Duty of honest contractual performance (or doctrine of abuse of rights)6
Duty of good faith (also implied covenant of good faith and fair dealing or duty to negotiate in good faith)7
Contract A and Contract B in Canadian contract law6
Related areas of law
Conflict of laws
Commercial law
By jurisdiction
Australia
Canada
China (mainland)
Ireland
India
Saudi Arabia
United Kingdom
England and Wales
Scotland
United States
Other law areas
Tort law
Property law
Wills, trusts, and estates
Criminal law
Evidence
Notes
1 Specific to common law jurisdictions
2 Specific to civil and mixed law jurisdictions
3 Historically restricted in common law jurisdictions but generally accepted elsewhere; availability varies between contemporary common law jurisdictions
4 Specific to the German Bürgerliches Gesetzbuch and other civil codes based on the pandectist tradition
5 Explicitly rejected by the UNIDROIT Principles of International Commercial Contracts
6 Specific to Canadian contract law both in Québec and in the country's common law provinces
7 Specific to civil law jurisdictions, the American Uniform Commercial Code, and Canadian jurisprudence in both Québec and the common law provinces pertaining to contractual and pre-contractual negotiation
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Risk of loss is a term used in the law of contracts to determine which party should bear the burden of risk for damage occurring to goods after the sale has been completed, but before delivery has occurred. Such considerations generally come into play after the contract is formed but before buyer receives goods, something bad happens.
Under the Uniform Commercial Code (UCC), there are four risk of loss rules, in order of application:
Agreement - the agreement of the parties controls
Breach - the breaching party is liable for any uninsured loss even though breach is unrelated to the problem. Hence, if the breach is the time of delivery, and the goods show up broken, then the breaching rule applies risk of loss on the seller.
Delivery by common carrier other than by seller.
Risk of loss shifts from seller to buyer at the time that seller completes its delivery obligations
If it is a destination contract (FOB (buyer's city)), then risk of loss is on the seller.
If it is a delivery contract (standard, or FOB (seller's city)), then the risk of loss is on the buyer.
In cases not covered by the foregoing rules, if the seller is a merchant, then the risk of loss shifts to the buyer upon buyer's "receipt" of the goods. If the buyer never takes possession, then the seller still has the risk of loss.[1]
In bankruptcy law, the risk of loss rule under a contract can be abrogated by a secured interest.[2]
^Uniform Commercial Code § 2-509(3)
^In re H.S.A., II, Inc. (GMAC Business Credit, L.L.C. v. Ford Motor Co.), 271 B.R. 534, 47 UCC Rpt.Serv. 747 (Banktcy. E.D. Mich. 2002).
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