When does title of the product transfer to the buyer?

| DRC

The DRC Help Desk often receives calls from shippers asking if they can have the product back after the buyer has expressed discontent over its quality or condition upon arrival.  The simple answer to this question is no.

There is a very close relationship between risk, control, and title which is discussed further below.

Delivered* (destination transfer of risk)

On a Delivered transaction, the shipper maintains control of the product until arrival at final destination.   Prior to delivery, a call to the transportation company to have the product returned or redirected to an alternate receiver could be made. The risk of taking either of these actions without reasonable cause, is that the buyer may claim damages including the purchase of replacement product because the shipper did not fulfill the contract. However, once the buyer accepts the load, they are under no obligation to give it back.

FOB* (shipping point transfer of risk)

On an FOB transaction, the shipper loses control over the product and transit risk transfers to the buyer when the buyer’s transportation company picks up the load at the named origin and starts conveyance to the final destination. Therefore, the only ways the shipper can have the product back is if the buyer agrees to give it back or if the buyer rejects and follows the proper procedures to reject the load. Section 10 – Dealers Duties – of the DRC Trading Standards details the procedure to reject the load as long as the buyer has not committed an act of acceptance as indicated in Section 19.1.    it is important to note that the buyer, having assumed the transit risk at shipping point, may not make a proper rejection unless transit time and temperatures are normal.

*We have used the North American contract terms, not ICC Incoterms for this explanation.