All America Export-Import Corp. (All America) placed an order for several thousand pounds of yarn with A.M. Knitwear (Knitwear). On June 4, All America sent Knitwear a purchase order. The purchase order stated the terms of the sale, including language that stated that the price was F.O.B. the seller’s plant. A truck hired by All America arrived at Knitwear’s plant. Knitwear turned the yarn over to the carrier and notified All America that the goods were now on the truck. The truck left Knitwear’s plant and proceed to a local warehouse. Sometime during the night, the truck was hijacked, and all the yarn was stolen. All America had paid for the yarn by check but stopped payment on it when it learned that the goods had been stolen. Knitwear sued All America, claiming that it must pay for the stolen goods because it bore the risk of loss.
Who wins? Explain your reasoning using language and concepts regarding F.O.B terms and risk of loss.
A.M. Knitwear v. All America, Etc. , 41 N.Y.2d 342, 390 N.Y.S.2d 832, 1976 N.Y. Lexis 3201 (Court of Appeals of New York)
