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84-2-510. Effect of breach on risk of loss. (1) Where a tender or delivery of goods so fails to conform to the contract as to give a right of rejection the risk of their loss remains on the seller until cure or acceptance.

(2) Where the buyer rightfully revokes acceptance he may to the extent of any deficiency in his effective insurance coverage treat the risk of loss as having rested on the seller from the beginning.

(3) Where the buyer as to conforming goods already identified to the contract for sale repudiates or is otherwise in breach before risk of their loss has passed to him, the seller may to the extent of any deficiency in his effective insurance coverage treat the risk of loss as resting on the buyer for a commercially reasonable time.

History: L. 1965, ch. 564, ยง 75; January 1, 1966.

KANSAS COMMENT, 1996

1. This section changes, in some circumstances, the allocation of loss when one of the parties breaches the underlying sales contract. The general effect of the section is to shift at least some of the risk of loss to the breaching party.

2. Under subsection (1), the risk of loss remains with the seller when the seller tenders nonconforming goods until the defect is cured or the buyer accepts the goods despite their nonconformity. In the case of an installment contract (84-2-612) or other case in which perfect tender is not required, the nonconformity must be such as to give the buyer the right to reject the goods. Otherwise risk of loss passes to the buyer. Section 84-2-709(1)(a) seems to preclude the seller from an action for price in such a case, even if risk of loss has passed to the buyer, unless the goods are conforming. But section 84-2-709(1)(a) should be construed consistently with this subsection and permit an action for the price so long as the buyer had no right to reject, even if the goods did not conform perfectly to contract requirements.

3. Under subsection (2), the rightful revocation of acceptance by the buyer shifts the risk of loss back to the seller to the extent of any deficiency in the buyer's insurance coverage. Revocation must occur before the goods are destroyed or lost, however, since 84-2-608(2) requires that a buyer revoke acceptance "before any substantial change in condition of the goods which is not caused by their own defects."

4. Subsection (3) addresses the effect of breach by the buyer. It shifts the loss from the seller to the buyer when the buyer repudiates or otherwise breaches if four additional conditions are met: (1) the goods are conforming; (2) they are already identified to the contract (see 84-2-501); (3) some portion of the loss is not covered by the seller's insurance, but only to the extent of the deficiency in coverage; and (4) the loss occurs within a commercially reasonable time of the breach. The provisions of subsections (2) and (3) limiting loss reallocation to "the extent of any deficiency in his effective insurance coverage" operate as anti-subrogation devices and effectively make any insurance company bear the loss.

CASE ANNOTATIONS

1. Under a commercial tripartite finance leasing arrangement, after the supplier has fully performed all acts required under the contract, the agency-lessor assumes the risk of loss by fire. Evco Distributing, Inc. v. Commercial Cred. Equip. Corp., 6 Kan. App. 2d 205, 211, 213, 627 P.2d 374.


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