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Simple English definitions for legal terms
risk of loss
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A quick definition of risk of loss:
Term: Risk of Loss
Definition: When you have something that belongs to you, like a toy or a book, you are responsible for taking care of it. If something bad happens to it, like it gets lost or broken, that's called the risk of loss. Sometimes, people can buy insurance to protect their things from the risk of loss. There are rules called the Uniform Commercial Code that say who is responsible for the risk of loss when people buy and sell things. But, people can also make their own rules about who is responsible for the risk of loss by making a special agreement called a contract.
A more thorough explanation:
Definition: Risk of loss refers to the responsibility that a carrier, borrower, or user of property or goods takes on if there is damage or loss to the object. For example, if you borrow your friend's bike and it gets stolen, you are responsible for the risk of loss. An insurance company can also agree to insure the object against the risk of loss.
The Uniform Commercial Code (UCC) § 2–509 allocates the risk of loss when there is no contractual breach, and shifts the risk of loss to the buyer when the seller or bailee take certain steps to deliver the goods in certain circumstances. UCC § 2–510 lays out when risk of loss passes to the buyer when one of the parties breaches the contract. The UCC only provides default rules, however, and parties may allocate the risk of loss between themselves as they wish through a contract provision. Parties may even require that one party obtains insurance to cover risk of loss.
Example: Let's say you order a new laptop online. The seller ships the laptop to you, but during transit, the laptop is damaged. In this case, the risk of loss would be on the seller because they have not yet delivered the laptop to you. However, if the laptop was delivered to your doorstep and then stolen, the risk of loss would be on you as the buyer because the seller has fulfilled their obligation to deliver the laptop to you.