Midnight fire: 5 billion in consigned goods turns to ash
An agent’s warehouse burns at 2am, destroying all 5 billion of the brand’s consigned goods plus the agent’s own stock. Initial cause: electrical short. The agent claims “force majeure, each bears their own”; the brand says “my goods were in your custody — you compensate.”
Bailment law (Articles 513–521, 2015 Civil Code) draws clear lines: custodians must preserve and care for property as their own; fault-based loss or damage means compensation — except for force majeure (unforeseeable, insurmountable events despite all necessary measures). Is an electrical short force majeure? Usually not — where wiring was old, unmaintained, without fire protection.
Liability: three scenarios
1. Fire from agent’s fault (unmaintained wiring, smoking in warehouse, no fire systems, prohibited goods stored): the agent fully compensates the burned consigned value. The brand proves fault via fire-authority minutes and cause investigations.
2. Genuine force majeure (lightning despite arresters, spread from a neighbor despite compliant separation): the agent is excused — each bears their own loss. But the agent must prove all necessary measures were taken (full fire protection, periodic maintenance).
3. Undetermined cause: the fiercest disputes. Courts examine: was the warehouse fire-compliant? Did the agent carry compulsory fire insurance? Who proves what? Typically custodians must prove their freedom from fault — a reversed burden disadvantaging agents.
Insurance: who ultimately pays
Warehouses face compulsory fire and explosion insurance — the agent (warehouse owner) must buy it. Where bought: the insurer pays, the brand takes proceeds for consigned portions (mind beneficiary clauses). Where the agent skipped compulsory cover: administrative fines plus self-bearing all loss — and the brand gains extra fault evidence against the agent. Brand lesson: consignment contracts must require agents to produce valid insurance certificates periodically — one check-line preventing a 5-billion lawsuit.
Frequently asked questions
Outright-bought goods burned in a distributor’s warehouse?
Outright goods are the distributor’s property — fire loss is theirs (claiming their own insurance). The brand is uninvolved, absent warranty/replacement duties on that lot. Entirely unlike consigned goods (brand property).
Agent blames “electrical shorts are force majeure”?
Shorts count as force majeure only after all preventive measures (periodic maintenance, compliant systems, full fire protection) yet still occurring. Old unmaintained wiring without fire protection makes shorts fault, not force majeure — case law and practice are consistent here.
Should brands insure consigned goods themselves?
Yes — all-risk cover for consigned stock at third-party warehouses (stock throughput). Never rely 100% on agents’ insurance: they may skip it, under-buy it, or name other beneficiaries.
What should consignment contracts say on fire safety?
Consignee duties: maintain compliant fire systems, periodic maintenance, compulsory fire insurance with copies to the brand, immediate incident notification, brand warehouse inspections. Breach of each duty carries matching liability.
Fire spread from a neighboring warehouse?
Agents must prove reasonable spread-prevention (distances, firewalls). Brands/agents may also sue the neighboring warehouse owner where their fault started the fire — a second, independent suit from the consignment relation.
This article has been quality-reviewed by the FLAW AI Legal Council