Ownership, Risk, and the Unexpected Loss of Goods
In our last post, we explored when legal ownership of goods passes from seller to buyer—and how that impacts who bears the risk if something goes wrong.
But what if the goods are destroyed before that ownership can even pass?
What if you ordered a large shipment of seasonal produce, and before anything was delivered, a fungal outbreak wiped out the crop?
Is the contract automatically cancelled? Or are you still liable to pay?
This is where things get complicated. In this post, we’ll break down what happens when goods perish—and how it matters whether the goods were specific, unascertained, or drawn from a known source.
1. Specific Goods That Are Already Lost (Section 6 SGA)
Let’s start with a rare but critical scenario.
Imagine you contract to buy a unique vintage guitar, serial number 177. Neither you nor the seller knew that, the night before, the storage facility was robbed and that exact guitar was taken.
Legally, this is a contract for specific goods—an individually identified item.
Since the guitar no longer existed at the time of the contract, and neither party knew, the law treats the contract as void from the start. That’s what Section 6 of the Sale of Goods Act says.
No fault, no damages—but also no sale.
2. Specific Goods That Perish After the Contract (Section 7 SGA)
Now, suppose the guitar was intact at the time of the sale—but gets destroyed in a freak fire before delivery, and before ownership has passed to you.
As long as the loss wasn't caused by either party’s fault, and the guitar is truly irreplaceable, the agreement is treated as frustrated: the contract ends automatically.
You don’t have to pay, and the seller doesn’t have to deliver. Neither party is at fault.
That’s the rule under Section 7 of the SGA.
But again, this only applies to specific goods—clearly identified and agreed upon at the time of the contract.
3. Unascertained Goods Perishing? No Excuses.
Things change completely when the goods aren’t yet identified—like “300 cartons of oat milk” or “5,000 nails”.
Here, Sections 6 and 7 do not apply.
So what happens if your supplier can’t deliver the oat milk because their factory flooded?
Unless your contract says otherwise, the seller is still on the hook. They must find another source or pay damages.
That’s the tough rule of commercial law: if the goods are generic and not yet set aside for you, the seller assumes the risk of non-availability.
4. Can You Limit This Risk by Naming a Source?
Yes—and this is where the law allows for more nuance.
Say you order “250 kg of organic lentils grown on Farm A, Plot B.”
If that specific field is destroyed by pests, and there's no lentils from anywhere else, courts may treat the contract as depending on a specific source, even if the goods themselves weren't yet physically separated.
If the source fails, the contract can be discharged, and the seller might avoid liability.
This isn’t automatic. Courts will look at your wording:
This subtle distinction is crucial when dealing with seasonal, agricultural, or location-based goods.
5. But What About Frustration?
Frustration is a broader legal doctrine: it applies when an unforeseen event makes the contract impossible or radically different to perform.
But courts are reluctant to apply it in sales cases—especially for generic goods—because the expectation is that businesses will plan for risks.
If you agree to supply solar panels from a region known for export bans, and an embargo hits, courts may say: “You assumed that risk.”
But if an event was truly outside anyone’s control—and not part of the risk either party agreed to take—frustration may still apply.
Just don’t count on it unless you’ve ruled out other protections.
6. Practical Takeaway: Force Majeure Clauses Save You
Rather than hoping frustration applies, smart contracts plan for uncertainty.
Use a force majeure clause that says something like:
“Neither party shall be liable for delay or failure if caused by events beyond reasonable control, including natural disasters, war, pandemic, or government restrictions.”
You can even tie this to specific sources:
“If the seller is unable to deliver due to crop failure on Farm B, the obligation shall be suspended.”
These clauses give you legal breathing room—without relying on courts to fill in the gaps.
Real Business Example
Let’s say a café chain in Denmark signs a deal to buy 1,000 kg of wild blueberries, harvested from a specific mountain region in Norway. The berries aren’t yet picked, but both parties agree on the location and harvest season.
Due to a sudden change in climate, that region experiences early frost and the berries rot before harvest.
Here’s what matters:
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The contract was for future goods from a clearly identified source.
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The harvest was impossible, through no fault of either party.
A court may treat the contract as frustrated, relieving both sides from further obligation.
But if the contract simply said “1,000 kg of wild blueberries” with no mention of source, the seller would likely have to find berries elsewhere—or pay damages.
Summary: Know Your Goods. Know the Risk.
When it comes to goods perishing or becoming unavailable:
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Specific goods lost before contract? → Contract is void (Section 6).
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Specific goods lost after contract but before delivery? → Contract is avoided (Section 7).
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Unascertained goods unavailable? → Seller is liable—unless contract limits this.
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Identified sources matter → Courts may imply a narrower obligation.
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Frustration is rare but real → Don’t rely on it—plan for it.
And most of all: if the source or supply chain matters to you, make it clear in the contract.
What happens if specific goods are already lost at the time of contract formation?
The contract is void from the start, and neither party is liable (Section 6 SGA)
The buyer must still pay even if the goods never existed
The seller can substitute similar goods from another source
If specific goods perish after the contract is made but before delivery, what is the legal effect?
The contract is frustrated, ending automatically; neither party is at fault (Section 7 SGA)
The buyer must accept delivery and pay full price anyway
The seller can replace the goods from unascertained stock
How does the law treat unascertained goods that perish before delivery?
The seller remains liable to deliver the goods or pay damages unless the contract explicitly limits this risk
Unascertained goods automatically void the contract if lost
The buyer automatically assumes ownership and risk
How can businesses limit risk of loss for future or source-specific goods?
Include force majeure clauses and clearly specify sources or conditions in the contract
Rely on frustration automatically applying without specifying it in the contract
Ignore specifying sources and trust suppliers to manage risks
