Who Bears the Risk? Understanding Risk of Loss Under NY UCC
When goods are sold and shipped, one critical question arises: Who is responsible if the goods are lost or damaged during transit? The answer depends on the shipping terms agreed upon by the parties, as outlined in the New York UCC.
Understanding UCC §§2-509 and 2-510:
Risk of Loss:
Refers to the responsibility for goods that are lost, damaged, or destroyed during shipment.
Shipping Terms Define Risk Allocation:
Shipment Contracts (FOB Shipping Point):
Definition: Seller is required to ship the goods, but not deliver them to a specific destination.
Risk Transfer: Risk of loss passes to the buyer when the goods are delivered to the carrier.
Example: Once the seller hands over the goods to FedEx, the buyer assumes the risk.
Destination Contracts (FOB Destination):
Definition: Seller must deliver the goods to a specified destination.
Risk Transfer: Risk of loss remains with the seller until the goods are tendered at the destination.
Example: The seller is responsible until the goods arrive at the buyer's warehouse.
Importance for Merchants:
Contract Clarity:
Clearly specifying shipping terms in the contract avoids confusion and disputes.
Insurance Considerations:
Knowing when the risk transfers helps in deciding who should insure the goods during transit.
Financial Protection:
Understanding risk allocation prevents unexpected losses.
Key Takeaways:
Always specify shipping terms (FOB Shipping Point or FOB Destination) in your contracts.
Be aware of when the risk of loss transfers to plan accordingly.
Consider obtaining appropriate insurance to cover potential risks during transit.
Disclaimer:
This article is for informational purposes only and does not constitute legal advice. Although I am an attorney, I am not your attorney, and reading this article does not create an attorney-client relationship. For advice pertaining to your specific situation, please consult a qualified attorney licensed in your area.
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