Jason's Foods, Inc. v. Peter Eckrich & Sons, Inc

In Jason's Foods, Inc. v. Peter Eckrich & Sons, Inc., 774 F.2d 214 (7thCir.1985), Jason's Foods agreed to sell to Eckrich 38,000 pounds of ribs. The ribs were stored by a bailee--an independent meat storage facility. Under the sales agreement, delivery would be made by transferring the ribs from Jason's account ledger at the storage facility to Eckrich's account at the facility, without moving the ribs. Jason's asked the storage facility to move the ribs from Jason's account to Eckrich's. The facility clerk noted the transfer on the books immediately. Eckrich did not receive a receipt, and did not know the transfer had been made until 11 days later. In the meantime, the ribs were destroyed by a fire at the storage facility. The parties disputed when the risk of loss transferred. Jason's contended the risk transferred to Eckrich on the date the clerk transferred the ribs to Eckrich's account, because on that date Jason's lost ownership and control over the ribs. Eckrich argued that it should not bear the risk of loss of ribs it did not know it owned or controlled. The court explained that under 2-509(2), risk of loss is not related to title, but rather shifts when the transfer is acknowledged. Id. at 217. The court then considered to whom the statute required acknowledgment be made. Judge Posner opined that there would be little purpose in acknowledging to the seller the buyer's right to possession, particularly because the seller has informed the bailee of the buyer's right to possession and necessarily already has such knowledge. Id. The court noted that 2-503(4)(a) also indicates that acknowledgment by the bailee of the buyer's right to possession is a method of tendering goods sold without being moved. But, that section likewise fails to indicate to whom the bailee must make the acknowledgment. Id. The court noted, however, that the corresponding provision of the Uniform Sales Act, which preceded the UCC, provided that acknowledgment must be made to the buyer, and the UCC comments following 2-503 state that the section was not intended to change the Uniform Sales Act provision. Id. Additionally, the court noted that the comments to 2-509 indicate that in the circumstance of delivery without moving goods in the possession of a bailee, the rules on manner of tender apply on the issue of risk of loss. Id. The court deduced that acknowledgment by the bailee to the buyer is required for tender, and likewise for transfer of the risk of loss. Id. The court noted that the acknowledgment need not be in writing, and the court declined to answer whether the pertinent date is when a written acknowledgment is mailed or when it is received, because it found that issue had not been raised by the parties. Id. at 218.