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What Is the Effect of Perishing of Goods on the Contract of Sale

When it comes to the contract of sale, the perishing of goods can have significant effects on both the buyer and the seller. This is because perishing, which refers to the destruction or deterioration of goods, can result in the inability to deliver or receive the goods as agreed upon in the contract.

Under the Uniform Commercial Code (UCC) in the United States, the perishing of goods is governed by Section 2-613, which provides specific rules for determining the effects of perishing on a contract of sale. Let’s take a closer look at what these rules entail.

Seller’s obligations

If the goods perish before the risk of loss passes to the buyer, the seller is excused from their obligation to deliver the goods. This means that the seller is not liable for failing to deliver the goods as agreed upon in the contract.

However, if the seller has already shipped the goods and they perish while in transit, the seller may still be liable if they did not properly identify the goods and make arrangements for their delivery.

Buyer’s obligations

If the goods perish after the risk of loss passes to the buyer, the buyer is still obligated to pay for the goods unless the contract specifically states otherwise. This is because the buyer assumes the risk of loss once the goods are delivered.

However, if the buyer had already paid for the goods and they perish before delivery, the buyer is entitled to a refund of their payment.

Effects on the contract

If the goods perish before the contract is formed, the contract is automatically voided because there are no goods to sell.

If the goods perish after the contract is formed but before delivery, the contract is still valid but may be unenforceable if one of the parties cannot perform their obligations.

If the goods perish after delivery, the contract is fully executed and the obligations of the parties have been fulfilled.

In conclusion, the perishing of goods can have significant effects on the contract of sale. It is important for both buyers and sellers to understand their obligations and rights under the UCC and to include specific provisions in their contract regarding the perishing of goods to avoid disputes and misunderstandings.