Part 1: Who is responsible for damaged goods before delivery?

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Table of Contents

• The risk passes with the property
• What type of goods?
• What is the intention?
• Conclusion

You have just bought a new bike online and it is expected to ship in the next few days. While it’s on the dock, waiting to be loaded, a clumsy truck-driver reverses and crushes the bike. Can you ask the retailer for a replacement bike, or will you have to pay for a new one?

If a retailer provides you with damaged goods, you may have rights under the Australian Consumer Law (ACL) and you should refer to one of our articles on this issue. But the situation may be different if the goods are damaged when they are already yours. This article discusses when you will be considered the owner under a contract for the sale of goods.

The risk passes with the property

A key factor will be whether the property or title to the bike has been transferred to you at the time of the damage, or whether the property remained with the retailer. In general, goods will be at the seller’s risk until property is transferred to the buyer.

What type of goods?

To determine whether the property had been transferred to you, it will first be necessary to categorise the goods as specific or unascertained. Specific goods are goods that are identified and agreed on at the time of the contract – otherwise, goods will generally be unascertained. So, if you are buying the bike that Cadel Evans rode in the 2011 Tour de France, this is likely to be an example of specific goods. By contrast, if you are buying a “BIKE01” from an online catalogue, it is unlikely that this will be a specific and identified bike – and so it is likely to be an example of unascertained goods.

It is important to categorise the goods in this way because, as a general rule, property cannot pass until goods are ascertained.

What is the intention?

Assuming that the goods have been ascertained, the basic rule is that the property (and therefore the risk) will pass when the parties intended for it to pass. To identify the parties’ intention, the following factors are taken into account:

1. the terms of the contract;
2. the conduct of the parties; and
3. the circumstances of the case.

The first of these is often the most important, as many contracts for the sale of goods contain a provision that specifically states when the property is transferred from the buyer to the seller. So, if you bought your bike from a large online retailer, chances are the answer will be found in their standard form terms and conditions.

Where the parties’ intention is uncertain, there are default rules for determining when the property is transferred from the buyer to the seller. For instance, where there is an unconditional contract for the sale of specific goods in a deliverable state, the property passes when the contract is made – even if the buyer hasn’t paid and the goods have not been delivered. This means that Cadel’s bike could already be yours when it becomes damaged.

Conclusion

If you are involved in a dispute about the sale of goods, it is a good idea to talk to a lawyer about your options. At LegalVision, we have great experience helping our clients resolve commercial disputes, so give us a call on 1300 544 755.

This article is based on the law that applies in New South Wales. LegalVision can also assist if your issue relates to another jurisdiction. Contact us at 1300 544 755.