When does risk transfer occur for goods sold in transit?

Risk transfer for goods sold in transit typically occurs at the point when the contract for sale is established. This concept is rooted in the principles of contract law and the terms laid out in the sale agreement, which outline the specific responsibilities and liabilities of the parties involved.

Once a contract for sale is in place, it identifies the key terms, including risk of loss. The contract may specify when the buyer assumes risk—such as upon shipment, arrival, or at another defined stage in the transaction. This is important because, in commercial transactions, the ownership of goods does not always equate to the transfer of risk; understanding when the risk shifts is crucial for both parties in managing potential losses.

Negotiation or signing an agreement does not inherently transfer the risk, as risk is contingent upon the terms defined within the contract. Therefore, the moment the contract is established is crucial, as it lays the groundwork for any subsequent actions regarding the goods, including who bears the risk of loss during transit.