Business Law- Ch. 20: Title, Risk, & Insurable interest

Sale on approval

A seller offers to sell goods to a buyer and sends the goods to the buyer on a trial basis.

Entrustment rule

Entrusting goods to a merchant who deals in goods of that kind gives the merchant the power to transfer all rights to a buyer in the ordinary course of business.

Fungible goods

Goods that are alike naturally, by agreement, or by trade usage.

Good faith purchaser

One who buys without knowledge of circumstances that would make a person of ordinary prudence inquire about the validity of the seller's title to the goods.

Document of Title

Seller delivers a bill of lading or a warehouse receipt to the buyer.

Destination contract

Seller is required to deliver the goods to a particular destination, usually directly to the buyer, but sometimes to another party designated by the buyer.

Identification

Takes place when specific goods are designated as the subject matter of a sales or lease contract.

Insurable interest

The moment the contract goods are identified by the seller or lessor, the buyer or lessee has a special property interest that allows the buyer or lessee to obtain the necessary insurance coverage for those goods even before the risk of loss has passed.

Consignment

The owner of goods (consignor) delivers them to another (consignee) to be sold or kept.

Sale or return

The sale is completed but the buyer has an option to return the goods and undo the sale.

Shipment contract

The seller is required or authorized to ship goods by carrier, such as a trucking company.

Insolvent

When a person ceases to pay his or her debts in the ordinary course of business or cannot pay debts when they come due.