MBE Rules · Contracts
Risk of Loss
UCC §2-509, 2-510
The rule
Absent breach, risk passes on the seller's tender per shipment or destination terms, or for non-carrier sales on the buyer's receipt from a merchant seller; a breaching party bears risk to the extent of the aggrieved party's deficiency in insurance.
In plain English
The risk of loss in a contract typically transfers from the seller to the buyer when the seller has fulfilled their delivery obligations. If the seller breaches the contract, they remain responsible for the risk of loss to the extent that the buyer is not adequately insured.
Worked example
A seller ships a batch of goods to a buyer under a contract that specifies destination terms. The goods are damaged in transit, but the seller had already tendered the goods at the destination. Since the seller fulfilled their obligation, the risk of loss passes to the buyer, and the buyer must bear the loss.
Memory hook
Risk shifts with delivery; breach keeps it with the seller.
The trap
Exams often include scenarios where students must determine whether the seller's tender was adequate or if a breach occurred, which can be confusing.
How examiners test it
Questions frequently present fact patterns involving shipment terms and breaches, requiring candidates to analyze when the risk of loss transfers.
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