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ACC 473 > Chapter 21: Title, Risk and Insurable Interest > Flashcards

Chapter 21: Title, Risk and Insurable Interest Flashcards

1
Q

UCC replaces title with

A
  1. Identification
  2. Risk of Loss
  3. Insurable Interest
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2
Q

For any interest to pass to buyer, goods must be

A
  1. In existence
  2. Future goods
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3
Q

In existence

A
  1. Must be identified as specific goods in the sales contract
  2. If contract calls for ascertaining goods in existence, identification takes place at the time the contract is made
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4
Q

Future goods

A
  1. Animals born within 12 months of contract; identification
  2. For crops harvested within 12 months of contracting, identification takes place at time of planting (or when crops begin to grow)
  3. All others, identification occurs when goods are shipped, marked, or otherwise designated
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5
Q

Fungible goods

A

Goods that are naturally alike, by agreement or trade usage
Seller-owner can pass title and risk of loss without separating the goods
EX: specific grades or types of wheat, oil and wine stored in large containers

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6
Q

Identification

A

Gives the user the right
- To obtain insurance on the goods
- To recover from third parties who damage the goods

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7
Q

Identification occurs:

A
  1. If goods are designated when contract is made
  2. If goods are not designated when contract is made, then identified at time of designation
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8
Q

When can title pass?

A

Once goods exist and are identified

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9
Q

Title can pass:

A
  1. Time and place seller performs physical delivery
  2. When agreed to by the parties
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10
Q

Delivery Arrangements

A
  1. Shipment Contract
  2. Destination Contract
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11
Q

Shipment Contract

A

Title passes at time and place of shipment
(Seller is only required to deliver goods to a carrier)

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12
Q

Destination Contract

A

Title passes when goods are tendered at the destination
(Seller is required to deliver goods directly to buyer or another party designated by the buyer)

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13
Q

Bill of lading

A

Receipt for goods that is signed by a carrier and serves as a contract for transportation of the goods

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14
Q

Warehouse Receipt

A

Receipt issued by a warehouse for goods stored in the warehouse

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15
Q

When a sales contract does not call for seller to ship the goods

A

Passage of title is dependent on whether seller must deliver a document of title

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16
Q

Issues when persons acquire goods with imperfect title and attempt to sell or lease them

A

A buyer acquires whatever title the seller has in the goods sold. A lessee acquires whatever leasehold interest the lessor has the power to transfer subject to the lease contract

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17
Q

When can titles be void (Void titles)

A

1.Buyer unknowingly purchases goods from seller who is not the owner
2. If seller is a thief, the seller’s title is void
3. Buyer gets no title (even in acts of good faith)
Owner can recover goods

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18
Q

Voidable Title

A

Where goods seller is selling were
1. Obtained by fraud
2. Paid with a check which was dishonored
3. Purchased on credit when the seller was insolvent
Owner cannot recover goods

19
Q

Entrustment Rule

A

Entrusting goods to a merchant who deals in goods of that kind gives merchant the power to transfer all rights to a buyer in the ordinary course of business. Allows innocent buyer to obtain title to goods purchase from a merchant even if merchant does not have good title

20
Q

Buyer in the ordinary course of business

A

One who acts in good faith without knowledge the sale violates the rights of another

21
Q

Risk of Loss (ROL)

A
  1. Does not necessarily pass with title
  2. Important because of insurance concerns
  3. Can be agreed to by parties
  4. Passes to buyer depending on whether delivery is “with” or “without” movement of goods
22
Q

FOB (free on board)

A

Indicates that the selling price of goods includes transportation costs to specific FOB place named in contract. Seller pays expenses & carries risk of loss to FOB place

23
Q

FAS (free alongside)

A

Requires that the seller, at his or her own expense and risk, deliver the goods alongside the carrier before risk passes to the buyer

24
Q

CIF (Cost, Insurance, Freight)

A

Requires, among other things, that the seller “put the goods in possession of a carrier” before risk passes to buyer

25
Q

CIF (Cost, Insurance, Freight)

A

Requires, among other things, that the seller “put the goods in possession of a carrier” before risk passes to buyer

26
Q

Delivery ex-ship

A

The risk of loss does not pass to the buyer until the goods are properly unloaded from the ship or other carrier

27
Q

ROL Shipment Contracts

A

ROL passes to buyer when tendered to carrier. Any goods damaged in transit is buyer’s loss

28
Q

ROL Destination Contracts

A

ROL passes to buyer when goods tendered at particular destination

29
Q

Bailee

A

A party who, by a bill of lading, warehouse receipt, or other document of title, acknowledges possession of goods and/or contracts to deliver them

30
Q

Bailment

A

Temporary delivery or passage (possession) of personal property without passage of title to another

31
Q

ROL: If seller is not a merchant

A

Passes to buyer on tender of delivery

32
Q

ROL: If seller is a merchant

A

ROL passes when buyer actually takes physical possession of goods

33
Q

Goods Held by a Bailee: Negotiable document of title

A

The rights to the goods, free of any claims against the party that issued the document, pass with the document to the transferee

34
Q

Goods Held by a Bailee: Non-negotiable document of title

A

Transferee obtains only the rights that the party transferring it had, subject to any prior claims

35
Q

When goods are held by a bailee, ROL passes to buyer when:

A
  1. The buyer receives a negotiable document of title for the goods
  2. Bailee acknowledges the buyer’s right to possess the goods
  3. The buyer receives a nonnegotiable document of title, and the buyer has had a reasonable time to present the document to the bailee and demand the goods
    (if the bailee refuses to honor the document, the risk of loss remains with the seller)
36
Q

Conditional Sales

A
  1. Conditioned on the buyer’s approval of goods or on buyer’s resale of goods
  2. Buyer is in possession
  3. Disputes can arise as to party to bear ROL
37
Q

Types of Conditional Sales

A
  1. Sale on Approval
  2. Sale on Return
38
Q

Sale on Approval

A
  1. Seller offers to sell goods to buyer (usually not a merchant) and sends the goods on a trial basis
  2. Only an “offer to sell” has been made, along with a bailmentsince buyer has possession
  3. Title and ROL remain with seller
  4. ROL passes when buyer approves (accepts offer) expressly or implicitly
39
Q

Sale or Return

A
  1. Buyer (usually a merchant) purchases goods primarily for resale
  2. Buyer has right to return goods in lieu of payment if goods do not sell (Sale may be undone at buyer’s option)
  3. Title/ROL passes to buyer with possession
  4. Goods are subject to claims of buyer’s creditors while in buyer’s possession
  5. Buyer bears expense of returning goods
40
Q

Seller’s Breach

A
  1. Rejection by buyer (Risk stays with seller)
  2. Buyer accepts, discovers defect and revokes acceptance (risk passes back to seller to the extent that buyer’s insurance does not cover the loss)
41
Q

Buyer’s Breach

A

Loss immediately shifts to buyer provided:
1. Goods are identified in contract
2. ROL passes to buyer for a commercially reasonable time after seller learns of the breach
3. Buyer is liable only to the extent that the seller’s insurance does not cover loss

42
Q

Insurable Interest: Buyer

A

Buyer has insurable interest in goods identified

43
Q

Insurable Interest: Seller

A

Seller has insurable interest in goods as long as they retain title or a security interest (after titles passes to buyer)

44
Q

Insurable Interest: Both buyers and sellers

A

Can have an insurable interest at the same time. Must sustain an actual loss to recover insurance proceeds

ACC 473 (7 decks)

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