Transfer the Risk of Loss in a Sale of Goods
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How to Transfer the Risk of Loss in a Sale of Goods
The Uniform Commercial Code governs sales of goods transactions. A typical sale of goods transaction involves a buyer, a seller, and a common carrier (the service delivering the goods). While the goods are in transit, the goods may be damaged, destroyed, or spoiled. A sale of goods contract should specify who bears this risk.
Who Bears the Risk for Damaged Goods?
Generally, the risk of loss passes from the seller to the buyer when the seller delivers the goods to the buyer. If the contract requires or authorizes shipment by a carrier, the risk of loss passes to the buyer when the goods are delivered to the carrier. However, the seller may still bear the risk of loss during shipment if the contract requires the goods to be delivered to a particular destination.
- Shipment Contracts: If the buyer and seller agree to a "shipment contract," then the buyer bears the risk during shipment. The seller’s risk ceases when he delivers the goods to the common carrier for delivery.
- Destination Contracts: If the buyer and seller agree to a "destination contract," then seller continues to bear the risk of loss until the goods actually reach the buyer’s destination.
Seeking Legal Help
Although contracts for the sale of goods may seem straightforward, it may be difficult to understand who bears the risk of loss for the goods during transit. You should contract a qualified contracts lawyer to help you negotiate, draft, and review your sale of goods contract.
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Last Modified: 08-24-2016 10:15 PM PDT
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