BLTC-9e Sample Answers for End-of-Chapter Hypothetical Questions with Sample Answer

Chapter 19: Title and Risk of Loss

19.2 Hypothetical Question with Sample Answer

When will risk of loss pass from the seller to the buyer under each of the following contracts, assuming the parties have not expressly agreed on when risk of loss would pass?

1 A New York seller contracts with a San Francisco buyer to ship goods to the buyer F.O.B. San Francisco.

2 A New York seller contracts with a San Francisco buyer to ship goods to the buyer in San Francisco. There is no indication as to whether the shipment will be F.O.B. New York or F.O.B. San Francisco.

3 A seller contracts with a buyer to sell goods located on the seller’s premises. The buyer pays for the goods and arranges to pick them up the next week at the seller’s place of business.

4 A seller contracts with a buyer to sell goods located in a warehouse.

Sample Answer:

1 In a destination contract, the risk of loss passes to the buyer when the goods are tendered to the buyer at the specified destination—in this case, San Francisco.

2 In a shipment contract, if the seller is required or authorized to ship goods by carrier, but the contract specifies no locale, the risk of loss passes to the buyer when the goods are duly delivered to the carrier.

3 If the seller is a merchant, risk of loss to goods held by the seller passes to the buyer when the buyer actually takes physical possession of the goods. If the seller is not a merchant, the risk of loss to goods held by the seller passes to the buyer on tender of delivery.

4 When a bailee is holding goods for a person who has contracted to sell them and the goods are to be delivered without being moved, risk of loss passes to the buyer when (1) the buyer receives a negotiable document of title for the goods, (2) the bailee acknowledges the buyer’s right to possess the goods, or (3) the buyer receives a nonnegotiable document of title and has had a reasonable time to present the document to the bailee and demand the goods. (If the bailee refuses to honor the document, the risk of loss remains with the seller.) If the goods are to be delivered by being moved, but the contract does not specify whether it is a destination or a shipment contract, it is presumed to be a shipment contract. If no locale is specified in the contract, risk of loss passes to the buyer when the seller delivers the goods to the carrier.