Question

Harrison, a men’s clothing retailer located in Westport, Connecticut, ordered merchandise from Ninth Street East, Ltd., a LA based clothing manufacturer. Ninth Street delivered the merchandise to Denver-Chicago Trucking Company (Denver) in LA and then sent four invoices to Harrison that bore the notation “F.O.B. Los Angeles”. Denver subsequently transferred the merchandise to a connecting carrier, Old Colony Transportation company, for final delivery to Harrison’s Westport store. When Old colony tried to deliver the merchandise, Harrison’s wife asked the truck driver to deliver the boxes inside the store, but the driver refused. The dispute remained unresolved, and the truck departed with Old Colony still in possession of the goods. By letter, Harrison then notified Ninth Street of the nondelivered, but Ninth Street was unable to locate the shipment. Ninth Street then sought to recover the contract purchase price from Harrison. Harrison refused, contending that risk of losses remained with Ninth Street because of its refusal to deliver the merchandise to Harrison’s place of business.

            What are the argument that the risk of loss remained with Ninth Street?

            What are the arguments that the risk of loss passed to Harrison?

            What is the appropriate outcome?

Answer 1

As per Uniform Commercial Code § 2-509(3) "if the seller is a merchant, then the risk of loss shifts to the buyer upon buyer's "receipt" of the goods. If the buyer never takes possession, then the seller still has the risk of loss. "

The Risks of Loss passed to Harrison, since the invoice sent specifically mentioned F.O.B. Los Angeles.

§ 2-319 provides that:

(a) when the term is F.O.B. the place of shipment, the seller must at that place ship the goods in the manner provided in this Article (Section 2-504) and bear the expense and risk of putting them into the possession of the carrier; or

(b) when the term is F.O.B. the place of destination, the seller must 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 (Section 2-503).

Since the seller has put the goods in possession of the Carrier, the Risks of Loss was passed to buyer Harrison.

The appropriate outcome would be Harrison should bear the Risks of Loss

The Contract doesnot specifically mentioned it to be a destination contract, thus the contract is a delivery contract and the risks of loss is of the buyer i.e Harrison.

since when contract which contains no express mandate that the goods be delivered at a specifically delineated destination is not a “destination” contract, the buyer assumes the risk of loss, pursuant to the Code provisions, upon the delivery of the goods to the carrier. Caveat Emptor!