Contracts: Title & Risk of Loss

Question 1

UCC Article 2:

Identification

Answer 1

• before interest, goods must exist and be identified
• GR: goods currently in existence @ contract creation
• Fungible Goods: cannot be distinguished: ID when marked/designated to the contract
• Future Goods: identified when shipped, marked, designated
• ** once goods exist and are identified, then title and risk of loss may pass ***

Question 2

UCC Article 2:

Delivery Terms

Answer 2

F.O.B. (free on board)
- title and rol pass at time of delivery of conforming goods
F.A.S. (free alongside vessel)
- title and rol pass at place of shipment
C.I.F. (cost, insurance, freight)
- title and rol pass at time of delivery of conforming goods, gets BOL, gets insurance, names destination, and forwards documents to buyer
C&F (cost & freight)
- Same as CIF but no insurance
COD (cash on delivery)
- pay cash upon tender of goods
- if they are shipped timing of right to inspection shifts

Question 3

UCC Article 2:

Passage of Title

Answer 3

1. Determine if delivery or non-delivery
   - w/o agreement delivery is at seller’s place of business
2. Non-Delivery
   - is there a document of title?
   - no. then title passes @ moment of contract
   - yes & non-negotiable. @ moment of receipt
   - yes & negotiable. @ moment of receipt
3. Delivery
   - Tender is the key: goods have arrived and are available for pickup, and buyer notified
4. Ex-Ship
   - title and rol do not pass until ship arrives and goods unloaded
5. Deliver
   - delivery at buyer’s destination

Question 4

UCC Article 2:

Passage of Risk of Loss

Answer 4

Remember: goods must be identified
1. Non-Delivery
- determine if contract delivery or non-delivery
-is seller a merchant?
- if so, rol does not pass until buyer has posession
- if not, rol passes upon tender
Delivery:
- FOB place of shipment, then rol when given to carrier
- FOB destination: rol at time of tender
Negotiable document of title & no delivery
- to buyer on buyer’s receipt of document
Nonnegotiable document of title & no delivery
- to buyer on buyer’s receipt of document & time to present and receive
Held by Third Parties no document of title
- bailee acknowledges buyer’s right to posession
- rol upon tender by warehouseman

Question 5

UCC Article 2:

Breach of passage of title & ROL

Answer 5

• buyer has right to reject non-confirming goods. rol does not pass until defect has been cured.
• if goods are accepted and then acceptance is revoked, then rol back to seller
• breach due to fault of buyer and rol has not passed, moves to buyer
• breach affects rol but not title

Question 6

UCC Article 2:

Special Issues

Answer 6

Sale on Approval: until buyer accepts, title & rol with seller
- accept by:
- Due notification
- failure to reject
- any act inconsistent with seller’s ownership
Sale or Return: actual sale with title and rol to buyer with clause that the can revert to seller if buyer returns
- failure to timely return finalizes sale

Question 7

UCC Article 2:

Third Party Rights and Title

Answer 7

Bona Fide Purchaser for Value

• void title transferred: void title cannot be transferred
• voidable title transferred: stays with original owner unless sold to a bona fide purchaser for value
• entrusting goods to merchant: they can transfer to buyer in ordinary course of business