Chap 23 Transfer of Title and Risk of Loss Flashcards
a sale of goods
is the transfer of title from the seller to the buyer for a consideration known as the price
a contract for sale of gods
requires each party to perform some obligation and gives each party the right to expect performance by the other party
what is important to the sale of goods
performance by each party
transfer of title
allocation of loss
title cannot pass
under a contract for sale until existing goods have been identified as those to which the contract refers
future goods
goods that are not both existing and identified
future goods cannot
constitute a present sale, but only operates as a contract to sell
if goods are not existing and identified
title cannot transfer so there is no sale
identification
at some point the seller obtains, manufactures, prepares or selects existing goods which she intends to deliver to or hold for the buyer
identification may be made
by either the seller of the buyer, at any time and in any manner agreed upon
if not otherwise specified, identification takes place
- when the contract is made, if it is for goods already existing and identified
- when the seller ships, marks or otherwise designates existing goods, if the contract is for goods which did not already exist at the time of the contract or
- when the crops are planted or start growing, if the contract is for crops to be grown within twelve months, or at the time of the next normal harvest, or when the young animals are conceived, if the contract is for the offspring of animals to be born within 12 months
insurable interest
at common law, only a person with title or a lien (a legal claim of a creditor on property) could insure his interest in specific goods
the code extends insurable interest
to a buyers interest in goods that have been identified as the goods in the contract
the seller also has an insurable interest
in the goods as long as he has title to them or any security interest in them
security interest
a security interest is defined as an interest in personal property or fixtures that ensures payment or performance of an obligation
any reservation by the seller
of title to the goods delivered to the buyer is considered a security interest
passage of title
title passes when the parties intend it to pass, provided the goods exist and have been identified
if the parties have no explicit agreement as to when the title of the goods transfers
the code provides rules that determine when title passes to the buyer
title that is stolen
is no title at all
physical movement of goods
when delivery i to be made by moving the goods, title passes at the time and place the seller completes his delivery of the goods
when and where delivery occurs
depends on the type of the contract
a shipment contract
does not name a required destination
title is transferred when and where the seller delivers the goods to the carrier who will deliver them
a destination contract
specifies the destination
title is transferred upon tender of goods at the destination
no movement of the goods
when delivery is to be made without moving the goods, unless otherwise agreed, title passes
a on delivery of a document of title or
b at the time and place of contracting, if the goods are identified and no documents are to be delivered
where the goods are not identified at contracting, title passes when the goods are identified
power to transfer title
if the seller is the rightful owner of the goods or is authorized to sell the goods for the rightful owner, the seller has the right to transfer title
in some situations, however, unauthorized sellers
may have the power to transfer title to certain buyers
this section pertains to such sales as by a person in possession of goods who neither owns the goods nor has the authority to sell them
void and voidable title to goods
a person claiming ownership of goods by an action or agreement that is void obtains no title to the goods and therefore cannot transfer it
a voidable title is one
for which the transferor can reverse the transfer of title back to herself
although the buyer has acquired legal title, the seller may rescind the transfer
if however, the buyer were to reset the goods to a good faith purchaser for value, before the seller has rescinded the transfer of title, the right of rescission in the seller is ended, and the good faith purchaser acquires good title
entrusting goods to a merchant
if an owner of goods has entrusted goods to a bailee, such as a repairman, who then sells the goods to a third party, the owner of the goods has a right of recourse
the question then becomes, what right should the true owner of the goods have against a third party
once again, the law must balance the right of ownership against the rights of parties in market transactions
if the bailee is a merchant who deals in goods of the kind sold
the code protects the third party buyer (called a buyer in the ordinary course of business)
because the merchant is cloaked with the appearance of ownership or apparent authority to sell, the innocent third party purchaser is unlikely to know that the merchant is not the rightful owner of the goods
one who entrusts goods to a merchant who deals in goods of the kind gives him (the merchant) the power (not the right) to transfer all rights of the entrustor to a buyer in the ordinary course of business
risk of loss
losses are borne by either the seller, the buyer or both when the goods have been damaged, destroyed or lost without the fault of either the seller or the buyer
if the loss is placed on the buyer
he is under a duty to pay the price for the goods even though they were damaged or he never received them
if the loss is placed on the seller
she has no right to recover the purchase price from the buyer, although she does have a right to the return of the damaged goods
risk of loss where there is breach
where one party breaches the contract, the code places the risk of loss on the party who breaches the contract
if, however, the non breaching party is in control of the goods, the code places the risk of loss on him to the extent of insurance coverage
breach by the seller
the risk of loss is on the seller until the buyer has accepted the goods or until the seller has remedied the defect
if the buyer accepts, and then rightfully revokes his acceptance of the goods, the risk of loss is on the seller, beyond the buyers insurance coverage
breach by the buyer
where conforming goods have been identified to a contract that the buyer repudiate or breaches before risk of loss has passed to him, the seller may treat the risk of loss as resting on the buyer for commercially reasonable time beyond the sellers effective insurance coverage
risk of loss in absence of a breach
where there is no breach, the risk of loss may be allocated by the agreement of the parties
is the parties have not otherwise agreed, the code places the risk of loss, for the most part, on the party who is more likely to have greater control over the goods, is more likely to insure the goods, or i better able to prevent the loss of goods
agreement of the parties
the parties, by agreement, may not only shift the allocation of risk of loss but may also divide the risk between them
such an agreement is controlling
trial sales
some sales allow the buyer to try the goods for a period of time and then return them without any reason required
the code recognizes two types of trial sales - sale on approval (goods primarily for the buyers use) and sale or return (goods primarily for resale by the buyer)
contracts involving carriers
contracts frequently contain terms which identify it as either a shipment contract of a destination contract
under a shipment contract, risk of loss passes to the buyer when the goods are delivered to the common carrier
under a destination contract, risk of loss passes to the buyer when the goods are tendered to the buyer at the named destination
goods in possession of a bailee
where a bailee has possession of the goods, delivery can be made without movement of the goods
the code provides that the risk of loss will pass in this situation:
a when the buyer receives the negotiable document
and b when a non-negotiable title document is tendered to the buyer
if title documents are not used, the risk passes when the seller tenders to the buyer instructions directing the bailee to deliver the bailee acknowledges the buyers right to possession
all other sales
if the contract is not a trial sale, does not require delivery by a carrier and the goods are not possessed by a bailee, risk of loss will depend on the status of the parties
where the seller is a merchant, the buyer assumes the risk of loss upon receipt of the goods
if the seller is a non merchant, the risk shifts to the buyer when the goods are tendered to the buyer
FOB is
a delivery term, not a price term
seller to make delivery FOB shipping point
title transfers when goods duly delivered to carrier
risk of loss transfers when goods duly delivered to carrier
CIF and CF
title transfers when goods duly delivered to carrier
risk of loss transfers when goods duly delivered to carrier
CIF is
cost insurance & freight
CF is
cost & freight
COD (collect on delivery)
title transfers when goods duly delivered to carrier
risk of loss transfers when goods duly delivered to carrier
FAS (free along side)
title transfers when the goods are delivered alongside the vessel as is customary at that port
risk of loss transfers when the goods are delivered alongside the vessel as is customary at that port
seller to make delivery FOB destination
title transfers when goods are tendered by the carrier so as to enable the buyer to take delivery
risk of loss transfers when goods are tendered by the carrier so as to enable the buyer to take delivery
delivery ex ship
title transfers upon tender of the goods at destination
risk of loss transfers when the goods are off of the ship or unloaded at destination
no arrival - no sale is
when seller not liable for non arrival of he goods unless he cause non arrival of the goods
no arrival - no sale
title transfers when the goods are tendered by the carrier so as to enable the buyer to take delivery
risk of loss transfers when the goods are tendered so as to enable the buyer to take delivery
seller to deliver document of title only
title transfers upon receipt of a negotiable or non-negotiable document of title
risk of loss transfers upon receipt of negotiable or non-negotiable document of title
goods in possession of bailee to be delivered without being moved and no documents of title to be issued
title transfers at time and place of contracting
risk of loss transfers when bailee acknowledges buyers right to possess the goods
all situations not previously covered
title transfers at time and place of contracting
risk of loss transfers upon buyers receipt of the goods is the seller is a merchant, or upon tender of the goods to buyer if seller is a non-merchant
sale on approval
title transfers when buyer approves, accepts, fails to return the goods seasonably or manifests dominos or control over the goods inconsistent with sellers rights of ownership
risk of loss transfers when buyer approves, accepts, fails to return the goods seasonably or manifests dominos or control over the goods inconsistent with sellers rights of ownership
sale or return
title transfers apply appropriate rule in 1-10
same for risk of loss
sale on consignment
use rule B (sale or return) as this is considered to be a sale or return
same for risk of loss
keep in mind that the parties
may contract for the passing of title in a manner different than specified herein and/or allocate the risk of loss in whole or part by agreement
