Risk of Loss UCC Terms in Sales of Goods Contracts Flashcards
What are the delivery obligations of seller of goods if the delivery is by a common carrier?
If there is an agreement as to place of delivery by a common carrier, then the question is: what does the seller have to do to complete its delivery obligation. There are two possible UCC answers to that question:
- Shipment contracts
- Destination contracts
What is the general rule for shipment contracts and delivery obligations when using a common carrier?
One possibility is that the contract is a shipment contract which means that the seller completes its delivery obligation when it:
(i) gets the goods to a common carrier, and
(ii) makes reasonable arrangements for delivery, and
(iii) notifies the buyer.
In a shipment contract, the seller completes its delivery obligation before delivery is completed.
HYPO: Shipment Contracts:
1) S, a Snook, Texas pet store, contracts to deliver armadillos to B, a Buffalo, New York pet store. What are S’s delivery obligations if this is a shipment contract?
2) Same facts as, i.e., Snook seller and Buffalo buyer. What if the contract provides for the shipment of the armadillos to Chicago, F.O.B., Chicago?
1) Know the difference between delivery and delivery obligations
2) This is a destination K
What is a destination contract and delivery obligations when using a common carrier?
The other possibility is that the contract is a destination contract, which means that the seller does not complete its delivery obligation until the goods arrive at the destination.
How do you determine whether a contract is a shipment or destination contract?
Most contracts with delivery obligations are shipment contracts. Watch for the use of FOB – free on board (city) – as source for determining whether the contract is a shipment contract or a destination contract. FOB followed by city where the seller is or where goods are means shipment contract; FOB followed by any other city means destination contract.
What is a risk of loss problem?
Risk of loss issues arise where
(i) after the contract has been formed, but before the buyer receives the goods,
(ii) the goods are damaged or destroyed, and
(iii) neither the buyer nor the seller is to blame.
What are the possible consequences in a risk of loss problem?
If the risk of loss is on the buyer, he has to pay the full contract price for the lost or damaged goods. If the seller has the risk of loss, no obligation on the buyer and possible liability on the seller for nondelivery.
What are the risk of loss rules?
There are four risk of loss rules. None involve “title.” Title is irrelevant. Do rule #1 first, if it does not apply, then #2 and if it does not apply, then:
- Agreement: agreement of the parties controls.
- Breach: breaching party is liable for any uninsured loss even though breach is unrelated to problem. (if there is a breaching party)
- Common carrier delivery: risk of loss shifts from seller to buyer at the time the seller completes its delivery obligations. (GR)
- Catch-all” (no agreement, no breach, no delivery by a carrier): the determining factor is whether the seller is a merchant. WHETHER THE BUYER IS A MERCHANT IS IRRELEVANT. Risk of loss shifts from a merchant-seller to the buyer on the buyer’s “receipt” of the goods; risk of loss shifts from a nonmerchant seller when he or she “tenders” the goods.
HYPO: Risk of Loss: B buys a stove from S, a used appliance dealer. S tells B that he can pick up the stove at the loading dock. Before B can drive his truck to the loading dock, lightning strikes the stove. Does B have to pay for the damaged stove?
No this is the receipt rule for merchant sellers, default rule
HYPO: Risk of Loss: B, a used appliance dealer, buys a used stove from S. S tells B to pick up the stove at his convenience that the stove is on S’s back porch. Later, vandals damage the stove before B gets it. Does B have to pay for the damaged stove?
Post tender = Transfer of the risk of loss
