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Passing of risk refers to the obligation to protect the goods under contract until the event defined. For example, "free on board" (FOB) contracts transfer ownership and risk to the buyer from the moment the goods are loaded for shipment.

In many cases, absent a specific contract term to the contrary, the risk of loss passes from the seller to the buyer when the carrier offers the goods at the buyer's destination.

The party holding the risk is the one who should be responsible for insurance to cover the loss or damage to the goods. The other party may be asked to PAY for the insurance, but the loss would only be compensated to the person holding the risk.

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