UCC - Delivery Terms and Risk of Loss

Question 1

Delivery Terms

Answer 1

• all Ks for sale of goods require delivery
• delivery terms important b/c determine when risk of loss passes from seller to buyer if goods are damaged or destroyed

Question 2

Effect of Breach on Risk of Loss - Defective Goods

Answer 2

• if buyer has right to reject the goods, the risk of loss doesn’t pass to the buyer until defects are cured or buyer accepts goods in spite of their defects
  -> buyer generally has right to reject any defect

Question 3

Effect of Breach on Risk of Loss - Revocation of Acceptance

Answer 3

• if buyer rightfully revokes acceptance, risk of loss is treated as having rested on seller from beginning to extent of any deficiency in buyer’s insurance coverage

Question 4

Exam Tip - Nonconforming Goods + Risk of Loss

Answer 4

• if seller ships nonconforming goods, it ELIMINATES the importance of determining whether K = shipment or destination contract
• if goods = nonconforming, risk of loss remains on seller

Question 5

Noncarrier Case

Answer 5

• a sale in which it appears that the parties did not intend that the goods would be moved by a common carrier
• in such case, if seller = merchant, risk of loss passes to buyer only when they take physical possession of the goods
• if seller NOT a merchant, risk passes to buyer upon tender of delivery

Question 6

Carrier Case

Answer 6

• sale in which it appears that the parties intended the goods to be moved by a carrier
• two types:
  -> shipment contract
  -> destination contract

Question 7

Shipment Contract

Answer 7

• if K authorizes or requires seller to ship goods by carrier but doesn’t require them to deliver goods at a particular destination, it’s a shipment K
  -> risk of loss passes to buyer when goods are delivered to the carrier
• in absence of a contrary agreement, Article 2 presumes a K = a shipment K

Question 8

Seller’s Duties Under A Shipment Contract

Answer 8

• Seller must:
  1) make a reasonable K w/ carrier on behalf of buyer
  2) deliver goods to the carrier
  3) promptly notify buyer of the shipment AND
  4) provide buyer w/ any docs needed to take possession of the goods

Question 9

Destination Contracts

Answer 9

• if K requires seller to deliver goods at a particular destination, risk of loss passes to buyer when goods are tendered to buyer at destination

Question 10

FOB

Answer 10

• “free on board”
• letters are always followed by a location (ex: a city name) + risk of loss passes to buyer at named location
• seller bears risk + expense of getting goods to named location
• Ks can be either shipment Ks or destination Ks, depending on location named

Question 11

FAS

Answer 11

• “free alongside”
• generally used only when goods are to be shipped by boat
• risk of loss passes to buyer once goods are delivered to the dock

Question 12

Contracts + Delivery Address

Answer 12

• all Ks for goods require an address for delivery
• merely indicating an address does NOT make something a destination K
• contract that doesn’t contain an FOB term or any other term explicitly allocating risk of loss = shipment K

Question 13

Place of Delivery - Noncarrier vs. Carrier Contracts

Answer 13

• seller’s place of business for noncarrier
• shipment K - seller must deliver to shipper
• destination K - seller must tender delivery of goods to buyer at destination

Question 14

Time for Payment - Noncarrier vs Carrier K

Answer 14

• upon tender of delivery for noncarrier
• when buyer receives goods for carrier

Question 15

Risk in Sale or Return Ks

Answer 15

• sale or return K = buyer takes goods for resale but may return if unable to resell the goods
• treated as an ordinary sale -> normal rules apply
• if goods returned to seller, risk remains on buyer while goods are in transit

Question 16

Sale on Approval

Answer 16

• buyer takes goods for trial period + may return even though they conform to K

Question 17

Risk - Sale on Approval Ks

Answer 17

• risk doesn’t pass until buyer accepts the goods (by failing to return or notifying seller of intention w/in required time)
• if decides to return, return at seller’s risk

Question 18

Goods Destroyed Before Risk of Loss Passes

Answer 18

• EXAM FAVORITE, PARTICULARLY ON ESSAYS
• if goods that were identified when K was made are destroyed 1) w/o fault of either party and 2) before risk of loss passes to buyer, K is avoided
  -> seller’s performance is excused
• if goods not identified until after K made, seller would have to prove impracticability

Question 19

Insurable Interest and Identification

Answer 19

• buyer often bears risk of loss before receiving goods purchased -> Article 2 gives buyers a special property interest in goods as soon as they’re id’ed as the ones that will be used to satisfy the K
• special property interest is insurable

Question 20

Bilateral K’s Formed by Performance

Answer 20

• K includes all terms on which writings of both parties agree
• any necessary missing terms are filled in by supplemental terms provided for in Art 2
• vs. at common law, K includes terms of last communication sent to the party who performed