Who Bears the Loss in Transit
Under the Uniform Commercial Code text, where the contract requires or authorizes shipment by carrier, risk of loss passes to the buyer when the goods are duly delivered to the carrier, or, if a particular destination is required, when they are there duly tendered while in the carrier's possession. The text makes this subject to contrary agreement of the parties.
This guide explains the text of three Uniform Commercial Code (UCC) sections. It is not legal advice, does not say whether or how any state applies them, does not address the effect of a breach, and makes no statement about any particular deduction.
When does risk pass if a particular destination is required?
Where the contract requires or authorizes the seller to ship by carrier and does require delivery at a particular destination, UCC 2-509(1)(b) says the risk of loss passes to the buyer when the goods are there duly tendered while in the carrier's possession, so as to enable the buyer to take delivery.
A separate section, UCC 2-503, is titled "Manner of Seller's Tender of Delivery". UCC 2-503(1) says tender of delivery requires that the seller put and hold conforming goods at the buyer's disposition and give the buyer any notification reasonably necessary to enable the buyer to take delivery.
This guide calls that the destination case. The three sections do not use the label "destination contract".
What can change the default?
UCC 2-509(4) makes the section "subject to contrary agreement of the parties" and to other provisions of the Code, on sale on approval and on the effect of breach on risk of loss. This guide does not cover those other provisions.
UCC 2-319(1) opens "Unless otherwise agreed".
What does the text say about F.O.B. delivery terms?
Unless otherwise agreed, UCC 2-319(1) says F.O.B. at a named place is a delivery term, and it names two places that differ in how far the seller bears expense and risk.
Under F.O.B. the place of shipment, UCC 2-319(1)(a) has the seller ship the goods at that place "in the manner provided in this Article" and "bear the expense and risk of putting them into the possession of the carrier".
Under F.O.B. the place of destination, UCC 2-319(1)(b) has the seller "at his own expense and risk transport the goods to that place and there tender delivery of them in the manner provided in this Article".
The section also covers other terms, which this guide does not describe.
In the text, which rule applies depends on what the contract requires and on any contrary agreement of the parties. This guide does not say which applies to any particular shipment.
The glossary defines F.O.B..
Questions
When does risk of loss pass to the buyer?
- Where the contract requires or authorizes shipment by carrier, UCC 2-509(1)(a) says risk passes when the goods are duly delivered to the carrier. If a particular destination is required, UCC 2-509(1)(b) says risk passes when they are there duly tendered while in the carrier's possession. This guide does not cover other cases.
What does the Code say about F.O.B. and risk?
- Unless otherwise agreed, UCC 2-319(1) treats F.O.B. at a named place as a delivery term. It names what the seller must do at its expense and risk under F.O.B. the place of shipment and under F.O.B. the place of destination.
Can an agreement change when risk of loss passes?
- UCC 2-509(4) makes the section "subject to contrary agreement of the parties" and to other provisions of the Code, on sale on approval and on the effect of breach on risk of loss. This guide does not cover those provisions. It explains cited text and is not legal advice.
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