Delivery of Goods Law in New York: Rejection, Risk of Loss, and Remedies

The law of delivery of goods in New York is governed by Article 2 of the state’s Uniform Commercial Code, which applies to virtually every sale of tangible goods, from a single online furniture order to a bulk industrial shipment. The code decides when the seller has done its job, when the buyer has to inspect and pay, when ownership and the risk of damage shift from one side to the other, and what each party can do when the other falls short. Several of these protections carry strict notice deadlines, and missing one can permanently forfeit a claim that would otherwise have been strong.

When the Seller Has Finished Delivering

A seller satisfies the duty to deliver by placing conforming goods at the buyer’s disposal and giving reasonable notice so the buyer can take possession.¹ Delivery must happen at a reasonable hour, and the goods must remain available long enough for the buyer to pick them up. The buyer, in turn, must provide facilities reasonably suited to receiving the goods.

When a carrier is involved, the critical question is whether the contract is a shipment contract or a destination contract. The two look similar on paper and operate very differently.

In a shipment contract, the seller finishes the delivery obligation by handing the goods over to a carrier, arranging reasonable transportation, promptly notifying the buyer that the shipment is on its way, and forwarding any documents the buyer needs to claim the goods.² Skipping any of those steps can give the buyer grounds to reject.

In a destination contract, the seller bears all risk and expense until the goods arrive at the specified delivery point and are properly tendered there.¹ When a contract does not clearly specify which type it is, New York courts generally treat it as a shipment contract. That default surprises many buyers who assume the seller is on the hook for problems in transit.

F.O.B. and Similar Shorthand

Contracts often use abbreviated terms to allocate delivery duties. “F.O.B. place of shipment” means the seller must deliver the goods to the carrier at the shipping location and bear the cost and risk up to that point. “F.O.B. place of destination” means the seller must transport the goods to the buyer’s location at the seller’s own expense and risk. When the term also specifies “F.O.B. vessel” or “F.O.B. car,” the seller must additionally load the goods aboard the vehicle at its own risk.³ Getting these terms right in the contract prevents expensive confusion about who pays for shipping and who files an insurance claim if goods are damaged along the way.

Inspecting Before You Pay

Before paying or formally accepting goods, you have the right to inspect them at any reasonable time, place, and in any reasonable manner, and when goods are shipped, the inspection can happen after they arrive.⁴ The buyer pays inspection costs up front, but if the goods turn out to be nonconforming and are rejected, those costs shift back to the seller.

Two exceptions matter. If the contract calls for C.O.D. delivery or payment against documents of title, the buyer must pay before inspecting.⁴ Paying under those terms does not count as acceptance, so the buyer can still reject nonconforming goods afterward. It does mean the buyer carries the financial risk of chasing a refund rather than simply refusing to pay.

Rejecting a Nonconforming Shipment

New York follows the perfect tender rule: if the goods or the delivery fail to conform to the contract in any respect, the buyer can reject the entire shipment, accept all of it, or accept some commercial units and reject the rest.⁵ “Any respect” is a high standard. A shipment of 1,000 widgets where 50 have cosmetic defects technically gives the buyer the right to reject the entire lot.

Two caveats keep this rule from being as absolute as it sounds. Installment contracts, where goods are delivered in separate lots, apply a different standard that requires the defect to substantially impair the value of that installment. Contracts can also include provisions limiting the buyer’s rejection rights. For single-delivery deals without such clauses, perfect tender applies.

The Seller’s Right to Cure

Rejection does not always kill the deal. If the deadline for performance has not yet passed, the seller can notify the buyer of an intent to fix the problem and then make a conforming delivery within the original contract period.⁶

Even after the contract deadline has passed, a seller who had reasonable grounds to believe the original tender would be acceptable gets a further reasonable time to substitute conforming goods, as long as the seller promptly notifies the buyer.⁶ This usually arises when a seller ships something slightly different from what was ordered, genuinely believing the buyer would accept it, perhaps because similar substitutions were accepted before.

Accepting the Goods, and the Notice Trap That Follows

Acceptance happens in one of three ways: the buyer inspects the goods and signals satisfaction (or agrees to keep them despite a defect), the buyer fails to reject within a reasonable time after having a chance to inspect, or the buyer does something inconsistent with the seller’s ownership, such as reselling the goods or incorporating them into a finished product.⁷ Accepting part of a commercial unit counts as accepting the entire unit, so using half a pallet of materials means accepting the full pallet.

Here is where many buyers lose their rights without realizing it. Once you have accepted goods, you must notify the seller of any defect within a reasonable time after you discover or should have discovered it. If you fail to give that notice, you are barred from any remedy, period.⁸ The code does not spell out a number of days. Courts evaluate reasonableness based on the type of goods, how quickly the defect should have been apparent, and what the buyer did once the defect surfaced.

The notice itself does not have to be a formal legal document. A phone call, email, or letter identifying the problem is generally enough. What matters is that the seller learns about the issue early enough to investigate, offer a remedy, or mitigate further loss. Sitting on a known defect for months and then filing a lawsuit without ever telling the seller will almost certainly result in a lost case.

Taking Acceptance Back

Acceptance is not always final. A buyer can revoke acceptance of goods whose defects substantially impair their value, but only in limited circumstances: the buyer accepted expecting the defect to be fixed and it was not, or the buyer did not discover the defect at the time of acceptance because it was hard to detect or because the seller’s assurances masked it.⁹

Revocation must happen within a reasonable time after the buyer discovers or should have discovered the defect, and before any substantial change in the goods’ condition that is not caused by the defect itself. The buyer must also notify the seller. A buyer who successfully revokes acceptance has the same rights as a buyer who rejected the goods in the first place, including the ability to cancel the contract and recover payments already made.⁹

When Title Passes

Title to goods cannot pass until the goods are identified to the contract, meaning they must be specifically designated as the goods being sold.¹⁰ Beyond that, the parties can agree on any timing and conditions. When the contract is silent, the default rules are:

In a shipment contract, title passes at the time and place the seller hands the goods to the carrier.
In a destination contract, title passes when the goods are tendered at the destination.
If the goods are delivered without being moved and a document of title is involved, title passes when that document is delivered. If the goods are already identified and no document is involved, title passes at the time the contract is made.¹⁰

If the buyer rejects the goods or justifiably revokes acceptance, title automatically reverts to the seller by operation of law.¹⁰

Leaving Your Goods With a Merchant

A rule worth knowing before you drop valuables off anywhere: if you entrust your goods to a merchant who deals in that kind of product, the merchant has the legal power to transfer your ownership rights to a buyer in the ordinary course of business.¹¹ “Entrusting” is broadly defined and includes any delivery of possession, even leaving a watch with a jeweler for repair. If that jeweler then sells your watch to an unsuspecting customer who pays fair value, the customer gets good title. Your only remedy is against the jeweler.

Who Bears the Loss If Goods Are Damaged

Risk of loss decides who absorbs the financial hit when goods are damaged or destroyed. The answer turns on the type of delivery arrangement and whether either party has breached.

With a carrier involved, risk tracks the shipment-vs.-destination distinction. In a shipment contract, risk transfers to the buyer as soon as the seller properly delivers the goods to the carrier. In a destination contract, the seller keeps risk until the goods arrive and are tendered at the agreed location.¹² Because courts default to treating ambiguous contracts as shipment agreements, a buyer who assumes the seller carries risk all the way to the buyer’s door may be in for an unpleasant surprise.

When goods are stored with a warehouse or other third-party holder and will be delivered without being physically moved, risk passes to the buyer when the buyer receives a negotiable document of title, when the third party acknowledges the buyer’s right to possession, or after the buyer receives a non-negotiable document or delivery instruction.¹²

For transactions that do not involve a carrier or a third-party holder, whether the seller is a merchant matters. If the seller is a merchant, risk does not pass until the buyer physically receives the goods. If the seller is not a merchant, risk passes when the seller tenders delivery.¹² The practical effect: buying from a business that carries inventory gives you more protection than buying from an individual.

Breach rearranges all of this. When the seller delivers nonconforming goods that give the buyer a right of rejection, risk stays on the seller until the goods are cured or accepted. If the buyer rightfully revokes acceptance, the buyer can treat risk as having been on the seller from the start, to the extent of any gap in the buyer’s own insurance coverage. When a buyer breaches before risk has passed, the seller can treat risk as resting on the buyer for a commercially reasonable time, again limited by any insurance shortfall.¹³

What a Buyer Can Do When the Seller Breaches

When a seller fails to deliver, delivers nonconforming goods, or repudiates the contract, the buyer can cancel the contract and recover any payments already made.¹⁴ Beyond cancellation, two damage formulas are available.

Under cover damages, the buyer purchases substitute goods from another source and sues for the difference between the cover price and the original contract price, plus any incidental or consequential damages. Under market-price damages, a buyer who does not cover can recover the difference between the market price at the time the buyer learned of the breach and the contract price.¹⁴

For unique or hard-to-replace goods, such as custom-manufactured products, the buyer may be able to obtain a court order requiring the seller to actually deliver the goods rather than just pay damages.¹⁴

Incidental damages for buyers include costs reasonably incurred in inspecting, transporting, and storing rejected goods, along with expenses connected to finding substitute goods. Consequential damages can be larger: they include any losses the seller had reason to know about at the time of contracting that the buyer could not reasonably prevent. If a seller knew a manufacturer needed raw materials by a certain date to fulfill its own customer orders, and a late delivery caused the manufacturer to lose those orders, the lost profits may be recoverable.¹⁵

What a Seller Can Do When the Buyer Breaches

When a buyer wrongfully rejects goods, revokes acceptance without justification, or fails to pay, the seller can withhold delivery of any unshipped goods, stop goods already in transit, resell the goods, or sue for damages.¹⁶

If the seller resells the goods in a commercially reasonable manner, the seller recovers the difference between the contract price and the resale price, plus incidental damages.¹⁷ The resale can be public or private, but the seller must give the buyer reasonable notice of a private resale. A good-faith purchaser at the resale takes the goods free of any claims by the original buyer.

When resale is impractical, the seller can claim damages based on the difference between the market price at the time of tender and the unpaid contract price. If even that formula falls short of making the seller whole, as often happens with lost-volume sellers who could have sold to both the breaching buyer and the replacement buyer, the seller can recover lost profits instead.¹⁸

If the buyer accepted goods but has not paid, the seller can sue for the full contract price.¹⁹ Sellers also recover incidental damages, which include reasonable costs of stopping delivery, storing or transporting goods after the breach, and arranging a resale.²⁰

The Four-Year Deadline to Sue

A lawsuit for breach of a sales contract must be filed within four years after the breach occurs.²¹ The clock starts when the breach happens, not when you discover it. For delivery problems, that usually means the date the goods should have arrived or the date nonconforming goods were tendered. For warranty claims, the breach occurs at the time of delivery unless the warranty explicitly covers future performance, in which case the clock starts when the defect is or should have been discovered.

The parties can agree in their original contract to shorten this period to as little as one year, but they cannot extend it beyond four years.²¹ Shortened limitation periods are common in commercial supply agreements, so check your contract before assuming you have the full four years. If a timely-filed lawsuit is dismissed on procedural grounds, you generally get six months after the dismissal to refile, even if the original four-year period has expired.

One threshold issue sits behind all of these rights: a contract for the sale of goods worth $500 or more is generally unenforceable in New York unless it is in writing and signed by the party you want to hold to the deal.²² The writing does not need to capture every negotiated term, but it must state a quantity. If a dispute involves a handshake deal above that threshold, the remedies above may be out of reach before the delivery questions are ever reached.

1
New York State Senate. New York Code UCC 2-503 – Manner of Seller’s Tender of Delivery
2
New York State Senate. New York Code UCC 2-504 – Shipment by Seller
3
New York State Senate. New York Code UCC 2-319 – F.O.B. and F.A.S. Terms
4
New York State Senate. New York Code UCC 2-513 – Buyer’s Right to Inspection of Goods
5
New York State Senate. New York Code UCC 2-601 – Buyer’s Rights on Improper Delivery
6
New York State Senate. New York Code UCC 2-508 – Cure by Seller of Improper Tender or Delivery Replacement
7
New York State Senate. New York Code UCC 2-606 – What Constitutes Acceptance of Goods
8
New York State Senate. New York Code UCC 2-607 – Effect of Acceptance Notice of Breach
9
New York State Senate. New York Code UCC 2-608 – Revocation of Acceptance
10
New York State Senate. New York Code UCC 2-401 – Passing of Title Reservation for Security Limited Application of This Section
11
New York State Senate. New York Code UCC 2-403 – Power to Transfer Good Faith Purchase of Goods Entrusting
12
New York State Senate. New York Code 2-509 – Risk of Loss in the Absence of Breach
13
New York State Senate. New York Code UCC 2-510 – Effect of Breach on Risk of Loss
14
New York State Senate. New York Code UCC 2-711 – Buyer’s Remedies in General Buyer’s Security Interest in Rejected Goods
15
New York State Senate. New York Code UCC 2-715 – Buyer’s Incidental and Consequential Damages
16
New York State Senate. New York Code 2-703 – Seller’s Remedies in General
17
New York State Senate. New York Code UCC 2-706 – Seller’s Resale Including Contract for Resale
18
New York State Senate. New York Code UCC 2-708 – Seller’s Damages for Non-Acceptance or Repudiation
19
Legal Information Institute. Uniform Commercial Code 2-709 – Action for the Price
20
New York State Senate. New York Code UCC 2-710 – Seller’s Incidental Damages
21
Legal Information Institute. Uniform Commercial Code 2-725 – Statute of Limitations in Contracts for Sale
22
Legal Information Institute. Uniform Commercial Code 2-201 – Formal Requirements Statute of Frauds