Transfer of risk is the point defined by a contract or applicable trade rule when the buyer, rather than the seller, bears the economic risk of loss or damage to goods. It is separate from payment, physical possession and transfer of legal title unless the agreement expressly links them.
How is the transfer point determined?
Read the contract, chosen Incoterm and named place together. The relevant event may be delivery to a carrier, placement on a vessel, arrival at a named place or completed unloading.
Why does the named place matter?
An Incoterm without a precise place or port can leave the transfer location uncertain. Record the facility, terminal, port or other point and the applicable rule version.
Risk versus title
Risk concerns who bears loss or damage. Title concerns ownership. They can transfer at different times, and neither should be inferred solely from who paid freight.
How does risk affect insurance and claims?
Each party should understand which transit leg it must insure or otherwise bear. If damage occurs, preserve transport records, inspection evidence and notices while confirming who held risk at the event.
What should the transaction record show?
Keep the contract, Incoterm and version, named place, delivery evidence, handoff timestamp, carrier documents, insurance responsibility and any exception.
