Acme Pharmaceutical Company (APA) has discovered, after years of research, that the bark of the samosa tree, found only in the highlands
of Papua New Guinea, has remarkable curative effects on some forms of cancer when processed under a variety APA's patented processes.
Rain Forest Inc. provides APA with the procuring and shipping of the raw bark to APA's production labs in St. Louis. The bark, by the way,
can also be used for beautiful furniture accessories such as wood trim, table veneers, and picture frames.
On January 1, APA orders 700 pounds of bark from Rain Forest. Rainforest harvests one ton of the bark on January 20 and ships the ton of
bark, via freighter, to the port of Long Beach CA. At its facilities in Long Beach, Rain Forest divides up the bark into rail cars: 700 pounds to
be shipped to APA FOB St. Louis. The remainder is shipped via rail to High Point, North Carolina to High Point Fine Furniture. This shipment
is FOB Long Beach.
En route to their respective destinations, both trains coincidentally derail. The one to St. Louis due to a lightning strike; the one to High Point
due to the negligence of an Overland Railway employee who flipped a switch causing the Nashville TN to separate and thus causing the
The loss caused by the St. Louis-bound train derailment falls on Rainforest since it had title, risk of loss, and an insurable interest.
Since the shipment on the train to High Point was designated FOB Long Beach, the risk of loss remained back in Long Beach with the
seller Rain Forest, Inc. though Rain Forest, Inc. can hold Overland Railway liable for the employee's negligence.
What APA is unaware of is that Rain Forest, Inc. stole the bark from a private forest reserve. APA entered into the contract with Rain
Forest, Inc. in good faith and completely unaware of the theft. Once delivered, APA paid Rain Forest,Inc. in full. As such, APA now has
good title to the bark under the good faith rule.