46.505 Transfer of title and risk of loss
Source: FAR 46.505 on acquisition.gov
FAR 46.505 establishes when title and risk of loss for supplies transfer from contractor to Government, emphasizing the importance of contract terms and acceptance procedures.
Overview
FAR 46.505 outlines when title and risk of loss for supplies transfer from the contractor to the Government in federal contracts. It clarifies that, unless otherwise specified, title passes to the Government upon formal acceptance, regardless of physical possession. The risk of loss remains with the contractor until delivery to a carrier (for f.o.b. origin) or until acceptance/delivery at the destination (for f.o.b. destination), unless the contract states otherwise. If supplies are nonconforming and subject to rejection, the contractor retains risk of loss until the issue is cured or the Government accepts the supplies. Contractors are not liable for loss or damage caused by Government personnel acting within their official capacity. These rules are implemented through the clause at 52.246-16, which must be included as prescribed in FAR 46.316.
Key Rules
- Transfer of Title
- Title to supplies passes to the Government upon formal acceptance unless the contract specifies an earlier transfer.
- Risk of Loss
- Risk of loss remains with the contractor until delivery to a carrier (f.o.b. origin) or acceptance/delivery at destination (f.o.b. destination), unless otherwise stated in the contract.
- Nonconforming Supplies
- For supplies that fail to meet contract requirements and are subject to rejection, the contractor retains risk of loss until cure or acceptance.
- Government Negligence
- Contractors are not liable for loss or damage caused by Government employees acting within their official duties.
- Contract Clause Reference
- These policies are enforced through FAR clause 52.246-16, as prescribed in 46.316.
Responsibilities
- Contracting Officers: Ensure the correct clauses are included in contracts and clarify title/risk transfer terms.
- Contractors: Understand when title and risk of loss transfer, and maintain responsibility for supplies until those points.
- Agencies: Oversee compliance and ensure contract terms align with FAR requirements.
Practical Implications
- This section protects both parties by clearly defining when ownership and risk shift, reducing disputes over liability for loss or damage. Contractors must be vigilant about delivery terms and acceptance procedures, especially for nonconforming goods. Misunderstanding these provisions can lead to financial liability or disputes over damaged or lost supplies.
(a) Titleto supplies shall pass to the Government upon formal acceptance, regardless of when or where the Government takes physical possession, unless the contract specifically provides for earlier passage of title.
(b) Unless the contract specifically provides otherwise, risk of loss of or damage to supplies shall remain with the contractor until, and shall pass to the Government upon-
(1) Delivery of the supplies to a carrier if transportation is f.o.b. origin; or
(2) Acceptance by the Government or delivery of the supplies to the Government at the destination specified in the contract, whichever is later, if transportation is f.o.b. destination.
(c) Paragraph (b) of this section shall not apply to supplies that so fail to conform to contract requirements as to give a right of rejection. The risk of loss of or damage to such nonconforming supplies remains with the contractor until cure or acceptance. After cure or acceptance, paragraph (b) of this section shall apply.
(d) Under paragraph (b) of this section, the contractor shall not be liable for loss of or damage to supplies caused by the negligence of officers, agents, or employees of the Government acting within the scope of their employment.
(e) The policy expressed in (a) through (d) of this section is specified in the clause at 52.246-16, Responsibility for Supplies, which is prescribed in 46.316.