WHO BEARS THE RISK OF LOSS IN A CONTRACT OF SALE?

Read also: DOES GROSS INADEQUACY OF PRICE AFFECT A CONTRACT OF SALE?

• If the thing is lost before perfection, the seller and not the one who intends to purchase it bears the loss.

• If the object is lost after perfection but before delivery, the buyer bears the loss.

• If the thing is lost after delivery, the buyer bears the risk of loss.

In a contract of sale, in case the object is lost, who should be the one to bear the loss?

Under the Civil Code:

A thing is considered as lost when it:

1. Perishes;
2. Goes out of commerce; or
3. Disappears in such a way that its existence is unknown or cannot be recovered

However, in an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the obligation.

Civil Code further provides that in case of loss, unless otherwise agreed, the goods remain at the seller’s risk until the ownership therein is transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the buyer’s risk whether actual delivery has been made or not, except that:

1. Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of the contract and the ownership in the goods has been retained by the seller merely to secure performance by the buyer of his obligations under the contract, the goods are at the buyer’s risk from the time of such delivery.
2. Where actual delivery has been delayed through the fault of either the buyer or seller, the goods are at the risk of the party in fault.

The risk of loss of specific goods is borne by the seller as a general rule, until ownership is transferred.

 Accordingly, if the object has been lost before perfection, the seller bears the loss. The reason for this is that, there was no contract, for there was no cause or consideration. Being the owner, the seller bears the loss. This means that he cannot demand payment of the price.

If the object was lost after delivery to the buyer, clearly the buyer bears the loss. (Res perit domino — the owner bears the loss.)

If the object is lost after perfection but before delivery. Here the buyer bears the loss, as exception to the rule of res perit domino. The reason for this is that had the sale been perfected, the buyer would have borne the loss, that is, he would still have had to pay for the object even if no delivery had been made. 

---

Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

All rights reserved.

---

SUBSCRIBE NOW FOR MORE LEGAL UPDATES!

[email-subscribers-form id=”4″]