Law: The Risk of Destruction and Deterioration

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The issue in this case is whether the risk of destruction and deterioration had passed onto Bagio, the buyer, or remained with ProformAgric, the seller.

Generally, risk and benefit pass to the buyer on transfer of possession and ownership (assuming these occur simultaneously). The general rule is that the risk and benefit pass to the buyer as soon as the sale is “perfecta”, meaning that the agreement is unconditional and the identity, quality, quantity and price of the thing sold are certain readily ascertainable. Because contracts vary, parties can expressly agree that risk and benefit will pass either before or after delivery. Nugent AJA in Islando Foods v Fedgen Insurance opined that the general position of the law was that risk passed to the buyer once the contract had been ‘perfected’, even where delivery had not yet taken place. However, the risk envisaged was the risk of damage through no fault of the seller, that is, the risk of damage by vis major, casus fortuitus or third party damage- not the risk of damage by a negligent seller.

In the scenario involving Bagio, the sale...

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