(1885) 10 App. Cas. 263.
HOUSE OF LORDS
The case involved a bulk consignment of sugar shipped f.o.b. Hamburg, on board the City of Dublin, for Bristol. The ship and entire consignment were lost after shipment, after which the seller appropriated to the respondent buyer's contract the 200 tons due under that contract, and the remaining 190 tons on board the same vessel to another contract (under which - unbeknown to both the seller and the respondent - the respondent was also the ultimate purchaser). The goods were then paid for by the buyer (the price being variable depending on saccharine content).
The action was not between buyer and seller, but related to the buyer's insurance policy. He was insured in floating policies upon "any kind of goods and merchandises" between Hamburg and Bristol, and the issue was whether he had an insurable interest in the goods.
Held:
The buyer had an insurable interest in the goods because they were at his risk from shipment under an f.o.b. contract. Because the goods were at the buyer's risk from shipment, he could claim on the policy, since in the event of the non-arrival of the goods, the buyer would suffer a financial loss.
Note:
The case is the best authority that in an f.o.b. sale risk passes from shipment. This had been known for some time, because delivery f.o.b. is to the ship, and had the contract been for specific goods no issue would have arisen, but the goods here were unascertained, and therefore property could not have passed by the time the damage occurred.
Though the seller's obligations under the sale contract were not directly at issue, there are dicta, especially in the speech of Lord Blackburn, that he was entitled to appropriate to the buyer's contract goods which he knew to be lost. (Note that the seller had in fact appropriated 200 tons of sugar which had been destroyed, to perform his contract with the buyer.)
An argument was rejected that the seller was in breach of contract by allowing the cargoes to become mixed, and that therefore he (rather than the buyer) should bear the risk of loss on the voyage.
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