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Let’s suppose there are two companies, company A and company B. Both companies come to an agreement: company A buys some goods from Company B and these goods must be delivered in four months. Now, before these goods are delivered, an employee of company B destroys them. Suppose I am company A. What could I do? Is this matter of property law? Or contractual law? Or both?

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It depends on the terms of the contract

Specifically, when risk in the goods transferred from B to A.

Most contracts

In a normal supply arrangement, the goods both belong to B and are at B’s risk until delivered to A.

If this is the case, then the destruction of the goods that B planned to supply is irrelevant. as is the fact that it was done by B’s employee. B must supply the contracted goods and if they have to source or manufacture different goods to meet that obligation then that is what they have to do. If it costs them more than they planned, tough. If they are on time, all is good. If they are late, then A is entitled to damages for breach of contract.

If the goods are unique and irreplaceable (e.g. a collection of Dutch Master’s paintings), then B cannot fulfil the contract and A is entitled to damages - at the least this will be the return of all they paid but it could be more if they can demonstrate losses that flow from not having the goods.

Contracts with unusual risk transfer

Now, both title and risk can transfer at different times, both from each other and during the course of the contract.

For example, in construction contracts, title passes from the builder to the owner once goods become a permanent part of the building but the builder usually carries the risk until the building as a whole is handed over. That means, on the day before handover, the owner owns the building but the builder pays if it burns down.

Similarly, this is so common in international shipping that there are standardised terms.

It’s possible that A has assumed the risk for the goods while they are still in B’s possession. If so, A would have no claim on B unless the loss was a result of an act or omission by B. In this is the case then B is acting as bailee for the goods and, unless the contract provides for the matter, their claim is property law matter in tort not contract law. As such they are entitled to the replacement value of the goods but not for any losses that flow from not having them.

However, if the goods were destroyed by a third party, C, in circumstances beyond the control of B, then A’s claim would be against C, not B.

The employee

If B’s employee were acting in the course of their employment when they destroyed the goods then B is vicariously liable and, at common law, so is the employee. Some jurisdictions have protected employees from liability so that A can only sue B but where this has not happened, A can sue both B and B’s employee.

Similarly, at common law, B can sue their employee unless they were acting on B’s directions (express or implied). Similarly, some jurisdictions do not allow employers to sue their employees. Notwithstanding, the employee may be subject to disciplinary action.

If the employee was acting on a “frolic of their own” totally outside the employment relationship (e.g the employee lives next door and set off fireworks at home that destroyed the goods) then they are an independent party and can be treated like C.

Similarly, if the “employee” is actually an independent contractor then: B is not responsible for their actions. They are treated like C.

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What could I do?Is this matter of property law?Or contractual law?Or both?

It pertains to contract law. If the destruction prevents company B from delivering on time, company A only has a claim against B: breach of contract. Quantifying an award will be hard (or perhaps futile) unless (1) the contract specifies the remedies for breach, or (2) company A proves it incurred losses because of B's breach.

Company B might have a claim against its employee regardless of whether the destruction impaired B's performance of its contract with A. This depends on the specifics of why or how the employee destroyed the goods. In the circumstances you outline, company A has no claim against B's employee.

Note: The principles of contract law are formulated in sources such as the Restatement (Second) of Contracts (frequently cited by courts in the U.S.) and, in jurisdictions based on the roman system, the civil code of the country at issue.

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  • thank you very much for your answer :)
    – Alex D'ago
    Sep 22 at 19:20
  • a disgruntled employee of company B deliberately destroyed the goods
    – Alex D'ago
    Sep 22 at 19:22
  • @AlexD'ago "a disgruntled employee of company B deliberately destroyed the goods". Then company B has one or more viable claims (including but not necessarily limited to breach of contract) against the employee. Sep 22 at 19:55

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