1. Chapter 19 Title and Risk of Loss

2. Learning Objectives
What is the significance of identifying goods to a contract?
If the parties to a contract do not expressly agree on when title to goods passes, what determines when title passes? 
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3. Learning Objectives
Risk of loss does not necessarily pass with title. If the parties to a contract do not expressly agree when risk passes and the goods are to be delivered without movement by seller, when does risk pass? 
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4. Learning Objectives
Under what circumstances will the seller’s title to goods being sold be void? When does a seller have voidable title?
At what point does the buyer acquire an insurable interest in goods subject to a sales contract? 
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5. Learning Objectives
Can both the buyer and the seller have an insurable interest in the goods simultaneously?
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6. Introduction
Sale of goods requires different rules than real property transactions: risk should not always pass with title.
UCC replaces title with identification, risk, and insurable interest.
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7. Identification
Identification takes place when specific goods are designated as the subject matter of the contract.
For any interest to pass to buyer, goods must be:
(1) in existence and (2) identified as specific goods in sales contract.
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8. Identification Identification gives buyer the right:
To obtain insurance on the goods.
To recover from third parties who damage the good.
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9. Identification Existing Goods. Future Goods.
If contact calls for ascertainable goods in existence, identification takes place at the time contract is made.
Future Goods.
Animals born within 12 months of contract, identification takes place at conception.
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10. Identification Future Goods (cont’d).
For crops harvested within 12 months of contracting, identification takes place at time of planting (or when crops begin to grow).
All others, when goods shipped, or marked or designated by seller.
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11. Identification Goods Part of a Larger Mass.
Goods are identified when marked, shipped, or designated by seller.
Exception: fungible goods which are naturally alike (grades of wheat, oil, wine).
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12. Passage of Title
Contract between seller and buyer usually determines when title passes.
Title can pass:
Upon physical delivery, or
When agreed to by the parties. 
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13. Passage of Title
Shipment and Destination Contracts: if no agreement, title passes depending on whether the contract is a shipment or destination contract.
Shipment: title passes at time and place of shipment.
Destination: title passes when goods are tendered at the destination.
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14. Passage of Title Delivery Without Movement of Goods.
With document of title (bill of lading): title passes when and where document delivered.
Without document: title passes when sales contract is made, if goods have been identified, or when identification occurs if they have not been identified.
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15. Passage of Title Sales or Leases By Nonowners.
Void Title: true owner gets goods back.
Voidable Title: good faith purchaser keeps goods.
The Entrustment Rule: merchant must deal in goods of that kind. Gives power to transfer valid title to good faith purchaser in ordinary course of business. 
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16. Passage of Title Sales or Leases By Nonowners (cont’d).
The Entrustment Rule (cont’d).
CASE Lindholm v. Brant (2007). Was this fair to the original owner?
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17. Ex. 19-1 Void and Voidable Titles
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18. Risk of Loss
ROL does not necessarily pass with title. ROL is important because of insurance concerns.
Unless agreed otherwise, ROL passes to Buyer depending on whether delivery is with or without movement of the goods.
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19. Risk of Loss Delivery With Movement of Goods—Carrier Cases.
Shipment Contracts: ROL passes to buyer when goods tendered to Carrier. If goods damaged in transit, buyer bears ROL.
Destination Contracts: ROL passes to buyer when goods tendered at contractually specified destination.
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20. Risk of Loss Delivery Without Movement of the Goods.
Often goods are held by a bailee on behalf of the seller in a bailment arrangement.
Documents of title give bailee possession of goods and/or contracts to deliver them.
Examples: warehouse, trucking company.
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21. Risk of Loss Delivery Without Movement of the Goods (cont’d).
Goods Held by Seller:
Document of Title is generally not used.
If Seller is a merchant, risk of loss passes when buyer takes physical possession of goods. (ROL remains with seller until buyer takes physical possession.)
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22. Risk of Loss Delivery Without Movement of the Goods (cont’d).
Goods Held by a Bailee (Warehouse). Risk of loss passes to buyer when:
Buyer receives document of title; bailee acknowledges Buyer’s right to goods and buyer receives title and has reasonable time to pick up.
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23. Ex Shipping Terms
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24. Risk of Loss Conditional Sales.
Sale on Approval: risk of loss passes when buyer approves expressly or implicitly.
Sale or Return: risk of loss passes to buyer when she possesses goods. Goods are subject to buyer’s creditors while in her possession.
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25. Risk of Loss Conditional Sales (cont’d).
Consignment: consignor (owner of goods) delivers them to another (consignee) to be sold or kept.
Generally, governed by Article 9: Secured Transactions.
CASE In re Music City RV, LLC (2010). What if the goods were owned by a business enterprise?
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26. Risk of Loss Conditional Sales (cont’d).
Who Holds Title to Consigned Goods?
Consignee does not have title to goods.
If consignee sells the goods, title passes from consignor to buyer, and consignor must be paid.
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27. Risk of Loss Conditional Sales (cont’d).
Creditor’s Claims to Consigned Goods.
Now governed by Article 9 (Chapter 29). Whether consignor’s creditors can assert claims against goods depends on whether a financing statement has been filed.
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28. Risk of Loss
Risk of Loss When Contract is Breached: generally breaching party bears risk of loss.
When Seller-Lessor Breaches.
Rejection - risk stays with seller.
Revocation of acceptance - risk passes back to seller to the extent that buyer’s insurance does not cover the loss.
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29. Risk of Loss Risk of Loss When Contract is Breached (cont’d).
When the Buyer or Lessee Breaches. Goods are identified, risk passes to buyer for a commercially reasonable amount of time after seller learns of the breach, to the extent that seller’s insurance does not cover loss.
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30. Insurable Interest
Buyer has an insurable interest in goods that have been identified.
Seller has an insurable interest in goods as long as they retain title or a security interest.
Both buyers and sellers can have an insurable interest at the same time.
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