postpone for two days. If the cake spoils during those two days, the buyer bears the loss because the delay was their fault.

B. Duties of a Bailee

Even if the risk has passed to the buyer, the seller (if still in possession) acts as a bailee. They must take "reasonable care" of the goods. If the goods are damaged due to the seller’s negligence while they are still holding them for the buyer, the seller remains liable.

3. Main Distinctions in Application

Situation	Who has Ownership?	Who bears the Risk?
Goods in Seller's Warehouse	Seller	Seller
Goods sold, but not yet delivered	Buyer	Buyer
Goods delayed by Buyer's request	Buyer	Buyer (even for accidental loss)
Goods damaged by Seller's negligence	Buyer	Seller (due to breach of care)

4. Why this Rule is "Prima Facie"

The term "prima facie" means "at first sight" or "unless the contrary is proved." This implies that the parties are free to enter into a contract that separates risk from ownership.

• Contractual Overrides: Parties can agree that the risk will pass only upon physical delivery, even if the ownership has already passed.

• Conditional Risk: In international trade (like CIF or FOB contracts), specific terms often dictate exactly when the risk shifts from the exporter to the importer, regardless of when the title (ownership) is transferred.