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Passing of Risk in a Contract of Sale South Africa

When negotiating a contract of sale in South Africa, it is important to pay close attention to the provisions regarding the passing of risk. While it may not seem like a significant issue at first glance, the passing of risk can have a significant impact on both the buyer and the seller.

In a contract of sale, the passing of risk refers to the moment when the responsibility for any loss or damage to the goods being sold shifts from the seller to the buyer. This is an important consideration as it determines who will bear the financial burden if the goods are lost, damaged or destroyed.

In South Africa, the passing of risk is governed by the Sale of Goods Act, which specifies the default position regarding risk transfer. According to the Act, risk will pass to the buyer as soon as the goods are delivered to them, regardless of whether payment has been made or not.

However, the parties to a contract of sale are free to agree to a different arrangement regarding the passing of risk. This is typically done through a well-drafted set of terms and conditions, which clearly set out the specific obligations of each party.

One of the most common ways to alter the default position regarding the passing of risk is to include a provision specifying when risk will pass from the seller to the buyer. This may be linked to a specific event, such as when the goods are loaded onto a truck for delivery, or when they are unloaded at the buyer`s premises.

Another way to shift the risk is by including a provision which requires the buyer to take out insurance cover for the goods during transit. This ensures that any loss or damage during transportation is covered by the insurance policy, rather than being the responsibility of the seller.

It is important to note that the passing of risk is distinct from the passing of title, which refers to the transfer of ownership of the goods being sold. While the two concepts are related, they are separate issues that must be dealt with separately in the contract of sale.

In conclusion, the passing of risk in a contract of sale is a crucial consideration for both buyers and sellers in South Africa. By clearly specifying the terms of risk transfer in the contract, parties can avoid costly disputes and ensure that their financial interests are protected. If you are entering into a contract of sale, it is recommended that you seek the advice of an experienced attorney to ensure that the agreement meets your specific needs and requirements.

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