Chapter 19 - Performance of Lease and Sales Contracts

Risk of Loss on Conditional Sale : Sale on approval

Sale of approval means there is no sale unless the buyer accepts the goods. There is no sale unless the merchant (i.e. computer store) allows customer to take the goods (i.e. computer) home for a specified time to try the goods out and see if they fit their needs. Acceptance of the goods occurs if the buyer expressly indicates acceptance, fails to notify the seller of rejection in the agreed upon trial time, or uses the goods inconsistently with the purpose of the trial. The risk of goods stays with the seller until the goods are accepted by the buyer.

Goods in the Possession of a bailee

Bailee, i.e. a warehouse, the risk of loss is passes to the buyer when the buyer receives a negotiable document of title (warehouse receipt or bill of lading) covering the goods, the vial acknowledges the buyer's right of 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 document to the bailee and demand the goods. If bailee refuses to honor the document or direction, the risk of loss remains on the seller.

Common law vs UCC on risk of loss

Common law places risk of loss to goods on the party who held title to the goods. Article 2 rejects this notion an adopts concise rules for risk of loss that are not tied to title. It also ggives the parties to the sales contract the right to INSURE the goods against loss if they have an INSURABLE INTEREST.

Who bears the risk of loss of a destination contract

Contract forces the seller to bear risk of loss of the goods during their transportation. Thus with the ecveption of a no arrival, no sale contract, the seller is required to replace any goods lost in transit.

Identification of goods

Distinguishing of the goods named in a contract from the sellers or lessors other goods. already existing goods are identified when the contract is made i.e. serial code of car. Merchandise goods are tagged of a larger group (100 boxes of the 1000 boxes). finally future goods - goods not yet in existence, are identified when the young are conceived or the goods or crops are planted and begin to grow. Other future goods are identified when they goods are marked and shipped.

Delivery of goods without moving them

INSURANCE NEEDED - shifts risk to the buyer Contract that authorizes goods to be delivered without requiring the seller to ship them. i.e. buyer required to pick up the goods. Sometimes seller has to deliver a DOCUMENT OF TITLE (warehouse receipt or bill of lading) is required in the contract and title is shifted when and where the buyer receives the document of title. If no document of title is required, and the items already exist, title is shifted when the buyer signs the agreement.

!!Entrustment Rule!!

If an owner entrusts the possess of his or her goods to a merchant who deals in goods of that kind, the merchant has the power to transfer all rights in the goods to a buyer in the ordinary course of business. The real owner cannot reclaim the rights.

Void title and lease: stolen goods

In a case where a buyer purchases goods or a lessee leases goods from a thief who has stolen them, the purchaser does not acquire title to the goods and the lessee does not acquire any leasehold interst in the goods. THE REAL OWNER CAN RECLAIN THE GOODS FROM THE PURCHASER OR LESSEE DUE TO VOID TITLE Only recourse is against the theif. Never gain title.

Risk of loss on conditional sale: sale or return

In a sale or return contract the seller delivers goods to a buyer with the understanding the buyer may return them if they are not used or resold within a stated or reasonable amount of time. Acceptance is if the buyer does not reject them.

Who bears risk of loss of a delivery of goods w/o moving them? Merchant-seller rule and non merchant-seller rule

Merchant seller - if seller is a recant, the of loss does not pass to the buyer until the goods are received. In other words, a merchant-seller bears the risk of loss between the time of contracting and the time the buyer picks up the goods. Nonmerchant seller - nonmerchant-selers pass the risk of loss to the buyer upon tender of deliver of goods, or when the seller places or holds the goods available for the buyer to take delivery and notifies the buyer of this fact.

Passage of Title

Once the goods that are the subject of a contract exist nd have been identified, title may be transferred from the seller to the buyer.

Destination contract

Requires the seller to deliver the goods either to the buyer's place of business or to another destination specified in the sales contract. title passes to the buyer when the seller enders delivery of the goods at a specified destination.

Shipment Contracts

Requires the seller to ship the goods to the buyer via a common carrier. Seller is required to make proper shipping arrangements and deliver goods to the carrier. Title shifts to the buyer at the time and place of shipment.

!!Sales by Non owners!!

People sell goods even though they do not hold valid title to them.

Who bears the risk of a shipment contract?

The risk of loss passes to the buyer when the seller delivers the conforming goods to the carrier. Buyer bears risk of loss during transportation.

Voidable title: sales or lease of goods to good faith purchasers of value.

a title that the purchaser has if the goods were obtained by fraud, a check that is later dishonored, or impersonation of another person The person who buys these items in good fait and pays sufficient consideration for the items can gain title to those goods and the real owner cannot reclaim them from the purchaser i.e. rolex purchased with bounced check and then resold for nearly market value, the original owner cannot reclaim them from the new buyer.