25-1 Chapter 19 Title to Goods and Risk of Loss

Identification of Goods and Passage of Title  Identification of goods: Distinguishing of the goods named in a contract from the seller’s or lessor’s other goods  Already existing goods are identified when a contract is made and names the specific goods sold or leased  Goods that are part of a larger mass of goods are identified when the specific merchandise is designated 19-2 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Identification of Goods and Passage of Title  Future goods: Goods not yet in existence  Identified when the goods are shipped, marked, or otherwise designated by the seller or lessor as the goods to which the contract refers 19-3 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Identification of Goods and Passage of Title  Title: Legal, tangible evidence of ownership of goods  Passage of title to goods  Title cannot pass until goods exist and have been identified  Title passes upon terms agreed to in contract  If no terms are stated, title passes when delivery is completed 19-4 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Identification of Goods and Passage of Title  Shipment Contract  The seller is required to:  Make proper shipping arrangements  Deliver the goods into the carrier’s hands  Destination Contract  Seller delivers goods either to buyer’s place of business or another destination specified in sales contract 19-5 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Identification of Goods and Passage of Title  Delivery of goods without moving them  Buyer is required to pick up the goods from the seller  If the document of title or bill of lading is required, the title passes when the seller delivers the document  If no document of title and goods are identified, the title passes at the time of contracting 19-6 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Risk of Loss Where There is No Breach of the Sales Contract  Carrier cases: Movement of Goods  Shipment Contracts  Risk of loss passes to buyer when seller delivers the conforming goods to the carrier  Destination Contracts  Risk of loss passes to buyer when seller delivers the conforming goods to the specified destination 19-7 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Risk of Loss Where There is No Breach of the Sales Contract  Noncarrier Cases: No Movement of Goods  Merchant Seller  Risk of loss passes to buyer when buyer receives the goods  Nonmerchant Seller  Risk of loss passes to buyer upon tender of delivery 19-8 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Risk of Loss Where There is No Breach of the Sales Contract  Goods in possession of a bailee  The buyer receives negotiable document of title, or  The bailee acknowledges buyer’s right to possession, or  The buyer receives a nonnegotiable document of title and has reasonable time to demand goods 19-9 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Risk of Loss Where There is a Breach of the Sales Contract  Seller in breach of a sales contract  Seller retains risk of loss on the delivery of nonconforming goods to the buyer  The risk of loss remains on the seller until:  The defect or nonconformity is cured, or  The buyer accepts the nonconforming goods Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Risk of Loss Where There is a Breach of the Sales Contract  Buyer in breach of a sales contract  A buyer breaches a sales contract if he or she:  refuses to take delivery of conforming goods  repudiates the contract  otherwise breaches the contract Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Risk of Loss in Conditional Sales  Sale on Approval  No sale unless and until the buyer accepts the goods  Risk of loss and title pass when the goods are accepted by the buyer Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Risk of Loss in Conditional Sales  Sale or Return  Buyer may return goods unsold after a period of time  Risk of loss and title pass to buyer when buyer has possession of goods Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Risk of Loss in Conditional Sales  Consignment  Seller (consignor) delivers goods to buyer (consignee) to sell  Consignor paid a fee for selling goods on behalf of the consignor  Treated as sale or return Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Risk of Loss: Lease Contracts  In ordinary lease, risk of loss retained by lessor  In case of finance lease, risk of loss passes to lessee  If tendered goods are nonconforming, risk of loss remains with the lessor or the supplier until cure or acceptance Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Sale of Goods by Nonowners  Void title: A situation in which a thief acquires no title to goods he or she steals  Buyer does not obtain good title to stolen goods  Lessee has no leasehold interest in stolen goods  Rightful owner can reclaim Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Sale of Goods by Nonowners  Fraudulently Obtained Goods  A seller or lessor has voidable title or voidable leasehold interest to goods obtained by:  Fraud  A check that is later dishonored  Impersonation of another person Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Sale of Goods by Nonowners  Entrustment rule: If the owner entrusts the possession of his/her goods to a merchant who deals in goods of that kind, the merchant has the power to transfer all rights in the goods to a buyer in the ordinary course of business  The real owner cannot reclaim the goods from this buyer Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

Case 19.1: Entrustment Rule  Case  Lindholm v. Brant  925 A.2d 1048, Web 2007 Conn. Lexis 264 (2007)  Supreme Court of Connecticut  Issue  Is Brant a buyer in the ordinary course of business who has a claim of ownership to Red Elvis that is superior to that of the owner Lindholm? Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Electronic Communications and Signatures  E-signatures are legally effective and can be enforced against contracting parties  Electronic record or electronic signature is attributable to a person if it was act of that person or his or her electronic agent  Electronic communication is effective even if no individual aware of its receipt Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall.

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