The passing of ownership and risk 189be returned to the seller. Where goods are delivered on approval, sale or return or other
similar terms, then the ownership passes to the buyer in the following circumstances:
(i) When the buyer signifies approval.
(ii) When the buyer does an act which adopts the transaction (an act which would prevent
the buyer from returning the goods to the seller, such as selling the goods on to another
buyer or consuming the goods).
(iii) When the buyer keeps the goods for longer than a time limit fixed by the contract.
(iv) If no time limit is fixed by the contract, when the buyer keeps the goods for more than
a reasonable time.
Example
Simon delivers goods to Brian, a shopkeeper, on sale or return. Brian sells the goods to a
customer. This is an act adopting the transaction. Therefore, the ownership passed to Brian
as soon as the goods were sold on. Brian then immediately passed ownership to the
customer under s. 18 Rule 1.Risk, mistake and frustration
We have already seen that s. 20(1) of the SGA 1979 provides that, unless the parties have
agreed otherwise or s. 20(4) applies, the risk passes from the seller to the buyer at the same
time as ownership of the goods passes.
Section 6 mistake
Section 6 provides that where there is a contract for the sale of specific goods, and the goods
without the knowledge of the seller have perished at the time when the contract is made,
the contract is void. Goods will have perished if they are stolen, damaged or destroyed.
Goods will also be regarded as having perished if they become damaged to the point where
they can no longer be regarded as the same thing, in a business sense, as the goods which
were sold.
Example
Sally agrees to sell a combine harvester (specific goods) to Bhavesh. Unknown to Sally, the
combine harvester had been destroyed in a fire half an hour before the contract was made.
The contract is rendered void by s. 6. Therefore, Sally will have no obligation to deliver
the goods and will not be in breach of contract for failure to do so. Bhavesh will have no
obligation to pay the price and can recover any amount of the price already paid.Section 7 frustration
Section 7 provides that where there is an agreement to sell specific goods and subsequently
the goods, without any fault on the part of the seller or buyer, perish before the risk passes
to the buyer, the agreement is avoided.
There are several points to notice about this section:
(i) The perishing of the goods must not be the fault of the buyer or the seller. If it is the
fault of either party, that party will bear the loss.