Seller (a merchant in Chicago) sells goods to Buyer (in New York) with shipping terms 'F.O.B. Chicago'. The goods are destroyed in transit. Who bears the risk of loss?

Answer options:

Seller, because the goods were not yet received by Buyer.

Buyer, because risk of loss passed when goods were delivered to the carrier.

Seller, because they are a merchant.

Shared equally.

How to approach this question

Identify F.O.B. term. F.O.B. [Place of Shipment] = Shipment Contract (Risk passes at carrier). F.O.B. [Destination] = Destination Contract (Risk passes at tender to buyer).

Full Answer

B.Buyer, because risk of loss passed when goods were delivered to the carrier.✓ Correct

F.O.B. Chicago (Seller's city) indicates a shipment contract. Risk of loss passes to the buyer when the seller puts the goods in the possession of the carrier.

Common mistakes

Thinking F.O.B. always means risk passes at destination.

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