1. Performance of Sales and Lease Contracts
Chapter 11

2. 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

3. 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

4. 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.

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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.

15. 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

16. 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