Performance of Sales and Lease Contracts Chapter 11

Identification of Goods Distinguishing goods named in contract from seller’s or lessor’s other goods Seller or lessor retains risk of loss until goods identified Title cannot pass until goods identified

Identification of Goods (continued) Parties can agree to time and manner of identification Existing goods are identified by naming specific goods Future goods are identified when born, planted, shipped. Marked or designated

Passage of Title The passing of title from a seller to a buyer for a price. Title cannot be passed 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.

Shipment and Destination Contracts Shipment Contract Seller should 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

Shipment and Destination Contracts (continued) Delivery of Goods without Moving Them Buyer is required to pick up goods from seller May require document of title or bill of lading

Risk of Loss: No Breach of 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

Risk of Loss: No Breach of 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’ of the goods: When seller places or holds the goods available for the buyer to take delivery and notifies the buyer of this fact

Risk of Loss: No Breach of Sales Contract (continued) Goods in Possession of a Bailee Risk of loss passes to buyer when: The buyer receives a negotiable document of title covering the goods The Bailee acknowledges the buyer’s right to possession of the goods OR The buyer receives a nonnegotiable document of title or other written direction to deliver and has a reasonable time to present the direction to the bailee and demand the goods

Risk of Loss: Conditional Sales Sale on Approval - There is no sale unless and until the buyer accepts the goods Sale on Return - Sale is considered final only if the buyer fails to return the goods within the specified time

Risk of Loss: Conditional Sales Consignment - Seller (consignor) delivers goods to buyer (consignee) to sell - Consignor is paid a fee if he/she sells the goods on behalf of the consignor

Risk of Loss: Breach of Sales Contract Seller in Breach If seller delivers nonconforming goods to the buyer Buyer in Breach If buyer refuses to take delivery of conforming goods, repudiates the contract or otherwise breaches the contract

Risk of Loss: Lease Contracts Risk of loss is retained by the lessor. In case of finance lease, risk of loss passes to the lessee If a tender of delivery of goods fails to conform to the lease contract, the risk of loss remains with the lessor or supplier until cure or acceptance

Sales by Nonowners Void Title and Lease: Stolen Goods Purchase of lease of stolen goods do not result in transfer of title of the goods and the lessee does not acquire any leasehold interest in the goods.

Sales by Nonowners (continued) Voidable Title Purchaser has voidable title if goods were obtained by fraud, if a check is later dishonored, or if he/she impersonates another person

Sales by Nonowners (continued) Entrustment Rule If an 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/title in the goods to a buyer in the ordinary course of business. The real owner cannot reclaim the goods from this buyer