The responsibility that a carrier, borrower or user of property or goods takes on if there is a damage or loss to the object is the risk of loss. An insurance company can also agree to insure the object against the risk of loss. The Uniform Commercial Code (UCC) § 2–509 allocates the risk of loss when there is no contractual breach, and shifts the risk of loss to the buyer when the seller or bailee take certain steps to deliver the goods in certain circumstances. UCC § 2–510 lays out when risk of loss passes to the buyer when one of the parties breaches the contract. The UCC only provides default rules, however, and parties may allocate the risk of loss between themselves as they wish through a contract provision. Parties may even require that one party obtains insurance to cover risk of loss.
[Last updated in December of 2020 by the Wex Definitions Team]