shipment contract

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Under Article 2 of the Uniform Commercial Code a shipment contract is one way in which buyer and seller could contract to allocate risk of loss between buyer and seller when goods are lost or damaged before the buyer obtains them from the seller and neither buyer nor seller is to blame for the loss. With a shipment contract, the buyer bears the risk of loss for the goods prior to actually receiving them. Here, the seller's only duty is to get the goods to a common carrier and make proper delivery arrangements for the goods to get to the seller. After this, under a shipment contract, if any loss occurs the buyer bears the risk of loss and is responsible for the costs. A shipment contract could be identified with language stating it is free on board and the city where the seller is located.

[Last updated in June of 2024 by the Wex Definitions Team]