Understanding when ownership transfers is critical under the Sale of Goods Act, as risk of loss follows ownership.
1. Caveat Emptor (Section 16)
The Latin maxim "Caveat Emptor" means "Let the buyer beware." In a contract of sale, there is no implied warranty or condition as to the quality or fitness of goods. The buyer must examine and satisfy themselves.
Exceptions where the Seller is liable:
- Where the buyer makes known the purpose, relying on the seller's skill/judgment, and the seller deals in such goods.
- Where goods are bought by description from a dealer (implied condition of merchantable quality).
- Where the seller actively conceals a defect or commits fraud.
2. Passing of Property (Transfer of Ownership)
- For specific or ascertained goods, ownership passes to the buyer when the parties intend it to pass (Section 19).
- For unascertained goods, ownership cannot pass until the goods are identified and unconditionally appropriated to the contract (Section 18 & 23).
- Risk Follows Ownership (Section 26): Unless otherwise agreed, the goods remain at the seller's risk until ownership is transferred to the buyer. Once ownership passes, the goods are at the buyer's risk, regardless of whether delivery has occurred.
3. Sale by Non-Owners (Nemo Dat Quod Non Habet)
The general rule is that no one can transfer a better title than he himself possesses. Exceptions where a non-owner can pass a valid title:
- Sale by a joint owner, mercantile agent, or person in possession under a voidable contract before rescission (Section 29).
- Sale by a seller in possession after sale (Section 30(1)).