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Section 86: Sections 76 to 123 [Repealed by the Indian Sale of Goods Act, 1930]

Indian Contract Act • Official Statutory Text & Practice Guide

Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1872
Section 85 All 266 Sections of Indian Contract Act Section 87

Legal Commentary & Landmark Judgments: Section 86

Section 86 of the Indian Contract Act, 1872 originally codified the cardinal rule of risk following property (res perit domino), providing that goods remain at the seller's risk until ownership passes, after which they are at the risk of the buyer; repealed by Act 3 of 1930 and succeeded by Section 26 of the Sale of Goods Act, 1930.

  • Statutory Maxim of Res Perit Domino: Established the baseline legal rule that risk of accidental loss, damage, or destruction follows title: goods remain at seller's risk until property passes, and at buyer's risk once property is transferred.
  • Independence of Risk from Physical Possession: Risk transfers with ownership irrespective of whether physical delivery has taken place, unless the contract or trade custom decouples risk from title.
  • Legislative Repeal and Modern Succession (Act 3 of 1930): Repealed by Act 3 of 1930 and re-enacted as Section 26 of the Sale of Goods Act, 1930, which retains the rule while explicitly providing that parties may contract out through Incoterms or express risk-allocation clauses.
Key Landmark Precedents:
  • Multichannel (India) Ltd. v. Union of India AIR 2001 Del 411: The Delhi High Court applied Section 26 of the Sale of Goods Act (the successor to Section 86 Contract Act), holding that risk follows ownership unless the contract explicitly separates risk from title via trade terms like CIF or FOB.
  • Agricultural Market Committee v. Shalimar Chemical Works Ltd. (1997) 5 SCC 516: The Supreme Court reaffirmed that in contracts for sale of goods, risk of loss in transit passes to the buyer the moment property in the goods transfers under the contract terms.
Courtroom Practice & Strategic Litigation Guidance:

In international and domestic sales agreements, never rely on default statutory risk rules. Incorporate standard Incoterms 2020 (CIF, CIP, FOB, Ex-Works) or express risk clauses. If representing a seller whose goods were destroyed in warehouse after ownership passed, plead Section 26 SGA (succeeding Section 86) to compel the buyer to pay the full price under the maxim res perit domino.

Section 85 All 266 Sections of Indian Contract Act Section 87