In a shipment contract, when does title and risk of loss pass from Seller to Buyer:...

In a shipment contract, when does title and risk of loss pass from Seller to Buyer:

a) If the terms was FOB Shipping Point?

b) If the shipment term was FOB Destination?

Expert Solution

The term, FOB Shipping Point, indicates that the sale will occur at the shipping point - at the seller's shipping dock. FOB Destination indicates that the sale will occur when it arrives at the destination - at the buyer's receiving dock.

a)

1.If the terms was FOB shipping point, the title to the goods and risk of loss usually passes to the buyer at the shipping point - at the seller's shipping dock.

2.This implies that the title of goods and risk of loss is transferred from the seller to the buyer when the goods are placed on a delivery vehicle. Goods in transit should be reported as a purchase and as inventory by the buyer. The seller should report a sale and an increase in accounts receivable.

3.The seller is not responsible for the goods during delivery. The buyer is liable to pay the price even if the goods are lost in transit.

b)

1.If the terms was FOB Destination, the title to the goods and risk of loss usually passes to the buyer at the destination - at the buyer's receiving dock.

2.Once the goods are delivered to the buyer’s specified location, the title of ownership of the goods transfers from the seller to the buyer.

3. The seller legally owns the goods and is responsible for the goods during the shipping process. And only when the purchased shipment arrives in perfect condition, the buyer accepts it and consider the items as inventory in his system. The sale is officially complete at that point.

ekkarill92 answered 1 year ago

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