© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C HAPTER 21: T RANSFER OF T ITLE AND R ISK OF L OSS

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. A.Transfer of Title. B.Risk of Loss. C.Bulk Sales. T OPICS C OVERED C HAPTER 21: T RANSFER OF T ITLE AND R ISK OF L OSS 2

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T RANSFER OF T ITLE  Transfer of title is fundamental to a sale of goods.  But title cannot pass to a buyer until the goods have been identified according to contract terms.  Title does not pass in a lease. 3

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T RANSFER OF T ITLE  Identification is a designation of specific goods as goods to which a contract of sale refers. Security Interest – an interest in personal property or fixtures that ensures payment or performance of an obligation.  4

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T RANSFER OF T ITLE  Identification. Insurable Interest – buyer obtains an insurable interest and specific remedies in the goods by identification of existing goods as goods to which the contract of sale refers. 5

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T RANSFER OF T ITLE  Passage of Title—title passes when the parties intend it to pass; when the parties do not specifically agree, the UCC provides rules to determine when title passes.  6

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T RANSFER OF T ITLE  Passage of Title. Physical Movement of the Goods – when delivery is to be made by moving the goods, title passes at the time and place where the seller completes his performance with reference to delivery. Shipment Contract. Destination Contract. 7

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T RANSFER OF T ITLE  Passage of Title. No Movement of Goods. Unless agreed otherwise, title passes when goods are identified and: (1) upon delivery of a document of title, or (2) at the time and place of contracting. 8

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T RANSFER OF T ITLE  Power to Transfer Title. The purchaser of goods obtains such title as her transferor either has or had the power to transfer. To encourage and secure good faith acquisitions of goods, it is necessary to protect third parties in certain circumstances.  9

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T RANSFER OF T ITLE  Power to Transfer Title. Void Title – no title can be transferred. Voidable Title – the good faith purchaser acquires good title.  R OBINSON V. D URHAM (1988). R OBINSON V. D URHAM (1988). 10

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. V OID T ITLE B Transferee goods Good faith purchaser C $ may not recover goods A voidable transfer of goods Transferor 11

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. V OIDABLE T ITLE A void transfer of goods Transferor C Good faith purchaser $ may recover goods B goods Transferee

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. I DENTIFICATION  Power to Transfer Title. Entrusting Goods to a Merchant – buyers in the ordinary course of business acquire good title when buying from merchants. H EINRICH V. T ITUS -W ILL S ALES, I NC. (1994). H EINRICH V. T ITUS -W ILL S ALES, I NC. (1994). 13

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. R ISK OF L OSS  Definition – allocation of loss between seller & buyer where goods are damaged, destroyed, or lost without the fault of either party.  14

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. R ISK OF L OSS  Risk of Loss Where There Is a Breach. Breach by the Seller – if the seller ships to the buyer goods that do not conform, the risk of loss remains on the seller until the buyer has accepted the goods or until seller has remedied the defect.  15

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. R ISK OF L OSS  Risk of Loss Where There Is a Breach. Breach by the Buyer – the seller may treat the risk of loss as resting on the buyer for a commercially reasonable time to the extent of any deficiency in the seller's effective insurance coverage. 16

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. R ISK OF L OSS  Risk of Loss in Absence of a Breach. Agreement of the Parties – the parties may by agreement allocate the risk of loss.  17

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. R ISK OF L OSS  Risk of Loss in Absence of a Breach. Trial Sales. If the goods are primarily for buyer's use, transaction is a sale on approval (risk of loss remains with the seller until “approval” or acceptance of the goods by the buyer).  18

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. R ISK OF L OSS  Risk of Loss in Absence of a Breach. Trial Sales. Consignment: If the goods are primarily for resale, it is a sale or return (the risk of loss is on the consignee until she returns the goods). 19

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. R ISK OF L OSS  Risk of Loss in Absence of a Breach. Contracts Involving Carriers – seller bears the risk of loss and expense until the goods are delivered to the carrier for shipment; in destination contracts, the seller bears the risk of loss and expense until tender of the goods at a particular destination. W INDOWS, I NC. V. J ORDAN P ANEL S YSTEMS, C ORP. (1999). W INDOWS, I NC. V. J ORDAN P ANEL S YSTEMS, C ORP. (1999). 20

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. R ISK OF L OSS  Risk of Loss in Absence of a Breach. Goods in Possession of Bailee: depends on contract and when title passes to bailee. All Other Sales – for merchant seller, risk of loss passes to buyer on the buyer's receipt of the goods; for nonmerchant seller, risk of loss passes to buyer upon tender of goods.  M ARTIN V. M ELLANDS, I NC. (1979). M ARTIN V. M ELLANDS, I NC. (1979). 21

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. B ULK S ALES  Definition – transfer, not in the course of the transferor's business, of a major part of his inventory.  Requirements of Article 6 – transfer is ineffective against any creditor of the transferor, unless certain requirements are met. 22