What is meant by "shipment vs. destination contracts"?

"Shipment vs. destination contracts" refers to two different ways that risk is allocated in sales contracts during the transportation of goods. In a shipment contract, the risk of loss or damage to the goods transfers from the seller to the buyer as soon as the goods are handed over to a carrier for shipment. This means that once the seller has delivered the goods to a shipping company, they are no longer responsible for any loss or damage that may occur during transit.

In contrast, a destination contract stipulates that the risk of loss remains with the seller until the goods reach the specified destination and are made available to the buyer. Therefore, the seller bears the responsibility for any loss or damage until the goods are delivered and accepted by the buyer.

This distinction is crucial in commercial transactions because it impacts how parties manage risks associated with shipping, insurance, and delivery. Understanding these differences helps businesses determine their responsibilities and potential liabilities in the event of damage to the goods while in transit.