Transfer of Ownership and Risk in a French Sale of Goods

The solo consensu principle: transfer of ownership France by consent alone

French sales law starts from a rule that surprises many foreign buyers and sellers: the transfer of ownership happens the moment the parties agree on the thing and the price. Nothing else is required. There is no need for delivery, for payment, for a signed deed, or for any registration. Under Article 1583 of the Civil Code, in a sale ownership is acquired by the buyer as against the seller as soon as the thing and the price have been agreed, even though the thing has not yet been delivered nor the price paid.

This is the principle known as solo consensu, transfer of ownership by consent alone. It is reinforced by the general law of contract in Article 1196 of the Civil Code, which provides that in contracts whose object is to transfer ownership, ownership passes at the time the contract is concluded. The sale is therefore perfect between the parties at the instant of agreement, and from that instant the buyer is the legal owner of the goods, with everything that ownership implies.

For the rule to operate, the thing and the price must both be determined, or at least determinable, at the moment of agreement. Where the object of the sale is a specific identified item, an identified machine, a named vehicle, a particular lot of stock, ownership passes at once. This is the default position for any sale of goods governed by French law, and it applies regardless of whether the parties ever turned their minds to the question of when the buyer becomes owner.

What the transfer of ownership means in practice

Once ownership has passed, the buyer holds the full rights of an owner, even though the goods may still be sitting in the seller's warehouse. The buyer becomes entitled to the fruits and benefits the goods produce, and gains the power to dispose of them: to resell, pledge, or otherwise deal with the goods, because they now belong to the buyer and no longer to the seller. Correlatively, the transfer of ownership strips the seller of any real right over the thing sold, subject only to limited protections such as the seller's right to retain the goods until payment.

The most commercially important consequence concerns creditors and insolvency. Because the buyer is now the owner, the goods form part of the buyer's estate and answer to the buyer's creditors, who may seize them there even before delivery. Conversely, they leave the seller's estate. If the seller later becomes insolvent, goods already sold in principle no longer belong to the seller's estate, which is precisely why the timing of the transfer of ownership matters so much in distressed situations.

There is an important limit on third-party effects for movable goods. While ownership passes between the parties by consent, French law protects a third party who acquires the same movable in good faith and takes possession of it: the maxim that possession of a corporeal movable is worth title can defeat an earlier buyer who left the goods in the seller's hands. This is one practical reason why a buyer who has become owner on paper should still take delivery, or at least secure the goods, as promptly as the contract allows.

When the transfer of ownership is deferred

The solo consensu rule assumes the goods are specific and identified. Where they are not, or where the parties have agreed otherwise, the transfer of ownership is pushed back to a later moment. Four situations account for almost all deferred transfers in commercial practice, and each has a definite trigger point that the parties should understand before they contract.

Generic or unascertained goods

Goods sold by weight, count or measure, and generic goods drawn from a larger mass, do not belong to any particular buyer until they are individualised. Under Articles 1585 and 1586 of the Civil Code, where goods are sold by weight, count or measure, ownership passes only when they are set apart by weighing, counting or measuring; where a defined bulk is sold in a single block, ownership passes at the conclusion of the contract. Until individualisation, a buyer of, say, a thousand hectolitres of wine from a larger harvest is not yet owner of any specific hectolitre.

Future goods, conditions and retention of title

Goods still to be manufactured pass to the buyer only when they are complete and in a state to be delivered, though ownership then passes even if delivery has not yet occurred. Where the sale is subject to a suspensive condition, ownership does not pass until the condition is fulfilled. And the parties may expressly defer ownership by a retention-of-title clause, under which the seller remains owner until the price is paid in full; we examine this device in detail in our guide to retention of title clauses. In each case the default rule is displaced, and the buyer becomes owner only at the later trigger.

Transfer of risk: the res perit domino rule

The second question is who bears the loss if the goods are accidentally damaged or destroyed. French law answers it with the maxim res perit domino: the thing perishes for its owner. Risk of accidental loss is by principle tied to ownership, so whoever is owner at the moment the loss occurs bears it. This is stated at the level of general contract law by Article 1196, paragraph 3, of the Civil Code, under which the transfer of ownership carries with it the transfer of risk of the thing.

The consequence is direct and, for the unwary, harsh. Because ownership normally passes at the moment of agreement, the transfer of risk normally passes at that same moment. The buyer therefore bears the risk of accidental loss from the instant it becomes owner, even though it has not yet taken delivery and even though the goods remain physically in the seller's possession. If the goods are destroyed by an accidental event, a fire or a flood for which neither party is at fault, the loss falls on the owner, which by default is the buyer.

For deferred transfers the risk moves with ownership. Where ownership passes only on individualisation of generic goods, risk also passes only then; where a block sale passes ownership at conclusion, risk passes at conclusion. The link between the two is the organising idea of the whole area: fix when ownership passes and, unless you say otherwise, you have fixed when risk passes.

The practical trap: goods destroyed after sale but before delivery

Take the situation that catches out the most parties. A buyer agrees to purchase a specific machine on 1 March, price agreed, delivery scheduled for 15 March. On 10 March the seller's warehouse floods and the machine is ruined, through nobody's fault. Who bears the loss? Because ownership of a specific thing passed on 1 March under Article 1583, the buyer was already the owner on 10 March. By res perit domino, the accidental loss falls on the owner, the buyer, who must still pay the price even though it will never receive a working machine.

This outcome feels wrong to buyers used to systems where risk tracks physical possession, but it follows inexorably from the default French rules. The buyer's protection lies not in possession but in the causes that displace the default. If the loss is due to the seller's fault, if the seller failed to preserve the goods with due care, the seller is liable in damages, and that liability neutralises the harsh result. The pure res perit domino outcome is reserved for genuinely accidental loss, the cas fortuit, where no one is at fault.

The party who invokes accidental loss to escape an obligation bears the burden of proving it. A seller who had custody of the goods until delivery and wishes to be relieved of the duty to deliver must prove that the loss was truly accidental and not the result of its own want of care. In practice, therefore, the buyer's first line of enquiry after a warehouse loss is whether the seller kept and protected the goods properly, because a preservation failure shifts the economic loss back to the seller regardless of who technically owned the goods.

Shifting the transfer of risk by contract

The default rules are not mandatory. Article 1196, paragraph 3, expressly allows the parties to agree otherwise, so the transfer of risk can be detached from the transfer of ownership by contract. The most common and sensible variation ties risk to delivery rather than to ownership: the buyer becomes owner on agreement but the seller continues to bear the risk of accidental loss until the goods are actually handed over. This aligns risk with physical control and is what most commercial parties intend, even when their contract is silent and the default therefore produces a different result.

The parties may go further still and choose one date for the transfer of ownership and a different date for the transfer of risk, and French courts accept that separation. A retention-of-title clause, for example, keeps ownership with the seller until payment while the contract can nonetheless place risk on the buyer from delivery, protecting the seller's security interest without leaving it to carry the risk of goods it no longer controls. The lesson is that ownership and risk are two dials that can be set independently, provided the contract does so clearly.

In cross-border sales the standard tool for allocating risk is a set of trade terms, the Incoterms, which fix the point at which risk of loss passes from seller to buyer along the transport chain. We look at these in the next sections and in our dedicated note on Incoterms and risk transfer. The essential point here is that a well-drafted sale contract should never leave the transfer of risk to the default: it should state, in terms, the moment risk passes and tie it to an event the parties can observe.

The seller's duty to preserve the goods until delivery

Even where ownership and risk have passed to the buyer, the seller is not free to neglect goods that remain in its hands. Under Article 1197 of the Civil Code, the obligation to deliver a specific thing carries with it the duty to preserve it, and to look after it with all the care of a careful person, until delivery. The seller who still holds the goods is therefore bound to keep and protect them, and answers for their loss up to the moment of delivery if that loss results from a failure of care.

This preservation duty is what tempers the severity of res perit domino. The buyer bears only accidental loss. If the goods perish or deteriorate because the seller stored them badly, packed them inadequately, or otherwise fell short of the required standard of care, the seller has breached Article 1197 and is liable in damages, which in economic terms places the loss back on the seller. The line between the two outcomes is fault: accidental loss for the owner, faulty loss for the negligent custodian.

The duty extends naturally to correct packaging and handling where the goods are to be dispatched. A seller who wishes to be discharged of risk on handing goods to a carrier must, among other things, provide appropriate packaging; inadequate packing that causes damage in transit is a preservation failure that keeps the seller liable notwithstanding the transfer of risk. Buyers and sellers alike should therefore document the condition and packing of goods at the point of handover, because that record often decides whether a later loss was accidental or the seller's fault.

International sales into France: Incoterms 2020 and the CISG

When goods move across borders into or out of France, the parties almost always adopt a trade term to allocate transport costs and the transfer of risk. The Incoterms 2020 rules published by the International Chamber of Commerce are the market standard. It is essential to understand what they do and do not do: each Incoterm fixes the allocation of transport costs and the point at which risk passes from seller to buyer, but it does not determine the moment the transfer of ownership takes place. Ownership continues to be governed by the applicable national law or the contract.

So under a term such as FOB or CFR, French case law locates the passing of risk at the point the goods cross the ship's rail or are placed on board at the port of shipment, while a delivered term such as DAP or DPU passes risk when the goods are made available or delivered at the agreed destination. These are risk-transfer points, not ownership-transfer points. Where the parties use a trade term without expressly subjecting it to Incoterms 2020, a French court will interpret its scope, drawing where relevant on transport-law provisions or on the usage of the port concerned, which makes an explicit reference to the chosen rules highly advisable.

Layered on top is the United Nations Convention on Contracts for the International Sale of Goods, the Vienna Convention or CISG, often described as the substantive law of international sales. It applies to sales of goods between parties whose places of business are in different Contracting States, or where private international law leads to the law of a Contracting State, unless the parties exclude it. The CISG contains its own regime for the passing of risk, which the Incoterms complement rather than contradict. Within the EU, however, the applicable law is determined by the Rome I Regulation, and the interplay between these instruments needs to be checked case by case.

Controlling when property and risk pass: a practical checklist

Because the default rules can produce results neither party intended, the transfer of ownership and the transfer of risk should be dealt with expressly in every sale contract of any value. The following steps set out how a seller or buyer contracting under, or into, French law should approach the two questions in sequence.

The table below contrasts the default French position with the variations most often used to override it, so the parties can see at a glance which dial each device turns.

Frequently asked questions about the transfer of ownership and risk in France

When does the transfer of ownership take place under French law?

For specific, identified goods, ownership passes to the buyer the moment the parties agree on the thing and the price, under Article 1583 of the Civil Code. Delivery and payment are not required. This is the solo consensu rule, transfer of ownership by consent alone.

Does the buyer become owner before paying or taking delivery?

Yes. By default the buyer of specific goods is owner from the moment of agreement, even though the price is unpaid and the goods undelivered. The seller retains only limited protections, such as a right to withhold the goods until payment, and can defer ownership by a retention-of-title clause.

What does res perit domino mean for a French sale?

It means the thing perishes for its owner: the risk of accidental loss falls on whoever owns the goods when the loss occurs. Because ownership usually passes on agreement, risk usually passes then too, so the buyer can bear the loss of goods it has not yet received.

If goods are destroyed in the seller's warehouse before delivery, who pays?

If ownership had already passed to the buyer and the loss was purely accidental, the buyer bears it and may still owe the price. If the loss resulted from the seller's failure to preserve the goods with due care under Article 1197, the seller is liable in damages instead.

Can we separate the transfer of risk from the transfer of ownership?

Yes. Article 1196, paragraph 3, lets the parties agree otherwise, so risk can be tied to delivery while ownership passes on agreement, or the two can be fixed on different dates. French courts accept such a separation, and a well-drafted contract should use it.

Do Incoterms decide when ownership passes?

No. Incoterms 2020 allocate transport costs and fix the point at which risk passes, but they do not determine the transfer of ownership, which remains governed by the applicable law or the contract. Ownership and the possible application of the CISG must be addressed separately.

How does a mise en demeure affect who bears the risk?

Article 1196, paragraph 3, provides that a party formally put on notice (mise en demeure) to take delivery may bear the risk from that point. So a buyer who is properly served with notice to collect the goods but fails to do so can find the risk of accidental loss placed on it.

Key takeaways on the transfer of ownership and risk in France

How our French lawyers help with the transfer of ownership and risk

Petroff Avocats advises both sellers and buyers on the transfer of ownership and risk in French and cross-border sales of goods. For sellers, we draft retention-of-title and risk clauses that protect payment and limit exposure to loss; for buyers, we structure the timing of ownership and the allocation of risk so you are not left paying for goods you never received. We review and negotiate Incoterms 2020 terms, advise on whether the CISG applies to your contract, and act in disputes over goods lost or damaged before delivery, where the outcome often turns on when ownership passed and whether the seller met its duty to preserve the goods.

This article is for general information only. It does not constitute legal advice and does not create a lawyer-client relationship. The rules on the transfer of ownership and risk depend on the goods, the contract and the applicable law, and international sales raise additional questions. Contact our French lawyers for advice on your situation.