Question

BUSINESS LAW (critical thinking legal question) Proffesional products, inc. (PPI), bought three pallets of computer wafers from Omneon Video Graphics. (A computer wafer is a thin, round slice of silicon from which microchips are made) Omneon agreed to ship the wafers to the City University of New York “FOB Omneon’s dock”. Shipment was arranged through Haas Industries, Inc. The “conditions of carriage” on the back of the bill of lading stated that Haas’s liability for lost goods was limited to fifty cents per pound. When the shipment arrived, it included only two pallets. Who suffers the loss? Is it fair for a carrier to limit its liability for lost goods? Explain

Answer 1

Risk of loss does not pass with the title under UCC and is generally determined by the contract and the terms in the contract determines who will have the risk of loss and pay the delivery of goods. In the case of FOB (Free on Board), the selling cost includes the transportation cost to the place indicated in the contract. As the named place in the contract is the place to which the goods are to be shipped, i.e. City University of New York, the contract is a destination contract. In the case of destination contract, the risk of loss passes to the buyer when the goods are tendered to the buyer at the specified destination. The risk of loss during transit to New York would be of the seller’s, Omneon Video Graphics. Hence the seller suffers the loss as it is a destination contract and the loss of goods happened while in transit. Haas’s liability for lost goods will be limited to fifty cents per pound based on the conditions mentioned.

The carrier has agreed to ship the products based on the special terms mentioned on the bill of lading and the seller has shipped by agreeing the conditions. If the seller has agreed its risk of loss while delivering the goods to the destination, there is nothing unfair in limiting the carrier’s liability through the conditions on bill of lading. Moreover it is the seller’s responsibility to ensure the sufficient number of goods while shipping. Hence it is fair for a carrier to limit its liability for lost goods.