Fred Ltd and George Ltd agree a contract upon which the former sells 10,000 barrels of oil to the latter with no advance payment. The parties have dealt successfully on good terms for many years and have never felt the need to formalise when the risk should pass in their arrangements. Unfortunately, in advance of separating the requisite oil barrels ready for delivery, arsonists destroy one of Fred Ltd’s oil depots, inclusive of stock. Which of the following most appropriately describes what follows from this per the Sale of Goods Act 1979?

(a) As the risk automatically passes on acceptance, at the time the goods were destroyed the risk would lie with George Ltd as the buyer and, with the goods being unascertained, Fred Ltd would bear the loss and George Ltd need not pay the contract price.

(b) Because the parties have not agreed on when the risk should pass the risk will pass with ownership, and at the times the goods were destroyed and, with the goods being specific, if Fred Ltd breaches the contract by failing to deliver replacement goods then Fred Ltd would bear the loss, and George Ltd need not pay the contract price.

(c) Because the parties have not agreed on when the risk should pass the risk will pass with ownership, and at the times the goods were destroyed and, with the goods being unascertained, if Fred Ltd does deliver replacement goods then Fred Ltd would bear the loss and George Ltd must accept the goods and pay the contract price.

(d) The contract is frustrated and the loss lies where it falls, hence, Fred Ltd will bear the loss and George Ltd need not pay the contract price.

provide a detailed explanation of how you have arrived at your designated correct answer including why you have dismissed the other options.

Answer rating: 100% (QA)

The most appropriate answer for this situation is c Because the parties have not agreed on when the ... View the full answer