FAR 46.505—Transfer of title and risk of loss.
Plain-English Summary
FAR 46.505 addresses two closely related but distinct issues for supplies under federal contracts: when title passes to the Government and when the risk of loss or damage shifts from the contractor to the Government. It also explains how those rules change depending on whether transportation is f.o.b. origin or f.o.b. destination, and it creates a special rule for nonconforming supplies that are subject to rejection. In addition, it protects contractors from liability for loss or damage caused by the negligence of Government personnel acting within the scope of their employment. Finally, it ties these rules to the contract clause at 52.246-16, Responsibility for Supplies, which is the clause that implements this policy in contracts where it is prescribed. In practice, this section matters because title and risk are not the same thing: the Government may own the supplies after acceptance, while the contractor may still bear the risk of loss until a later event occurs under the contract’s shipping terms. Contracting officers must ensure the contract’s delivery terms and any special title provisions are consistent with these default rules, and contractors must understand when they remain financially responsible for damaged, lost, or rejected supplies.
Key Rules
Title passes on acceptance
As a general rule, title to supplies passes to the Government upon formal acceptance. This is true regardless of when or where the Government physically receives the supplies, unless the contract expressly states that title passes earlier.
Risk follows shipping terms
Unless the contract says otherwise, the contractor bears the risk of loss or damage until the specified transfer point. For f.o.b. origin shipments, risk passes when the supplies are delivered to the carrier; for f.o.b. destination shipments, risk passes only when the Government accepts the supplies or they are delivered to the destination specified in the contract, whichever happens later.
Nonconforming supplies stay contractor risk
If supplies are so defective or nonconforming that the Government has a right to reject them, the normal risk-of-loss rule does not apply. The contractor keeps the risk until the defect is cured or the Government accepts the supplies, and only then does the standard rule in paragraph (b) take over.
Government negligence is excluded
When paragraph (b) applies, the contractor is not liable for loss or damage caused by the negligence of Government officers, agents, or employees acting within the scope of their employment. This limits contractor exposure where the Government itself causes the damage.
Clause implements the policy
The policy in paragraphs (a) through (d) is implemented through the contract clause at 52.246-16, Responsibility for Supplies, which is prescribed by FAR 46.316. Contracting officers should ensure the clause is included when required, because it carries these rules into the contract.
Responsibilities
Contracting Officer
Include and administer the applicable Responsibility for Supplies clause when prescribed, and ensure any special contract language on earlier passage of title or different risk allocation is clearly stated. The contracting officer should also align delivery terms, acceptance procedures, and inspection requirements with the intended transfer of title and risk.
Contractor
Protect the supplies until the applicable transfer point, understand when risk remains with the contractor under the shipping terms, and promptly cure or replace nonconforming supplies that are subject to rejection. The contractor must also recognize that it is not liable for loss or damage caused by Government negligence within the scope of employment.
Government/Receiving Activity
Formally accept supplies when they meet contract requirements, because acceptance is the default trigger for title passage and may also affect when risk shifts under destination shipments. Government personnel must handle supplies with due care, since negligence can relieve the contractor of liability for resulting loss or damage.
Transportation Carrier
Carry the supplies under the applicable f.o.b. terms, because delivery to the carrier can be the risk-transfer point for f.o.b. origin shipments. The carrier’s role affects when the contractor’s risk ends, although the carrier is not a party to the title rule itself.
Practical Implications
Title and risk are separate concepts, so do not assume that Government ownership means the contractor is no longer responsible for loss. A contract can transfer title at acceptance while risk may have shifted earlier or later depending on the f.o.b. term.
The f.o.b. term is critical. Under f.o.b. origin, the contractor’s risk usually ends when the goods are handed to the carrier; under f.o.b. destination, the contractor may remain at risk until delivery and acceptance at the destination.
Nonconforming supplies are a major pitfall. If the Government has a right to reject the items, the contractor generally keeps the risk until the defect is cured or the Government accepts them, so damaged rejected goods can remain the contractor’s problem.
Government-caused damage is not automatically the contractor’s responsibility. If Government personnel negligently damage the supplies while acting within the scope of their duties, the contractor is not liable under paragraph (b).
Contracting officers should avoid ambiguity by expressly stating any intended deviation from the default title rule, because paragraph (a) allows earlier passage of title only if the contract specifically provides for it.
Official Regulatory Text
(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 .