## Facts

- Nimeshbha Patel, an art collector, visited an Arizona gallery operated by American Fine Arts Edition, Inc. (AFAE) and agreed to buy two framed paintings for $15,000 plus tax.
- During the sale discussion, AFAE told Patel that AFAE would handle delivery to his doorstep, that the paintings would arrive in the same condition as in the gallery, and that Patel did not need to worry about shipping details.
- Patel allowed AFAE to ship the paintings using AFAE’s usual practices, but he declined AFAE’s offer to sell shipping insurance.
- Patel wrote his New Jersey address on the invoice. The invoice listed “Shipping Packing” as included in the price and stated under terms and conditions: “Ship to address above.”
- AFAE did not give Patel a tracking slip. AFAE said it would call Patel to tell him the delivery date, but AFAE did not call with shipping or delivery information.
- AFAE tendered the paintings to FedEx for delivery to Patel’s home using a service that required a direct signature by a responsible person at the delivery address.
- FedEx attempted delivery multiple times (10 attempts) and then recorded the shipment as delivered with a signature reading “N. Paterl.”
- Patel maintained that he never received the paintings. After learning of the alleged non-delivery, Patel disputed the credit card charges (chargebacks were processed), effectively rescinding payment.
- AFAE sued Patel (and also pursued claims involving FedEx in related proceedings) seeking the contract price for the paintings.
- The superior court ruled for AFAE, concluding the Patels bore the risk of loss once AFAE surrendered the paintings to FedEx in Arizona.
- Patel and his wife appealed.

## Issues

1. Whether the parties’ agreement, as shown by the invoice language and the parties’ understanding, required AFAE to deliver the paintings to Patel’s New Jersey address (a destination-type obligation) rather than merely place them with a carrier (a shipment-type obligation).
2. Whether, under Arizona’s UCC risk-of-loss rules, AFAE shifted the risk of loss to Patel when it delivered the paintings to FedEx in Arizona, despite Patel’s claim of non-receipt.
3. Whether the evidence of FedEx’s recorded delivery and signature (“N. Paterl”), together with Patel’s refusal of seller-offered insurance and AFAE’s control over shipment notice and tracking information, was sufficient to support judgment for AFAE for the purchase price.

## Decision

- The Arizona Court of Appeals reversed the judgment for AFAE and remanded for further proceedings.
- The court held the superior court erred by placing the risk of loss on the Patels simply because AFAE surrendered the paintings to FedEx at AFAE’s gallery.
- The invoice term “Ship to address above,” the inclusion of shipping/packing in the price, and AFAE’s statements that it would deliver to Patel’s doorstep supported treating the agreement as requiring delivery at the destination, not merely shipment.
- Under that type of agreement, AFAE retained the risk of loss until tender of delivery at Patel’s New Jersey address.
- The record did not establish that tender at the destination occurred in a way that shifted the risk to Patel, particularly where Patel asserted non-receipt and the delivery record reflected only a disputed signature (“N. Paterl”) rather than clear acceptance by Patel or proof of delivery to him.
- The court also considered that AFAE retained control over shipment information (declining to provide tracking details and failing to notify Patel of shipping and expected delivery), which left Patel without a meaningful chance to obtain his own cargo coverage after declining AFAE’s offered insurance.

## Legal Principles

- Under UCC Article 2 (as adopted in Arizona), risk of loss in a sales transaction depends on the parties’ agreement and, if the agreement is unclear, on default statutory rules.
- A shipment-type agreement generally shifts risk of loss to the buyer when the seller duly delivers conforming goods to the carrier.
- A destination-type agreement generally leaves risk of loss with the seller until the seller tenders delivery at the named destination.
- Contract interpretation looks to the written terms (such as an invoice) and the surrounding circumstances, including the seller’s promises about delivery and who controlled shipment arrangements.
- Carrier “proof of delivery” may be insufficient to establish tender to the buyer when receipt is disputed and the delivery record does not clearly show delivery to the buyer or an authorized recipient.

## Conclusion

American Fine Arts Edition, Inc. v. Patel reversed a trial court judgment that had made the buyer bear the loss of artwork that never reached him, holding that the seller’s invoice and assurances indicated an obligation to deliver to the buyer’s home and that the seller therefore kept the risk of loss until tender at the destination, which was not adequately proven on this record.


American Fine Arts Edition, Inc. v. Patel, 2010 WL 2889430 (2010)