Question

Joe wants to buy a new car. Joe heads over to the nearby car dealership, CarCorp, and is greeted by a salesperson. The salesman takes Joe around the lot, until Joe finds a car he is interested in. They agree on a price, and a contract is signed. Part of the contract states that CarCorp will ship the Car to Joe’s home address. This contract is a shipment contract. CarCorp delivers the green car to TransEx, the carrier who transports the goods. While enroute, the TransEx vehicle is in an accident, and Joe’s car is damaged. Upon inspection of the damage (which totals about 4,000 in damage to the vehicle), The (damaged) car is delivered to Joe (at his home address). Joe is upset. Joe wants to sue. Can Joe successfully sue anyone? Why or why not? Who can Joe sue? On what grounds? Would your answer to the above questions change if it was a destination contract?

Answer 1

Joe cannot sue anyone successfully and can sue only the carrier for his loss subject to certain limitation as it is a shipment contract. In the case of shipment contract the title to the goods and the risk of loss passes from the seller to the buyer when the goods are delivered to the carrier. After the goods have been delivered to the carrier, the seller has no liability for or insurable interest in the goods. Here the contract entered by Joe with CarCorp is a shipment contract and hence Joe has to bear the risk of loss and pay the seller. Joe has recourse against only the carrier for damaging his car subject to certain limitations which include an insurable interest on the car as in a CIF contract where the price includes insurance also.

If it was a destination contract, the title as well as risk of loss passes to the buyer only when it is delivered to the buyer. Hence Joe can sue the car seller if a damaged car is delivered to Joe.