E-Contract / Contractual Rights and Obligations in Transfer of Goods by Land, Sea and Air | Contract Law

The formation of a contract for the sale of goods does not necessarily bring the transaction to an end. In many commercial transactions, particularly those concluded electronically, the goods have to be transported from the seller to the buyer through a carrier. The mode of transportation may be land, sea or air, and each mode gives rise to particular contractual rights and obligations.

The electronic medium may be used to negotiate and conclude the contract of sale, issue invoices and transport documents, communicate shipping instructions and track the consignment. However, the rights and liabilities arising from the sale of goods and those arising from the carriage of goods must be distinguished.

The principal statutory framework for the sale itself is the Sale of Goods Act, 1930, while the particular carriage may additionally be governed by legislation applicable to the relevant mode of transport.

Relationship Between the Contract of Sale and Contract of Carriage

A transaction involving transportation of goods may involve more than one contractual relationship.

For example:

• Seller-Buyer: Contract of sale
• Seller/Consignor-Carrier: Contract of carriage
• Carrier-Consignee/Buyer: Rights and obligations arising under the carriage arrangement and applicable transport document

Thus, the seller’s obligation to deliver the goods and the carrier’s obligation to transport them safely are related but not identical contractual obligations.

The distinction becomes particularly important when the goods are damaged or lost during transit. The question then arises whether the loss falls upon the seller or buyer under the contract of sale, and separately whether the carrier is liable for the loss under the contract of carriage.

Transfer of Property and Risk in Goods

Under the Sale of Goods Act, 1930, property in the goods and risk are distinct concepts, although they are ordinarily connected.

• Section 19 (Intention of the Parties) – In the case of specific or ascertained goods, property passes when the parties intend it to pass, determined by the contract terms, conduct, and circumstances.
• Section 26 (Risk Prima Facie Passes with Property) – Unless otherwise agreed, the goods remain at the seller’s risk until the property in them is transferred to the buyer. Once property passes, the goods are ordinarily at the buyer’s risk, whether physical delivery has occurred or not.

Important Qualification

The parties may allocate risk differently from the passing of property. In modern e-commerce and international electronic sales, the allocation of risk during transit is standardly determined by standard trade terms (Incoterms). In a Free on Board (FOB) contract, property and risk pass to the buyer the moment the goods are placed on board the vessel at the port of shipment; delivery to the sea/air carrier under Section 39 constitutes full delivery to the buyer. Conversely, under a Cost, Insurance, and Freight (CIF) contract, while risk passes upon loading, the seller retains conditional title by holding the Bill of Lading until the buyer pays against the presentation of electronic shipping documents (Section 19).

Delivery of Goods to a Carrier (Section 39, SOGA 1930)

Under Section 39(1), where the seller is authorized or required to send goods to the buyer, delivery of goods to a carrier for transmission is prima facie deemed to be delivery to the buyer.

Seller’s obligations under Section 39

The seller must:

• Deliver the goods to the carrier in accordance with the contract;
• Enter into a reasonable contract with the carrier on behalf of the buyer. (Section 39(2));
• Take reasonable regard of the nature of the goods and circumstances of transportation; and
• Where transit involves sea carriage and insurance is customary, the seller must give the buyer sufficient notice to enable them to insure the goods. If the seller fails to give such notice, the goods remain at the seller’s risk during sea transit. (Section 39(3)).

If the seller fails to make a reasonable arrangement with the carrier and the goods are lost or damaged during transit, the buyer may refuse to treat delivery to the carrier as delivery to himself or may hold the seller liable for damages.

Modes of Transportation

1. Transfer of Goods by Land (Road and Rail)

Governed between seller and buyer by the Sale of Goods Act, 1930. The carrier’s liability depends on the mode:

• Road Transport: Governed by the Carriage by Road Act, 2007, where common carriers face strict liability for loss or damage unless a specific monetary limit was agreed upon in the common carrier receipt.
• Rail Transport: Governed by the Railways Act, 1989, where the railway administration acts as a bailee and is liable for loss, destruction, or damage unless it proves the exercise of reasonable foresight and care.

2. Transfer of Goods by Sea

Carriage of goods by sea is governed by the Carriage of Goods by Sea Act, 2025 (which came into force on 10 September 2025). The Act regulates the responsibilities, liabilities, rights, and immunities of ocean carriers.

• Bill of Lading: Serves three distinct functions: (i) Evidence of the contract of carriage, (ii) Receipt of goods by the carrier, and (iii) A document of title to the goods.
• Bills of Lading Act, 2025: Governs the statutory transfer of rights of suit and liabilities to the consignee or endorsee to whom property in the covered goods passes.

3. Transfer of Goods by Air

Governed by the Carriage by Air Act, 1972, which incorporates the international Montreal Convention framework.

• Carriage by Air covers the period during which goods are in the charge of the air carrier (at an aerodrome or on board).
• Consignor Duty: The consignor must provide accurate documentation for customs and regulatory compliance and is liable for damage caused by missing or defective information.
• Carrier Liability: The air carrier is subject to strict statutory liability for loss, destruction, or damage occurring during air carriage, subject to statutory liability caps.

Multimodal Transportation

Modern e-commerce and international commerce frequently involve more than one mode of transportation under a single contract.

For example:

1. Factory
2. Truck
3. Port
4. Ship
5. Airport
6. Truck
7. Buyer

Such arrangements are known as multimodal transportation.

The Multimodal Transportation of Goods Act, 1993 regulates multimodal transportation for exports from India on the basis of a multimodal transport contract. The Act contemplates transportation through at least two different modes under a single multimodal transport contract.

The Act also recognises a multimodal transport document, which can be issued in electronic form.  This is particularly relevant to e-contracts because modern logistics increasingly relies upon electronic documentation and communication.

Contractual Rights and Obligations During Transit

The principal rights and obligations can be understood through the following framework:

These rights do not operate independently of the contract. The precise allocation of risk, responsibility and liability depends upon the terms of the sale contract, contract of carriage, applicable transport legislation and relevant transport documents.

Seller’s Right of Stoppage in Transitu (Section 50, SOGA 1930)

Even where delivery to a carrier has taken place under Section 39 and property/risk has technically passed to the buyer, the Sale of Goods Act provides special protection to an unpaid seller. If the buyer becomes insolvent while the goods are in transit (i.e., in physical possession of the land, sea, or air carrier and before reaching the consignee), the unpaid seller possesses the statutory right under Section 50 to resume possession of the goods, stop delivery by notifying the carrier, and retain them until payment is received.

Risk and Examination During Transit

Risk Determination

One of the most important questions in the transfer of goods is, ‘Who bears the loss if the goods are damaged or destroyed while in transit?’

The answer cannot be determined merely by asking which party physically possesses the goods. Under Section 26 of the Sale of Goods Act, risk ordinarily follows property, unless the parties agree otherwise.

Therefore, the following questions must be examined:

1. When did property pass under the contract? (Section 19)
2. What are the agreed trade terms (e.g., FOB vs. CIF)?
3. Did the seller comply with Section 39 (reasonable carrier contract and sea insurance notice)?
4. Does the applicable transport statute (Carriage by Road, COGSA 2025, Carriage by Air Act) hold the carrier strictly liable?

Thus, risk under the sale contract and liability of the carrier are separate questions.

Examination of Goods and Acceptance

Section 41 of the Sale of Goods Act gives the buyer who has not previously examined the goods a reasonable opportunity to examine them for the purpose of determining whether they conform to the contract. This is particularly important in e-commerce and long-distance transactions because the buyer may not have physically inspected the goods before purchase.

The buyer is not necessarily deemed to have accepted the goods merely because they have been delivered. Acceptance may arise in accordance with Section 42, including where the buyer:

• Intimates acceptance to the seller;
• Does an act inconsistent with the seller’s ownership; or
• Retains the goods beyond a reasonable period without intimating rejection.

Electronic Contracts and Transportation Documents

Modern logistics relies heavily on electronic documentation, including electronic purchase orders, commercial invoices, shipping instructions, and automated tracking The legal recognition of electronic records therefore facilitates the performance of the underlying contract.

The legal transition from physical paper to Electronic Bills of Lading (e-BL) represents a pivotal point in e-contracts. Under Section 10A of the Information Technology Act, 2000, read alongside Section 63 of the Bharatiya Sakshya Adhiniyam, 2023, an e-BL generated via encrypted digital platforms (such as blockchain-based EDI or registry systems) serves as valid legal evidence of receipt and contract terms. However, because a traditional Bill of Lading is a “document of title” negotiating physical ownership, an e-BL requires strict statutory compliance or contractual consensus between the carrier, seller, and buyer to ensure that transfer of the digital token legally transfers title under Section 19 of the Sale of Goods Act, 1930.

Comparison between Land, Sea and Air

Conclusion

The transfer of goods represents the physical performance of an underlying contract of sale. When goods move across land, sea, or air, additional contracts of carriage arise alongside the primary sale agreement. The Sale of Goods Act, 1930 provides the fundamental rules governing delivery, passing of property, risk allocation (Section 26), and stoppage in transit (Section 50), while specialized carriage laws determine the carrier's statutory liability.

The growth of electronic contracting does not alter these substantive property principles. Instead, electronic records and e-transport documents (such as e-Way bills and e-Bills of Lading) provide a modern, efficient mechanism to negotiate, execute, and verify transactions—bridging digital agreement with physical delivery across global supply chains.