Risk of loss 1. ethicon, inc., a pharmaceutical company, entered into an agreement with ups supply chain solutions, inc., to transport pharmaceuticals. the drivers were provided by international management services co. under a contract with a ups subsidiary, worldwide dedicated services, inc. during the transport of a shipment from ethicon's facility in texas to buyers "f. o.b. tennessee," one of the trucks collided with a concrete barrier near little rock, arkansas, and caught fire, damaging the goods. who was liable for the loss? why? when was the relevant contract formed? 2. when parties don't agree on when the risk of loss passes, the provides special rules. 3. when there is no agreement, the risk of loss passes to the buyer . 4. did the parties agree on who bears the risk of loss? 5. how was delivery to occur? 6. f. o.b. is an acronym for what? 7. what kind of delivery contract is this? 8. under this type of contract, risk of loss would pass to the buyer when . 9. when were the pharmaceuticals damaged? 10. who bears the risk of loss? 11. what if the facts were different? what if the pharmaceuticals were damaged in the buyer's facility in tennessee? would the result be the same? 12. why?

Case Summary

El entered into an agreement with USCS for transporting pharmaceuticals. However, contract was done with USCS's subsidiary W. Drivers for transporting were provided by company IM. However, during transit of order from El's facility to buyer "F.O.B. T', a truck caught fire and destroyed due to an accident.

Liability for the loss is to be determined.

Risk of loss:

If a contract does not specify the terms for passing of risk of loss, an intervention by court is needed. In such cases. UCC states special rules and provisions and also interpret the terms of contract. Under UCC merely passing with title do not constitute passing risk of loss.

Destination contract:

These are the contracts where a seller is obligated to deliver the goods to buyer. Risk of loss can be passed either to seller or the buyer, depending upon the situation of delivery. If goods are tendered to buyer at specified location then, risk of loss passes to buyer. However. any loss of goods-in-transit will pass to seller.

Liability for Contracts:

In order for the principal to be liable to contracts formed by the agent with third parties the following must occur:

The agent is personally liable if the principal's identity is undisclosed at the time of contract formation. However, if the agent acted within the scope of authority, the principal may also be bound by the contract.

Legal Reasoning:

In this case, contract between El and USCS was a destination contract, which was destined

T". Transport service was provided from W (a subsidiary of USCS) but, drivers were from company IM. Thus, drivers were acted as agents on the behalf of principal "company IM". Also, as this was a destination contract and goods were destroyed due to the accident of truck when in-transit, El is not liable for loss in any case.

Now, referring to complete case of Royal & Sun Alliance Insurance, PLC (RSA) V. International Management Services Co. (IMS), 703 F.3d 604 (2d Cir. 2013), the issue observed was that the court decided whether a third-party contractor (IMS or company IM) is entitled to receive the benefit of a liability limitation in a contract between a shipper and a carrier where, the contract does not extend the limitation to third parties

The court found that liability limitations extend to third-party contractors only if the contract clearly states that they do. However, court found in favor of RSA and ordered IMSCO (or company IM) to pay damages plus interest.

Therefore, since IMS or company IM was not a party to the contract between RSA and UPSC IMS or company IM was separately liable from UPSC for the loss. This exposed IM to a greater liability under its own terms and was not covered by the agreement between RSA and UPSC.

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