Legal Definitions - destination contract

A destination contract is a legal agreement for the sale of goods where the seller explicitly promises to deliver the purchased items directly to a specific location designated by the buyer. Under this type of contract, the seller retains full responsibility for the goods, including any risk of loss or damage, until they successfully arrive at the buyer's specified destination and are made available to the buyer.

This means that if the goods are lost, stolen, or damaged while in transit, the seller is financially responsible for the loss. They must either replace the goods or issue a refund to the buyer. Destination contracts are commonly used in transactions governed by the Uniform Commercial Code (UCC) and are often indicated by terms such as "FOB Destination" (Free On Board Destination) or "FOB [Buyer's Address]," which signify that the seller's responsibility extends until the goods reach the buyer's specified location.

Here are some examples illustrating a destination contract:

• Example 1: Appliance Store Delivery

  A customer purchases a new washing machine from a large electronics and appliance store. The sales agreement specifies that the store will deliver the washing machine to the customer's home and install it. During the delivery process, the store's truck is involved in a minor accident, and the washing machine is damaged beyond repair before it ever reaches the customer's driveway.

  How it illustrates the term: This is a destination contract because the store (seller) committed to delivering the washing machine directly to the customer's home (the specified destination). Since the damage occurred before the item reached the buyer's location, the store bears the risk of loss. The store is responsible for replacing the damaged washing machine at no additional cost to the customer.

• Example 2: Business Equipment Purchase

  A construction company orders a specialized concrete mixer from a manufacturer located in another state. The purchase order explicitly states "FOB Construction Site" and includes the manufacturer arranging and paying for all shipping to the construction company's project site. While the mixer is being transported by a third-party freight carrier, it falls off the truck and is severely damaged.

  How it illustrates the term: This scenario represents a destination contract. By agreeing to "FOB Construction Site," the manufacturer (seller) has taken on the responsibility for the mixer until it safely arrives at the buyer's specific location. Because the damage occurred during transit and before reaching the construction site, the manufacturer is responsible for the loss and must either send a new mixer or refund the construction company, as the risk of damage had not yet transferred to the buyer.

• Example 3: Online Furniture Retailer

  An individual orders a custom-made sofa from an online furniture retailer. The retailer's website and order confirmation state that they provide "white-glove delivery" directly to the customer's living room. On the scheduled delivery day, the delivery team arrives but informs the customer that the sofa was somehow lost from their truck during the final leg of the journey.

  How it illustrates the term: This is a destination contract. The online retailer (seller) promised to deliver the sofa directly to the customer's residence and even place it in their living room (the ultimate destination). Since the sofa was lost before it could be delivered to the customer's home, the retailer bears the risk of loss. The retailer is obligated to either locate the sofa, send a replacement, or issue a full refund to the customer.