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Similarly, it is sometimes necessary to determine who must bearthe risk of loss , or the responsibility for loss or damage to goods. Thereason is that goods may be stolen, damaged, or destroyed after thesales contract has been entered but before the transaction is completed.Title to goods cannot be transferred under a sales contract until thegoods have been identified. Identified goods are goods that presentlyexist and that have been set aside for a contract.After the goods are identified, title passes to the buyer when theseller does what is required under the contract to deliver the goods.Goods that are not both existing and selected are known as futuregoods , such as crops that are not yet grown or items that have not yetbeen manufactured. No one can have title to future goods. They mayonly be the subject matter of a contract to sell at a later date.TITLE ANDRISK OF LOSSUsually title and risk ofloss pass at the sametime. When do title andrisk of loss pass whenno delivery is required?Shipment ContractA shipment contract is one in which the seller turns the goods overto a carrier for delivery to a buyer. A carrier is a transportation company.In a shipment contract, the seller is not responsible for seeingthat goods get to their destination. Both title and risk of loss pass to thebuyer when the goods are given to the carrier (see Figure 13.3).Shipment contracts are often designated by the term f.o.b., whichdesignates the place of shipment, such as Boston (see Figure 13.4).The term f.o.b. , or free on board, means that goods will be deliveredfree to the designated place. The buyer must pay the freight chargesfrom the shipping point to the destination. Thus, f.o.b. Boston meansthat the seller will put the goods on freight cars or trucks in Boston,but the buyer will pay all expenses from there.At the shipping point, the goods become the responsibility of thebuyer. Title and risk of loss are transferred when the seller delivers thegoods to the carrier for shipment.Figure 13.3Passage of Title and Risk of LossTerms of Contract Title Passes Risk of Loss PassesShipment contract When goods are deliverd to carrier When goods are delivered to carrierDestination contract When goods are tendered at destination When goods are tendered at destinationNo delivery required When contract is made Merchant seller: When buyer receives goods;Nonmerchant seller: When seller tendersgoods to buyerDocument of title When document of title is given to buyer When document of title is given to buyerAgreement of the parties At time and place agreed upon At time and place agreed upon278 Unit 3: Understanding Consumer Law