Sales and Leases | 105
Rule if Goods Are Identified to the Contract While in Transit In a shipment contract, and unless otherwise agreed, if goods are identified to the contract while in transit, then the risk of loss passes to the buyer at the time of identification. This rule applies regardless of when the goods were shipped. For instance, the seller may buy the goods while they are afloat on a ship and then divert the shipment to the buyer. [U.C.C. § 2-509, cmt. 2 (1951); 2 Hawkland UCC Series § 2- 509:3, Westlaw (database updated June 2021).] b. Risk of Loss in a Destination Contract In a destination contract, the risk of loss passes to the buyer when the goods are duly tendered to the buyer at the particular destination while in the carrier’s possession. The goods must, however, be tendered to the buyer in such a way as to enable the buyer to take delivery. Here, conforming goods must be made available to the buyer at a reasonable place and time, and the buyer must receive any notice necessary for her to take delivery. Finally, the seller must tender any documents necessary for the buyer to obtain delivery. [U.C.C. § 2-509(1)(b) (1951); 2 Hawkland UCC Series § 2-503:3, Westlaw (database updated June 2021).] c. Shipping Contract v. Destination Contract If the contract requires or authorizes the seller to ship the goods by carrier, courts generally presume that the contract is a shipment contract—even if the contract specifies a particular address for shipment. This presumption is generally overcome, and the contract is deemed a destination contract, if either (1) the contract explicitly places on the seller the obligation to make delivery at a specific location, as opposed to merely stating a shipment destination, or expressly keeps the risk of loss on the seller until delivery to the buyer at the specified location, or (2) the contract uses an industry term commonly recognized to create a destination contract. As for industry terms, F.O.B. means free on board. The term “F.O.B. destination” or “F.O.B. the place of destination” indicates a destination contract. [ See U.C.C. § 2-319(1)(b) (1951); Windows, Inc. v. Jordan Panel Systems Corp. , 177 F.3d 114 (2d Cir. 1999); Deiter v. Coons , 394 P.3d 87 (Idaho 2017); 2 Hawkland UCC Series § 2-319:2, Westlaw (database updated June 2021).]
3. Rule if a Bailee Holds the Goods for Delivery without Moving the Goods
Special rules apply if the goods are held by a bailee for delivery without being moved. Here, the risk of loss passes to the buyer:
when the buyer receives a negotiable document of title covering the goods;
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