Ownership and Risk of Loss Chapter 13

Possession vs. Title To have possession means to hold or occupy with or without rights of ownership To have possession means to hold or occupy with or without rights of ownership To hold title means to have ownership To hold title means to have ownership

Buying a used car? Don't just take the seller's word about the car's history. Buying a used car? Don't just take the seller's word about the car's history. Car Title Case Car Title Case Used Car Scam Used Car Scam &feature=related &feature=related &feature=related &feature=related

Who is Authorized to sell Goods? The owner of the goods The owner of the goods In retail stores, Salespeople have authorization to sell goods/represent the brands In retail stores, Salespeople have authorization to sell goods/represent the brands Auctioneers and sheriffs are authorized under Court Orders to sell stolen and repossessed goods or foreclosed properties Auctioneers and sheriffs are authorized under Court Orders to sell stolen and repossessed goods or foreclosed properties

Buying stolen goods Misdemeanor – value under$2000 Misdemeanor – value under$2000 Felony - if value over $2000 Felony - if value over $2000

When a buyer is induced by fraud: If the owner of goods is induced by fraud to sell their goods, The transfer of title is voidable by the seller If the owner of goods is induced by fraud to sell their goods, The transfer of title is voidable by the seller The seller can cancel the contract and recover their good UNLESS there is a Good Faith Purchaser involved The seller can cancel the contract and recover their good UNLESS there is a Good Faith Purchaser involved An innocent active third-party participant in a fraudulent sale An innocent active third-party participant in a fraudulent sale In this case, the Good Faith Purchaser had legal rights to the goods and the original Seller must seek damages from the original fraudulent buyer In this case, the Good Faith Purchaser had legal rights to the goods and the original Seller must seek damages from the original fraudulent buyer

Buyer does receive title if… Buyer does receive title if… HAD no have reason to suspect fraud; innocent buyer HAD no have reason to suspect fraud; innocent buyer Buyer Doesn’t receive title if… Buyer Doesn’t receive title if… Purchases stolen goods (regardless of innocence) Purchases stolen goods (regardless of innocence)

Requirements for Ownership Transfer: goods must be existing and identified 1. Existing Goods – physically in existence 2. Identified Goods – designated specifically as the subject matter If goods are not existing and identified, they are: If goods are not existing and identified, they are: Future Goods – good involved in a “contract to sell” Future Goods – good involved in a “contract to sell”

Title is exchanged when there is a Tender of Delivery – seller places (or authorizes a carrier to place) the proper goods at the buyer’s disposal and notifies the buyer so that the delivery can be received If contract says that the sellers ships goods, but not delivers goods, title passes as soon as goods are shipped. If contract says that the sellers ships goods, but not delivers goods, title passes as soon as goods are shipped.

Judge Judy Ebay Scammer: Ebay Scammer: &feature=related &feature=related &feature=related &feature=related

When does Ownership Transfer? Common Situations: Common Situations: Seller delivers good to destination Seller delivers good to destination Seller ships goods to destination Seller ships goods to destination Seller delivers document of title Seller delivers document of title Buyer takes possession at place of sale Buyer takes possession at place of sale

Risk of Loss

If Seller Ships Goods by Carrier Risk of loss passes to the buyer at the destination upon tender of delivery

FOB – Free on Board agreement that goods will be carried to a specific spot agreement that goods will be carried to a specific spot transfer of ownership occurs at that point transfer of ownership occurs at that point

CIF – Cost, Insurance, Freight contract for adequate insurance and proper shipment contract for adequate insurance and proper shipment Risk of loss passes when seller delivers goods to the carrier Risk of loss passes when seller delivers goods to the carrier

COD (Collect on Delivery) Carrier collects price and delivery charges upon delivery and transmits to the seller Carrier collects price and delivery charges upon delivery and transmits to the seller If buyer does not pay, goods are not transferred If buyer does not pay, goods are not transferred

Cash and Carry Sales Buyer pays cash for goods and takes immediate possession Buyer pays cash for goods and takes immediate possession Transfer of risk and title occurs immediately! Transfer of risk and title occurs immediately! Sales on credit do not affect the passing of risk Sales on credit do not affect the passing of risk

Bailee – individual that takes temporary possession of another person’s goods (ie. Public warehouse/ transporter)

Insurable Interest – gives the buyer the right to buy insurance on goods being delivered Keeps risk of loss with seller OR carrier (ie. UPS, Fed Ex.) Keeps risk of loss with seller OR carrier (ie. UPS, Fed Ex.) Protects YOU, as a buyer, from loss Protects YOU, as a buyer, from loss

Sale on Approval “on trial” or based on satisfaction “on trial” or based on satisfaction for example, companies give a 30 day “risk-free” trial for example, companies give a 30 day “risk-free” trial Risk of loss does not transfer until the buyer approves goods and accepts title Risk of loss does not transfer until the buyer approves goods and accepts title While in possession, buyer is responsible for damages due to negligence While in possession, buyer is responsible for damages due to negligence

Sale of an Undivided Interest Selling a fraction of interest in a good or realty Selling a fraction of interest in a good or realty Creates partial ownership Creates partial ownership

Auction – public sale to highest bidder Most auction sales are handled “with reserve” meaning an auctioneer may withdraw goods anytime before finalizing sale Most auction sales are handled “with reserve” meaning an auctioneer may withdraw goods anytime before finalizing sale

Bulk Transfer – the transfer of all or a major part of the goods of a business in one unit at one time Ex. Materials, supplies, merchandise, equipment A good faith buyer who buys some or all of the goods from a bulk transfer gets good title! A good faith buyer who buys some or all of the goods from a bulk transfer gets good title!