Chap 23 Transfer of Title and Risk of Loss

Question 1

a sale of goods

Answer 1

is the transfer of title from the seller to the buyer for a consideration known as the price

Question 2

a contract for sale of gods

Answer 2

requires each party to perform some obligation and gives each party the right to expect performance by the other party

Question 3

what is important to the sale of goods

Answer 3

performance by each party
transfer of title
allocation of loss

Question 4

title cannot pass

Answer 4

under a contract for sale until existing goods have been identified as those to which the contract refers

Question 5

future goods

Answer 5

goods that are not both existing and identified

Question 6

future goods cannot

Answer 6

constitute a present sale, but only operates as a contract to sell

Question 7

if goods are not existing and identified

Answer 7

title cannot transfer so there is no sale

Question 8

identification

Answer 8

at some point the seller obtains, manufactures, prepares or selects existing goods which she intends to deliver to or hold for the buyer

Question 9

identification may be made

Answer 9

by either the seller of the buyer, at any time and in any manner agreed upon

Question 10

if not otherwise specified, identification takes place

Answer 10

1. when the contract is made, if it is for goods already existing and identified
2. 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
3. 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

Question 11

insurable interest

Answer 11

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

Question 12

the code extends insurable interest

Answer 12

to a buyers interest in goods that have been identified as the goods in the contract

Question 13

the seller also has an insurable interest

Answer 13

in the goods as long as he has title to them or any security interest in them

Question 14

security interest

Answer 14

a security interest is defined as an interest in personal property or fixtures that ensures payment or performance of an obligation

Question 15

any reservation by the seller

Answer 15

of title to the goods delivered to the buyer is considered a security interest

Question 16

passage of title

Answer 16

title passes when the parties intend it to pass, provided the goods exist and have been identified

Question 17

if the parties have no explicit agreement as to when the title of the goods transfers

Answer 17

the code provides rules that determine when title passes to the buyer

Question 18

title that is stolen

Answer 18

is no title at all

Question 19

physical movement of goods

Answer 19

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

Question 20

when and where delivery occurs

Answer 20

depends on the type of the contract

Question 21

a shipment contract

Answer 21

does not name a required destination

title is transferred when and where the seller delivers the goods to the carrier who will deliver them

Question 22

a destination contract

Answer 22

specifies the destination

title is transferred upon tender of goods at the destination

Question 23

no movement of the goods

Answer 23

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

Question 24

power to transfer title

Answer 24

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

Question 25

in some situations, however, unauthorized sellers

Answer 25

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

Question 26

void and voidable title to goods

Answer 26

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

Question 27

a voidable title is one

Answer 27

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

Question 28

entrusting goods to a merchant

Answer 28

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

Question 29

if the bailee is a merchant who deals in goods of the kind sold

Answer 29

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

Question 30

risk of loss

Answer 30

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

Question 31

if the loss is placed on the buyer

Answer 31

he is under a duty to pay the price for the goods even though they were damaged or he never received them

Question 32

if the loss is placed on the seller

Answer 32

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

Question 33

risk of loss where there is breach

Answer 33

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

Question 34

breach by the seller

Answer 34

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

Question 35

breach by the buyer

Answer 35

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

Question 36

risk of loss in absence of a breach

Answer 36

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

Question 37

agreement of the parties

Answer 37

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

Question 38

trial sales

Answer 38

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)

Question 39

contracts involving carriers

Answer 39

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

Question 40

goods in possession of a bailee

Answer 40

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

Question 41

all other sales

Answer 41

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

Question 42

FOB is

Answer 42

a delivery term, not a price term

Question 43

seller to make delivery FOB shipping point

Answer 43

title transfers when goods duly delivered to carrier

risk of loss transfers when goods duly delivered to carrier

Question 44

CIF and CF

Answer 44

title transfers when goods duly delivered to carrier

risk of loss transfers when goods duly delivered to carrier

Question 45

CIF is

Answer 45

cost insurance & freight

Question 46

CF is

Answer 46

cost & freight

Question 47

COD (collect on delivery)

Answer 47

title transfers when goods duly delivered to carrier

risk of loss transfers when goods duly delivered to carrier

Question 48

FAS (free along side)

Answer 48

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

Question 49

seller to make delivery FOB destination

Answer 49

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

Question 50

delivery ex ship

Answer 50

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

Question 51

no arrival - no sale is

Answer 51

when seller not liable for non arrival of he goods unless he cause non arrival of the goods

Question 52

no arrival - no sale

Answer 52

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

Question 53

seller to deliver document of title only

Answer 53

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

Question 54

goods in possession of bailee to be delivered without being moved and no documents of title to be issued

Answer 54

title transfers at time and place of contracting

risk of loss transfers when bailee acknowledges buyers right to possess the goods

Question 55

all situations not previously covered

Answer 55

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

Question 56

sale on approval

Answer 56

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

Question 57

sale or return

Answer 57

title transfers apply appropriate rule in 1-10

same for risk of loss

Question 58

sale on consignment

Answer 58

use rule B (sale or return) as this is considered to be a sale or return

same for risk of loss

Question 59

keep in mind that the parties

Answer 59

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