[JimmySungChen]

Hey guys, I am very confused by one concept in UCC Sales Article:

Question: Lazur Corp. agreed to purchase 100 radios from Wizard Suppliers, Inc. Wizard is a wholesale of small home appliances and Lazur is an appliance retailer. The contract required Wizard to ship the radios to Lazur by common carrier, “F.O.B. Wizard Suppliers, Inc. Loading Dock.”

Under the UCC Sales Article:

The correct asnwer is

a. Title to the radios passes to Lazur at the time thy are delivered to the carrier, even if the goods are nonconforming.

Now we who studied Business Law all know, that if the goods are nonconforming, regardless of the shipping terms, the risk of loss stays with the seller, right? So I am confused and the only reason I can see that this is possibly right is because that the buyer is a retailer, so this is is a sale with return (consignment)? Please let me know if this is the correct reason behind this answer that the textbook has preached against.

Thank you!

[MaLoTu]

I was wondering the same thing. They always throw twists in. I am wondering if it is because in shipping the buyer doesn't know that they are nonconforming and therefore they assume liability at the carrier per the agreement… That is my best guess. They will still have to right to refuse.

Almost always from my phone... please excuse my typos!

All 4 passed - 2016

CA CPA

[Thrawn]

Risk of Loss and Title transfer at FOB shipping point in this case. Now, if the buyer rejects the goods after delivery to his place of business then the title and risk of loss revert to the seller. But as there is no way of determining that they are non-conforming until delivery and inspection the presumption is that they conform and title passes because that is how title and risk pass under UCC when two merchants are involved.

BEC 87 Feb 14
REG 84 Apr 14
FAR 82 Nov 14
AUD 86 Feb 15

[No_one]

Contract terms decide who will posses risk of loss. Here the term is FOB seller's dock, So even if it's non conforming good (They will be non confirming once they reach buyer and buyer check them right) during shipment from seller's dock until it reaches buyer, risk of loss is with buyer.

Once buyer says its non confirming, risk reverts back to Seller.

Hope it helps.

CA Candidate
FAR: You are down...
Aud: Surprised me...Thanks
BEC: 75% work done
REG: It's 80 but I am 100% done 🙂

[WeWillSee]

If the goods are nonconforming the risk of loss stays with the seller until accepted by the buyer.

In the answer they are talking about the title to the goods (not the risk), which will pass to the buyer as long as the delivery requirements have been met.

If the buyer rejects the goods, then the title revests with the seller when rejected. The risk of loss has remained with the seller the whole time.

[Author]

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