Risk of loss is a term used in the law

Law

Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...

 of contract

Contract

A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...

s to determine which party should bear the burden of risk for damage occurring to goods after the sale has been completed, but before delivery has occurred. Such considerations generally come into play after the contract is formed but before buyer receives goods, something bad happens.

Under the Uniform Commercial Code

Uniform Commercial Code

The Uniform Commercial Code , first published in 1952, is one of a number of uniform acts that have been promulgated in conjunction with efforts to harmonize the law of sales and other commercial transactions in all 50 states within the United States of America.The goal of harmonizing state law is...

 (UCC), there are four risk of loss rules, in order of application:

1. Agreement - the agreement of the parties controls
2. Breach
   Breach
   -In law:* Breach of confidence, a common law tort that protects private information that is conveyed in confidence* Breach of contract, a situation in which a binding agreement is not honored by one or more of the parties to the contract...
   
    - the breaching party is liable for any uninsured loss even though breach is unrelated to the problem. Hence, if the breach is the time of delivery, and the goods show up broken, then the breaching rule applies risk of loss on the seller.
3. Delivery by common carrier
   Common carrier
   A common carrier in common-law countries is a person or company that transports goods or people for any person or company and that is responsible for any possible loss of the goods during transport...
   
    other than by seller.
   1. Risk of loss shifts from seller to buyer at the time that seller completes its delivery obligations
   2. If it is a destination contract (FOB
      FOB (shipping)
      FOB is an initialism which pertains to the shipping of goods. Depending on specific usage, it may stand for Free On Board or Freight On Board. FOB specifies which party pays for which shipment and loading costs, and/or where responsibility for the goods is transferred...
      
       (buyer's city)), then risk of loss is on the seller.
   3. If it is a delivery contract (standard, or FOB (seller's city)), then the risk of loss is on the buyer.
4. If the seller is a merchant, then the risk of loss shifts to the buyer upon buyer's "receipt" of the goods. If the buyer never takes possession, then the seller still has the risk of loss.

In bankruptcy law, the risk of loss rule under a contract

Contract

A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...

 can be abrogated by a secured interest

Collateral (finance)

In lending agreements, collateral is a borrower's pledge of specific property to a lender, to secure repayment of a loan.The collateral serves as protection for a lender against a borrower's default - that is, any borrower failing to pay the principal and interest under the terms of a loan obligation...

.