What is Risk of loss (sales of goods)?
In short
Under the rules for sales of goods, risk of loss passes as the parties agree. Otherwise, in a shipment contract it passes when the seller delivers the goods to the carrier; in a destination contract, when the goods are tendered at the destination.
Key takeaways
- Without a carrier, a merchant seller keeps the risk until the buyer receives the goods; a non-merchant seller passes it on tender.
- If the seller ships nonconforming goods, risk stays with the seller until cured or accepted.
- Free on board (FOB) shipping point is a shipment contract; FOB destination is a destination contract.
Where it's tested
REG: Business Law: Contracts — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Goods are shipped 'FOB shipping point' by common carrier and are destroyed in transit through no fault of either party. Who bears the loss?