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Shipment Contracts and Personal Jurisdiction

Posted by James Juo | Jun 16, 2023 | 0 Comments

In a shipment contract, a seller is required to ship goods by carrier, but not required to deliver the goods at a particular destination, and the risk of loss passes to the buyer when the seller duly tenders them to the carrier. UCC § 2-509(1)(a).

In a destination contract, however, the seller is required to deliver the goods to a particular destination, and the seller bears the risk of loss until tender of delivery at the destination. § 2-509(1)(b).

Purchasing goods to be shipped from one state to another typically is considered to a shipment contract, such that title for those goods passes from the buyer to the seller when the goods are delivered to the common carrier for shipment. See, e.g., Butler v. Beer Across America, 83 F. Supp. 2d 1261, 1264 n.6 (N.D. Ala. 2000) (finding that title passes at the time and place of shipment under both Alabama's and Illinois's versions of the U.C.C.). The carrier acts as the buyer's agent. See, e.g., Lindgren v. GDT, LLC, 312 F. Supp. 2d 1125, 1132 (S.D. Iowa 2004).

There is a strong presumption under the Uniform Commercial Code (“UCC”) favoring interpretation of an ambiguous contract to be a shipment contract rather than a destination contract. Windows, Inc. v. Jordan Panel Systems Corp., 177 F.3d 114 (2nd Cir. 1999). “Unless the parties ‘expressly specify' that the contract requires the seller to deliver to a particular destination, the contract is generally construed as one for shipment.” Id. (citing 3A Ronald A. Anderson Uniform Commercial Code §§ 2-503:24, 2-503:26). For example, when the term “F.O.B.” (or “free on board”) is used with the place of destination, the seller must at his own expense and risk transport the goods to that place (i.e., F.O.B. place of destination). UCC § 2-319(1)(b).

Shipping Personal Jurisdiction

To establish specific personal jurisdiction over a nonresident party, simply having a contractual relationship typically is not enough. Iowa Elec. Light and Power Co. v. Atlas Corp., 603 F.2d 1301, 1303 (8th Cir.1979) (“Merely entering into a contract with a forum resident does not provide the requisite contacts between a [nonresident] defendant and the forum state.”); Doe v. Unocal Corp., 248 F.3d 915, 924 (9th Cir. 2001) (holding that a contract between a resident of the forum state and a non-resident does not automatically establish purposeful availment); Burger King Corp. v. Rudzewicz, 471 U.S. 462, 478, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985) (“If the question is whether an individual's contract with an out-of-state party alone can automatically establish sufficient minimum contacts in the other party's home forum, we believe the answer clearly is that it cannot.”).

An isolated shipment contract is unlikely to establish personal jurisdiction. In Lundgren v. GDT, the court held that, where title passed to the buyer when the seller delivered the goods to FedEx in California for shipment to Iowa, this would be “an insufficient basis for personal jurisdiction” in Iowa. Id., 312 F. Supp. 2d at 1132 & 1133 (“California purchases are not sufficient to subject GDT to personal jurisdiction in Iowa”).

The attorneys at Thomas P. Howard, LLC litigate cases nationwide including in Colorado.

About the Author

James Juo

James Juo is an experienced intellectual property attorney. He has successfully litigated various intellectual property disputes involving patents, trademarks, copyrights, and trade secrets. He also has counseled clients on the scope and validity of patent and trademark rights.

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