## Facts

- Jason’s Foods, Inc. agreed to sell Peter Eckrich & Sons, Inc. about 38,000 pounds of pork ribs stored in an independent cold-storage warehouse.
- The parties contemplated “delivery without being moved,” accomplished by transferring the ribs “on paper” from Jason’s warehouse account to Eckrich’s account.
- Jason’s told Eckrich the transfer would occur between January 10 and January 14.
- On January 13, Jason’s instructed the warehouse by telephone to transfer the ribs to Eckrich’s account, and a warehouse clerk recorded the transfer in the warehouse’s books that day.
- The warehouse did not send Eckrich any receipt or notice on January 13.
- The warehouse prepared and mailed an acknowledgment (warehouse receipt) around January 17 or 18.
- On January 17, before Eckrich received any acknowledgment, a fire destroyed the ribs.
- Eckrich first received the warehouse’s acknowledgment on January 24.
- Jason’s sued for the contract price, asserting that risk of loss had passed to Eckrich before the fire.
- The district court granted summary judgment for Eckrich, and Jason’s appealed.

## Issues

1. Under UCC § 2-509(2), when goods held by a bailee are to be delivered without being moved, does “acknowledgment by the bailee of the buyer’s right to possession” require communication to the buyer to shift the risk of loss?
2. If the bailee makes an internal bookkeeping transfer at the seller’s request but does not notify the buyer before destruction of the goods, has the risk of loss passed to the buyer?

## Decision

- The Seventh Circuit affirmed summary judgment for Eckrich.
- The court held that, under UCC § 2-509(2), risk of loss does not pass until the bailee acknowledges the buyer’s right to possession to the buyer.
- Because the warehouse did not communicate acknowledgment to Eckrich until after the fire, Jason’s retained the risk of loss when the ribs were destroyed and could not recover the price.

## Legal Principles

- For goods held by a bailee and delivered “without being moved,” UCC § 2-509(2) shifts risk of loss to the buyer only upon the bailee’s acknowledgment of the buyer’s right to possession to the buyer.
- An uncommunicated internal record change by the bailee, made at the seller’s request and unknown to the buyer, is insufficient to transfer risk of loss.
- Risk-of-loss rules allocate accidental loss in a manner tied to when the buyer can act as owner; the mere ability of either party to insure does not alter the statutory allocation.
- Expert testimony offered to interpret domestic law is generally improper; statutory text and commercial-law commentary may be considered in construing Article 2 where case law is lacking.

## Conclusion

Because the warehouse’s acknowledgment of Eckrich’s right to possession was not communicated to Eckrich until after the fire, risk of loss remained with Jason’s under UCC § 2-509(2), and Eckrich was not liable for the contract price.


Jason's Foods, Inc. v. Peter Eckrich & Sons, Inc., 774 F.2d 214 (7th Cir. 1985)