BLAW - Chapter 22b

BLAW - Chapter 22b - RISK OF LOSS Risk of loss is the term...

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RISK OF LOSS Risk of loss is the term used in the law of sales, and it addresses the question of allocation of loss between seller and buyer where the goods have been damaged, destroyed, or lost without the fault of either the seller or the buyer. o If the risk of loss is placed on the buyer, he is under a duty to pay the price for the goods even though they were damaged or he never received them o If the risk of loss is placed on the seller, she has no right to recover the purchase price from the buyer, although she does have a right to the return of the damaged goods. The parties can write, in their contract, which party will bear the risk of loss at different times during the transaction. The UCC rules come into play when the contracts do not clearly spell out such issues Under the common law, risk of loss falls upon the party who has title to the goods when the goods are damaged. The UCC has a much more complex set of rules (under §2-509 and §2-510). UCC General Rule of Thumb for Risk of Loss: When neither party has breached the contract, the risk of loss generally passes from the seller to the buyer when the seller has transported the goods as far as he is obligated to do so under the contract. Some key questions that will need to be answered in order to determine risk of loss are the following: o Whether there is a breach by the buyer or seller? o Whether the seller is a merchant? o Whether the goods are to be shipped by a carrier? o Whether it is a goods in bailment contract? The first important distinction is to determine whether one of the parties has breached the contract. Risk of Loss when there is No Breach In a “ simple delivery” sales contract, the buyer and seller contract, and the goods are transported without using a common carrier. The question of which party bears the risk of loss depends on whether the seller is a merchant or a non-merchant:
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This note was uploaded on 05/31/2010 for the course ACCT 1237 taught by Professor Hillman during the Spring '10 term at Drake University .

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BLAW - Chapter 22b - RISK OF LOSS Risk of loss is the term...

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