Transfer of title and risk of loss
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.