Question

In: Operations Management

A seller contracted to sell lumber to the buyer. The contract was a destination contract and the goods were to be shipped by common carrier.


 A seller contracted to sell lumber to the buyer. The contract was a destination contract and the goods were to be shipped by common carrier. The lumber was destroyed by fire before it was delivered to the buyer. Which of the following statements best describes this situation?

  •  The risk of loss has not yet passed to the buyer and remains on the seller until the goods are delivered. 

  •  The risk of loss passed to the buyer when the contract was made.

  •  The risk of lass passed to the buyer when the goods were delivered to the common carrier.

  •  The risk of lass remains on the seller until a document of title is delivered to the buyer.


Solutions

Expert Solution

Answer: The risk of loss has not yet passed to the buyer and remains on the seller until the goods are delivered

Explanation:

The risk of loss does not necessarily pass with the title and it is determined by the contract between the parties. Here the contract is a destination contract. The risk of loss passes from the seller to the buyer in destination contracts when the goods are tendered to the buyer at the specified destination. As the lumber was destroyed before it was delivered to the buyer, risk of loss did not pass to the buyer and remains on the seller.

keosha answered 2 years ago
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