Sales on Credit

The fact that a sale is made on credit does not affect the passing of title or risk of loss. A credit sale is simply a sale, which, by arrangement of the parties, calls for payment for the goods at a later date. Ownership and risk of loss may pass even though the time of payment or delivery is delayed.

COD Sale

Goods are often shipped COD, which means, “collect on delivery”. The carrier collects the price and transportation charges upon delivery and transmits this amount to the seller. If the buyer does not pay, the goods are not delivered. Thus, in effect, the seller retains control over the possession of the goods until the price is paid. In a COD arrangement, the buyer loses the right otherwise available to inspect the goods before payment.

Sale or Return

When goods are delivered to a merchant buyer in a sale or return, the ownership and risk of loss pass to the buyer upon delivery. This is true whether the sale is made for cash or on credit. However, the buyer has a right to return the goods to the seller. Such a transaction is a true sale, but if the buyer returns the goods within the fixed or a reasonable amount of time, ownership and risk of loss pass back to the seller. The returned goods must be in their original condition.

5 Sale on Approval (Try &Buy)

Sometimes goods are delivered to the buyer in a sale on approval, “on trial”, or “on satisfaction”. In such a case prospective ownership and risk of loss do not pass until the prospective buyer approves of the goods. This may be done by words, by payment, by any conduct indicating approval, or by retention of the goods beyond a specified or reasonable time. While in possession of the goods, of course, the prospective buyer is liable for any damage to them caused by his or her negligence. Normally the prospective buyer may reject for any reason.