When two parties engage in a contract of sale, the passing of risk is a crucial element to consider. It refers to the point in time where the responsibility for loss or damage to the goods being sold shifts from the seller to the buyer. Understanding the passing of risk is essential to protect the rights and interests of both parties, especially when dealing with valuable or fragile items.

The passing of risk is determined based on the terms and conditions of the contract of sale. In some cases, the contract may specifically state when the risk passes, while in others, it may be implied by the circumstances surrounding the transaction. Generally, there are two main approaches to determining the passing of risk, namely the delivery-based approach and the agreement-based approach.

Under the delivery-based approach, the risk passes to the buyer when the goods are delivered to them. This means that the seller remains responsible for the goods until they are handed over to the buyer. It is important to note that delivery does not necessarily mean physical possession. For instance, if the contract stipulates that the goods should be delivered to a specific carrier, the risk passes to the buyer once the carrier takes possession of the goods, even if the buyer has not yet received them.

In contrast, the agreement-based approach looks at when the parties have agreed that the risk will pass. This may be based on specific terms in the contract, such as the point of shipment or the location of the goods. The parties may also agree on conditions that trigger the passing of risk, such as payment of the purchase price or notification of the buyer`s acceptance of the goods.

It is important for both sellers and buyers to clearly understand when the passing of risk occurs. This can help to avoid disputes and ensure that both parties are adequately protected. For example, the buyer may want to ensure that insurance coverage is in place before the risk passes to them, while the seller may want to take steps to minimize the risk of loss or damage during transit.

In conclusion, the passing of risk is a critical component of a contract of sale. It determines when responsibility for loss or damage to the goods being sold shifts from the seller to the buyer. Understanding the passing of risk requires a careful analysis of the terms of the contract and the circumstances surrounding the transaction. By doing so, sellers and buyers can protect their interests and ensure a smooth and successful sale.