Rayco entered into a contract to buy Chia Pets from We Grow ‘Em. The contract specified that the shipment would be "F.O.B. destination; title to pass on the date of shipment." The goods were destroyed in transit to Rayco. Rayco argues that the loss is We Grow ‘Em's. Analyze the situation and determine who is liable for the loss
The question is who had the risk of loss at the time of loss. Ordinarily in a destination contract the risk of loss will not pass until the goods arrive and are tendered at the destination. In this transaction there is the aspect of the title transference, however. Under the UCC the transfer of title and that of risk of loss may be separated and, therefore, in the instant situation the title would have transferred upon shipment, but risk of loss continues to be controlled by the F.O.B. term. Under UCC Section 2-509 with F.O.B. destination, the risk of loss does not pass until the goods are tendered at the destination. Thus, We Grow ‘Em is liable for the loss.
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