Risk of Loss

Question 1

What are the seller’s obligations under the UCC’s risk of loss rules?

Answer 1

• Seller’s obligations = transfer and deliver goods.

Question 2

What are the buyer’s obligations under the UCC’s risk of loss rules?

Answer 2

• Buyer’s obligation = accept and pay for goods.

Question 3

What must the seller do if they bear the risk of lost goods?

Answer 3

• If seller bears ROL, he must provide replacement goods.

Question 4

What must the buyer do if they bear the risk of lost goods?

Answer 4

• If buyer bears ROL, he must pay the K price regardless.

Question 5

What is the difference between carrier and non-carrier cases?

Answer 5

• Carrier cases: Parties to a sale of goods K agree to use common carrier (trucking firm, train, etc.).
• Non-carrier cases: Parties to a sale of goods K do not agree to use a common carrier.

Question 6

In non-carrier cases, what key fact determines when ROL transfers?

Answer 6

• Depends on whether the seller is a merchant

Question 7

In non-carrier cases, when does the risk of loss transfer from seller to buyer?

Answer 7

• If seller is NOT a merchant: As soon as goods are made available to him (tendered), then the ROL transfers to buyer.
• If seller IS a merchant: ROL transfers to buyer once the goods are physically in buyer’s possession.

Question 8

In carrier cases, what key fact determines when ROL transfers?

Answer 8

• Depends on whether the contract is a shipment or destination contract

Question 9

When does the ROL transfer in shipment contracts?

Answer 9

• ROL passes to buyer when goods are delivered to the carrier.
• Buyer bears ROL if goods are damaged in transit.

Question 10

How are shipment contracts identified?

Answer 10

• Identified as “FOB Seller” (“free on board seller”)

Question 11

When does the ROL transfer in destination contracts?

Answer 11

• ROL passes to buyer when goods are tendered at the destination point specified in the K.
• Seller bears ROL if goods are damaged in transit.

Question 12

How are destination contracts identified?

Answer 12

• Identified as “FOB Buyer.”

Question 13

If the contract in a carrier case is silent on whether it is a shipment contract or destination contract, what is the default rule for ROL?

Answer 13

• If the carrier contract is silent on ROL, then the default rule is FOB Seller (meaning it is a shipment contract in which the BUYER bears the risk of loss once the goods are delivered to the carrier)