1. Chapter 18 Title and Risk of Loss

2. What is the significance of identifying goods to a contract?
Learning Objectives
What is the significance of identifying goods to a contract?
If parties do not expressly agree on when title passes, what determines passage?
Risk of loss does not necessarily pass with title.
When can seller’s title to good be void?
When does the buyer acquire an insurable interest in goods?

3. Title and Identification
Title: UCC replaced with concepts of identification, risk of loss and insurable interest.
Identification: when specific goods that exist are designated as the subject matter of a contract.
Title and Risk of Loss cannot be passed until goods identified.

4. Passage of Title Once goods exist and are identified, title can pass.
Shipment Contract: Title passes to Buyer (via shipper) at time and place of shipment.
Destination Contract: Title passes to Buyer when goods are tendered to Buyer.
Delivery Without Movement (Warehouse): depends on documentation required and when received.

5. Sales or Leases by Non-Owners
Problems with Imperfect Title
Void Title
Voidable Title
Good Faith Purchaser
Entrustment Rule

6. Risk of Loss
ROL does not necessarily pass to Buyer with title (unless parties agree).
Delivery with Movement of Goods (Carriers)
Shipment Contract: ROL passes when goods tendered to carrier.
Destination Contract: ROL passes to Buyer when goods tendered at destination in contract.

7. Risk of Loss Delivery Without Movement of Goods (e.g., warehouse)
Goods Held by Seller-Merchant : ROL passes to Buyer when he physically takes possession.
Goods Held by Seller-Non-Merchant: ROL passes to Buyer on tender of delivery.
Goods Held by Bailee: ROL passes based on terms of Bill of Lading or Warehouse Receipt.

8. Conditional Sales Sales based upon Buyer’s Approval. Sale or Return
Seller sells a good (or goods) with understanding that Buyer can return all or portion of goods. Buyer pays only for goods not returned.
Sale on Approval
Seller offers to sell to Buyer who takes goods on a trial basis

9. Risk of Loss in Breach In the event of Breach of Sales/Lease Contract:
Seller/Lessor Breach: ROL does not pass until Seller “cures” or Buyer accepts.
Buyer/Lessee Breach: ROL passes immediately to Buyer subject to:
Seller identification of goods.
Deficiencies in Seller’s insurance coverage

10. Insurable Interest
Buyer’s Insurable Interest: Once goods are identified, they can be insured by Buyer/Lessee.
Seller’s Insurable Interest: Seller’s can insure goods to which they own title.
Bulk Transfers: transfer not made in the ordinary course of business.

11. Bulk Transfers Governed by Article 6
Any transaction of a major part of the transferor’s material, supplies, merchandise “not made in the ordinary course of business.”
Majority of states have repealed Article 6.