Misdescribed Bills of Lading Do Not Prevent Risk-of-Loss Transfer Under Shipment Contracts When the Buyer Hires the Carrier

Introduction

In Certain Underwriters at Lloyd’s London v. Scents Corporation, the Eleventh Circuit addressed who bears the risk of loss for a shipment of high-end perfumes stolen in transit from Florida to Texas. The district court held that the sellers (the “Shippers”) bore the loss because their bills of lading allegedly misdescribed the cargo, which, in the district court’s view, vitiated transfer of title and risk to the buyer under Florida’s UCC. The Eleventh Circuit vacated, holding that under shipment contracts governed by Florida law, risk of loss passes to the buyer when the goods are properly delivered to the buyer-hired carrier, and that alleged inaccuracies in the shipper-issued bills of lading—without more—do not defeat that transfer under Fla. Stat. § 672.504(2).

The case arises out of a subrogation action brought by Certain Underwriters at Lloyd’s London (“Lloyd’s”), after paying the Shippers for stolen goods worth $351,543. Lloyd’s sued Scents Corporation d/b/a Perfumes of the World (“POTW”) for the price of the goods, asserting that risk of loss transferred to POTW upon delivery to the carrier that POTW hired through a broker. The district court granted summary judgment to POTW, but the Eleventh Circuit vacated and remanded, clarifying key features of Florida’s UCC risk-of-loss regime and the legal effect of bills of lading in this context.

Summary of the Opinion

• The Eleventh Circuit applied Florida law (as required by Erie principles in a diversity case) and reviewed the cross-motions for summary judgment de novo.
• The court held that the transactions at issue were “shipment contracts,” not “destination contracts,” based on invoice terms (e.g., FOB origin), industry practice, and the fact that POTW arranged and paid for the carrier through a broker.
• Under Florida’s version of UCC § 2-509 (Fla. Stat. § 672.509(1)(a)), in a shipment contract the risk of loss passes to the buyer when the goods are properly delivered to the carrier, absent breach.
• Alleged misdescriptions in shipper-issued bills of lading (e.g., “Toilet Preps” rather than detailed “high-end perfumes”) did not render the tender nonconforming under § 672.504(2) because POTW did not show that the descriptions were necessary to enable it to obtain possession, nor that more specificity was required by contract or usage of trade.
• Florida Article 7 provisions concerning bills of lading—Fla. Stat. §§ 677.301(1), (5) and 677.507(3)—did not apply, because those warranties and indemnities are triggered when a document of title is negotiated or delivered “for value,” which did not occur here, and because the shipper and issuer were the same entity.
• The court vacated the grant of summary judgment to the buyer and remanded. It declined to resolve a separate waiver/election-of-remedies argument (premised on the Shippers’ insurance claims) because the district court had not addressed it.

Factual and Procedural Background

POTW purchased $351,543 of high-end perfumes from three Florida suppliers (Benron Perfumes, M&R Distributors International, and Elegance Distributors). POTW hired a freight broker (TQL) to arrange a carrier with “high-value” insurance; TQL selected New Glory Corporation, which in fact lacked such coverage. The Shippers’ goods were consolidated onto a single truck for transport to POTW in Texas. The truck was stolen during transit.

The Shippers demanded payment from POTW, which refused. The Shippers then made claims to their Lloyd’s underwriters, were paid (less deductibles), and Lloyd’s, as subrogee, sued POTW for the unpaid price in Florida state court; the case was removed to federal court. The district court granted summary judgment to POTW, reasoning that inaccuracies in the Shippers’ bills of lading constituted a failure of conforming tender, preventing the passage of title and risk of loss. Lloyd’s timely appealed.

Detailed Analysis

Precedents and Authorities Cited

• Ladex Corp. v. Transportes Aereos Nacionales, S.A., 476 So. 2d 763 (Fla. Dist. Ct. App. 1985)
  • Key principle: Florida law distinguishes shipment and destination contracts. In shipment contracts, title and risk pass to the buyer upon proper delivery to the carrier; in destination contracts, the seller bears risk until tender at the destination.
  • The Eleventh Circuit relied on Ladex to reaffirm that shipment contracts are the default unless the parties “explicitly agree” otherwise.
• Pestana v. Karinol Corp., 367 So. 2d 1096 (Fla. Dist. Ct. App. 1979)
  • Establishes that destination contracts require explicit agreement; otherwise, contracts are treated as shipment contracts.
  • Supports the Eleventh Circuit’s treatment of the invoices’ terms (FOB origin, buyer-arranged pickup) as consistent with shipment contracts.
• Astro Aluminum Treating Co. v. Inter Contal, Inc., 296 So. 3d 462 (Fla. Dist. Ct. App. 2020)
  • Reiterates risk-of-loss principles under Florida’s UCC and helps confirm the shipment/destination dichotomy and effects.
• Apex Capital LP v. Carnival Corp., 123 So. 3d 94 (Fla. Dist. Ct. App. 2013)
  • Recognizes the dual role of a bill of lading as both receipt and contract for carriage, relevant to the court’s discussion of what a bill of lading is, but not dispositive on risk-of-loss allocation between buyer and seller.
• Stalley v. Cumbie, 124 F.4th 1273 (11th Cir. 2024)
  • Provides the de novo summary judgment standard.
• Statutes
  • Fla. Stat. § 672.509(1)(a) (UCC § 2-509): In shipment contracts, risk of loss passes to buyer upon delivery to the carrier absent breach.
  • Fla. Stat. § 672.510(1) (UCC § 2-510): If tender or delivery “so fails to conform to the contract as to give a right of rejection,” risk remains on the seller until cure or acceptance.
  • Fla. Stat. § 672.504 (UCC § 2-504): Seller’s shipment-tender obligations, including providing any document necessary to enable the buyer to obtain possession, and notifying the buyer of shipment.
  • Fla. Stat. § 672.503(2): Links shipment contracts to § 672.504’s tender obligations.
  • Fla. Stat. § 671.201(6): Defines “bill of lading.”
  • Fla. Stat. § 677.301(1), (5) (UCC § 7-301): Remedies for misdescription in bills of lading when transferred for value, and indemnity between shipper and issuer.
  • Fla. Stat. § 677.507(3) (UCC § 7-507): Warranties by a transferor when a document of title is negotiated or delivered for value.

Legal Reasoning

1. Shipment vs. Destination Contracts
   • The court started with the fundamental framework: Florida law recognizes shipment and destination contracts. Shipment contracts are the default; destination contracts require explicit agreement.
   • Evidence of shipment contracts here included: FOB “Origin” and similar terms; standard industry practice testified by POTW’s representative that buyers arrange pickup; and the fact POTW, through TQL, hired and paid the carrier. No document explicitly created a destination contract.
   • Conclusion: The parties’ contracts were shipment contracts, so risk of loss normally would pass to POTW when the goods were delivered to the carrier, unless a “breach” displaced that rule.
2. Did the Bills of Lading Render the Tender Nonconforming?
   • POTW’s theory rested on UCC “tender” rules. Under § 672.504, in a shipment contract, the seller must:
     • (1) Put the goods in the possession of a carrier and make a reasonable transportation contract (unless the parties otherwise agreed),
     • (2) Obtain and deliver any document “necessary to enable the buyer to obtain possession” or otherwise required by agreement or usage of trade, and
     • (3) Promptly notify the buyer of the shipment.
   • Subsection (1) was satisfied “as otherwise agreed” because POTW made the transportation arrangements through TQL, and the Shippers put the goods in the carrier’s possession. There was no dispute about subsection (3) notice.
   • The dispute centered on subsection (2): POTW argued that the bills of lading materially misdescribed the goods (e.g., “Toilet Preps”), causing inadequate carrier safeguards and invalidating tender.
   • The Eleventh Circuit rejected this argument for two reasons:
     • Necessity to obtain possession: POTW did not show that more detailed descriptions were necessary to enable it to obtain possession of the goods. POTW was the named consignee, had invoices identifying the goods purchased, and hired the carrier. There was no evidence that description accuracy on the bill of lading was required to establish POTW’s right to possession.
     • Agreement or usage of trade: The record did not show any contractual term or trade usage requiring a more granular description. Without such a requirement, a generalized description on the bill of lading did not violate § 672.504(2).
   • As a result, there was no nonconforming tender under § 672.504(2) that would trigger § 672.510(1) and keep risk on the seller.
3. Article 7 Warranties and Indemnities Do Not Alter Risk-of-Loss Here
   • POTW and the district court relied on Fla. Stat. §§ 677.301 and 677.507, which address misdescriptions in bills of lading when those documents are negotiated or delivered “for value.”
   • The Eleventh Circuit explained these provisions did not apply:
     • No negotiation or delivery for value occurred vis-à-vis POTW; the bill of lading was not transferred to POTW as a purchaser of the document of title. POTW had simply hired the carrier through a broker.
     • The “issuer” and “shipper” were the same here. Section 677.301(5)’s indemnity provision allocates responsibility between shipper and issuer; it does not govern risk-of-loss allocation between seller and buyer.
   • Therefore, these Article 7 remedies could not be used to keep risk with the sellers or negate risk transfer under § 672.509.
4. Bottom Line on Risk of Loss
   • Because the contracts were shipment contracts and there was no breach of tender affecting the buyer’s ability to obtain possession (or required by agreement or usage), the risk of loss passed to POTW when the Shippers delivered the goods to the buyer-hired carrier.
   • Accordingly, the district court erred in granting summary judgment to POTW on the theory that the bills of lading prevented risk transfer.
5. Remand and the Unresolved Waiver Argument
   • POTW also argued that the Shippers waived their contract claims against POTW by submitting insurance claims for theft rather than for nonpayment.
   • The district court did not reach that issue. The Eleventh Circuit declined to address it in the first instance and remanded for further proceedings.

Impact and Practical Implications

Although unpublished and therefore nonbinding, the opinion provides persuasive guidance on several recurring issues in sales and logistics disputes under Florida law:

• Shipment contracts remain the default. If the buyer arranges and pays for carriage and the invoices contain FOB origin or similar terms, courts will likely treat the deal as a shipment contract in which risk passes at carrier delivery, barring an explicit destination agreement.
• Bill-of-lading descriptions have limited bearing on risk-of-loss between buyer and seller. Absent contract language or established trade usage requiring specific content, a shipper’s generalized or imperfect description on a bill of lading does not, by itself, render the shipment tender nonconforming under § 672.504(2), unless it prevents the buyer from obtaining possession.
• Article 7 warranties and indemnities hinge on “transfer for value.” The misdescription remedies in §§ 677.301 and 677.507 are tailored to transactions in documents of title. They do not reallocate risk of loss between seller and buyer when a bill of lading is not negotiated or delivered for value.
• Allocation of transit risk is distinct from insurance choices. A buyer who engages a broker and expects high-value coverage bears the risk under § 672.509 once the goods are delivered to the carrier in a shipment contract—even if the broker fails to procure the promised coverage—leaving the buyer to seek recourse against the broker or carrier rather than the seller.
• Drafting pointers:
  • To shift risk to delivery at destination, parties should expressly adopt a destination contract and spell out the FOB terms accordingly (e.g., “FOB Buyer’s Facility – risk passes upon tender at destination”).
  • If detailed bill-of-lading descriptions are crucial (for security protocols, insurance tiers, or handling instructions), write those requirements explicitly into the sales contract as conditions of tender, or incorporate a recognized usage of trade.
  • Clarify who bears responsibility for carrier selection and insurance procurement, and state the consequences of failure to secure specified coverage.
• Litigation strategy implications: Buyers seeking to avoid paying for stolen goods in shipment will need evidence of a conforming-tender breach that affects possession rights or violates explicit contract terms or trade usage—not simply that a bill of lading was sparse or euphemistic. Conversely, sellers and their subrogating insurers can rely on § 672.509 to press for price payment when the buyer hired the carrier and there is no tender breach under § 672.504.

Complex Concepts Simplified

• Shipment vs. Destination Contract:
  • Shipment contract: Seller’s duty is to hand goods to a carrier; risk passes to buyer upon delivery to the carrier.
  • Destination contract: Seller must tender at the named destination; risk remains with the seller until that tender occurs.
  • Default rule: Shipment contract, unless the parties clearly agree otherwise.
• FOB (Free On Board):
  • FOB Origin (or similar references): Signals a shipment contract and risk transfer at the point of shipment.
  • FOB Destination: Signals a destination contract, with risk transfer at destination.
• Tender of Delivery in a Shipment Contract (Fla. Stat. § 672.504):
  • Seller must deliver goods to a carrier, provide necessary documents for the buyer to obtain possession, and notify the buyer of the shipment.
  • “Necessary to enable possession” focuses on whether the buyer can get the goods—not whether the description is ideal for insurance or security purposes unless the contract or trade usage says so.
• Bill of Lading:
  • Simultaneously a receipt and a carriage contract. It can also be a “document of title.”
  • If negotiated or transferred “for value” to a purchaser, Article 7 imposes warranties and potential liability for misdescriptions. If not, those Article 7 rules generally do not control risk-of-loss between the buyer and seller.
• Subrogation:
  • When an insurer pays an insured’s loss, it may step into the insured’s shoes to recover from responsible third parties. Here, Lloyd’s paid the Shippers and sued POTW in subrogation for the price.

What Remains for the District Court on Remand

The Eleventh Circuit left one issue open: POTW’s argument that the Shippers waived their claims by filing insurance claims framed as theft losses rather than buyer nonpayment. The district court did not decide that issue, and the Eleventh Circuit declined to address it in the first instance. On remand, the district court may need to consider:

• The nature of the Shippers’ insurance claims and whether they constitute a waiver or election of remedies that bars a contract-price claim against POTW.
• Whether Lloyd’s, as subrogee, stands in the Shippers’ shoes without expansion or diminution of rights, and whether any waiver by the Shippers would bind the subrogee.
• Any remaining factual disputes bearing on the risk-of-loss analysis (though the Eleventh Circuit’s discussion substantially narrows those issues).

Conclusion

The Eleventh Circuit’s decision clarifies that, under Florida’s UCC, misdescriptions in a shipper-issued bill of lading do not, by themselves, prevent risk-of-loss transfer to the buyer under a shipment contract, especially when the buyer hires the carrier and the description is not necessary to obtain possession or required by contract or trade usage. The opinion draws a clear line between Article 2 risk-of-loss rules and Article 7 document-of-title remedies that hinge on transfers “for value,” and it underscores that buyers cannot retroactively reallocate transit losses to sellers based on imperfect bill-of-lading descriptions when the essential tender requirements have been met.

For commercial actors, the case is a reminder to draft explicit risk-allocation and tender terms if they intend to deviate from the UCC default. For litigants, it offers a roadmap: risk-of-loss disputes in Florida will turn on whether the contract is a shipment or destination contract, and whether any tender breach under § 672.504 truly affects the buyer’s right to possess the goods or violates a clear contractual or trade requirement. The remaining waiver issue awaits resolution on remand, but on the central question of risk allocation during transit, the court’s reasoning is a significant and practical guide.

Key Takeaways

• Shipment contracts are the default in Florida; explicit terms are needed to create a destination contract.
• Under a shipment contract, risk of loss passes to the buyer upon proper delivery to the carrier, absent a tender breach.
• Bill-of-lading description inaccuracies do not constitute a tender breach unless they prevent the buyer from obtaining possession or violate explicit contract terms or trade usage.
• Article 7 misdescription remedies generally apply only when a bill of lading is transferred for value; they do not reallocate risk-of-loss between buyer and seller in ordinary shipment scenarios.
• If buyers want higher security/insurance protocols, they should write them into the sales contract; reliance on broker assurances alone will not shift the UCC risk-of-loss default.