Who bears the loss if goods are damaged during transport?

Loss of or damage to goods during transportation in Pakistan is allocated according to the sale contract, the law governing passage of property and risk, the carrier agreement and any applicable insurance. It is not invariably the seller's responsibility until the buyer physically receives the goods, nor does handing a shipment to a courier automatically transfer every risk to the buyer. The correct answer depends on agreed delivery terms and the relevant provisions of the Sale of Goods Act, 1930.

Section 26 of the Sale of Goods Act generally connects risk with the passage of property unless the parties agree otherwise, while recognising liability where delivery is delayed through a party's fault. Sections 39 and 40 address delivery to a carrier and goods sent to a distant place. For international shipments, clearly agreed Incoterms and chosen law may materially change the allocation.

Read the risk-of-loss clause first

Identify whether the contract calls for delivery at the seller's warehouse, delivery to a carrier, arrival at the buyer's depot or completed installation and acceptance.

Risk transfer, transfer of property and payment may occur at different times if the contract validly provides.

A purchase order saying "delivery included" does not always identify the precise moment risk changes hands.

Section 26 and passing of risk

Section 26 states a default framework under which goods remain at the seller's risk until property in them is transferred to the buyer, unless otherwise agreed.

Where ownership has passed, the risk may follow despite goods being physically elsewhere, subject to the statute and specific circumstances.

The lawyer must therefore examine when property passed under sections 18–25 and what the parties agreed regarding transit.

Unascertained goods

Goods selected from a general warehouse may not become identified to a particular contract until appropriation or another relevant event under the Act.

A buyer of fifty units from a stock of hundreds may occupy a different legal position before the seller selects and identifies the shipment.

Documentation of serial numbers, packing lists and shipment identification can determine whether the relevant property passed.

Goods delivered to a carrier

Section 39 addresses situations where goods are delivered to a carrier for transmission to the buyer and the conditions under which that delivery is treated as delivery to the buyer.

The seller may have obligations concerning a reasonable contract with the carrier or notice needed for insurance arrangements, depending on the statutory circumstances.

Simply showing a courier receipt is not always the complete defence to a damaged-goods claim.

Seller-controlled delivery

Where the seller undertakes delivery at the customer's site, the contract may keep transit risk with the seller until arrival or acceptance.

The seller should purchase appropriate transit insurance and maintain tracking and proof of delivery.

A buyer should not be required to pay for an unusable shipment merely on the basis of a dispatch record if the agreed delivery obligation remained unperformed.

Buyer-appointed carrier

Where the buyer selects and contracts with the carrier and risk passes at collection under the contract, the buyer may need to pursue the carrier or insurer.

The seller still should pack and hand over the agreed goods properly. Damage resulting from defective packaging can involve separate liability.

Documentation should identify who appointed the carrier and the condition of goods when collected.

Incoterms in international trade

Incoterms such as FOB, CIF, FCA or DDP can allocate delivery responsibilities, cost and risk if incorporated correctly and interpreted under the chosen rules.

For example, an agreed CIF term may require the seller to arrange insurance while risk can pass at a different stage than payment for freight.

The parties should state the exact Incoterms edition and named location rather than use initials without context.

Distinguish risk from title

The party bearing transit risk is not necessarily the party who has already paid, and title clauses may operate separately.

Retention of title can protect a seller's ownership position in some circumstances, subject to law and the contract.

A statement that title passes only on full payment does not automatically answer all questions of transit risk where the agreement allocates risk independently.

Delay caused by one party

Section 26 recognises consequences where delivery is delayed through fault. The party responsible for the delay may bear losses that would not otherwise fall on it.

A buyer who refuses a properly tendered delivery without justification may face a different allocation from a seller who misses a mandatory dispatch deadline.

The cause of damage, not merely the calendar date, can matter.

Carrier liability

A carrier may be responsible under its own contract and applicable carriage legislation, subject to lawful limitations and evidence.

The cargo owner should obtain the booking record, carriage terms and proof of mishandling.

A claim against a carrier does not necessarily extinguish the buyer's or seller's contractual claim against the other party; avoid double recovery.

Insurance claims

Cargo or transit policies can respond to defined perils, subject to exclusions, excesses, valuation and claims conditions.

A damaged shipment should be documented before repair, disposal or repacking where feasible.

Prompt notice to the insurer and surveyor may preserve coverage, while delay can complicate proof.

Packaging and inspection

Take photographs of packaging before dispatch, record seals and serial numbers and use suitable containers for fragile goods.

On arrival, note external damage on the receipt where possible and arrange a consistent inspection report.

The buyer should not destroy goods or discard packaging before the cause and extent of loss can be assessed.

A machinery example

A Pakistani manufacturer buys a machine with a contract stating delivery and commissioning at its factory. The unit is damaged while transported by a carrier selected by the seller.

The contract may place risk on the seller until factory delivery or acceptance, depending on the actual wording. The seller may then pursue its carrier or insurer.

If the parties instead agreed that risk passed upon collection from the foreign supplier, the analysis can be materially different.

Remedy and mitigation

The buyer may seek conforming replacement, refund or damages where justified under the contract and law.

The parties should act reasonably to prevent further loss, for example by safely storing damaged machinery.

Loss calculations should credit insurance proceeds and avoid charging the same damage to several parties.

Opinion and recommended course

Transit risk is determined primarily by the agreed delivery terms and the Sale of Goods Act, particularly sections 26, 39 and 40, not solely by who arranged shipping.

Identify goods, risk-transfer point, property-transfer terms and carrier responsibilities; preserve evidence, notify insurers and pursue the person contractually or legally responsible for the damage.

Principal authorities: Sale of Goods Act, 1930, sections 18–26 and 39–40; Contract Act, 1872; relevant carriage law and agreed Incoterms; the sale, logistics and insurance contracts.