Risk of Loss
Definition - What does Risk of Loss mean?
Risk of loss is the duty to make financial reparations for the destruction, theft or any other damage to or loss of specified property that occurs after a contract is created, but before it is fulfilled. Depending on the circumstances, it can be legally assigned to the buyer, carrier, seller or an insurance company.
Justipedia explains Risk of Loss
The Uniform Commercial Code (UCC), which is applicable in most states, assigns risk of loss based on several criteria. These are:
- Who controls/has authority over the item(s)
- Who is more likely to insure them
- Whether or not anyone violated the terms of the contract
Section 2-509 of the UCC specifies what happens if no one breached the contract. As set forth in this section, risk of loss is assigned to the buyer in most circumstances.