9. Risk of Loss (Art 2)

Question 1

When does risk of loss pass to Buyer in non-carrier cases?

Answer 1

Merchant seller
- Risk of loss passes to Buyer when ‘Buyer receives physical possession’

Non-merchant seller
- Risk of loss passes to Buyer when ‘Seller delivers’

Question 2

When does risk of loss pass to Buyer in carrier cases?

Answer 2

Shipment contract (No location)
- Risk of loss passes to Buyer when 'Seller delivers to Carrier'

Destination contract (Location)
- Risk of loss passes to Buyer when Seller 'delivers' to Buyer 'at location'

Free on Board contracts (No location)

• Risk of loss passes to Buyer when Seller delivers to Carrier
• Expenses of delivery are borne by Buyer

Free on Board contracts (Location)

• Risk of loss passes to Buyer ‘at location’
• Expenses of delivery are borne by Seller

Free Alongside contracts (Shipment by boat)
- Risk of loss passes to Buyer when Seller delivers ‘at dock’

Question 3

What are Seller’s duties in a shipment contract?

Answer 3

1) Reasonably contact Carrier
2) Deliver to Carrier
3) Promptly notify Buyer of delivery to Carrier
4) Give possession acceptance docs to Buyer

Question 4

Who bears the risk if there is a breach on the risk of loss?

Answer 4

Conforming goods

• If Buyer accepts => Buyer bears risk
• If Buyer rejects => Seller bears risk (up to extent of deficiency in Buyer’s insurance coverage)
• Risk of loss: From acceptance to rejection

Non-conforming goods

• If Buyer accepts => Buyer bears risk
• If Seller cures defect => Buyer bears risk
• If Buyer rejects => Seller bears risk

Question 5

Who bears the risk in sale contracts?

Answer 5

Sale/Return contract (Buyer cannot resell so return)

• If Buyer accepts => Buyer bears risk
• If Buyer returns => Buyer bears risk (while goods are being returned)

Sale on Approval Contract (Buyer can use and return)

• If Buyer accepts => Buyer bears risk
• If Buyer rejects => Seller bears risk

Question 6

What happens if goods are destroyed before risk passes?

Answer 6

Identified goods at time of contract

• No party’s fault
• Seller excused (void contract)

NOT identified goods at time of contract

• Seller must show impracticability
• Seller discharged