C241 Ch 17

good faith purchaser

A purchaser who buys without notice of any circumstance that would put a person of ordinary prudence on inquiry as to whether the seller has valid title to the goods being sold.

F.O.B.

Drill Makers, Inc., and Edge Mine & Mill Supply Stores enter into a contract for a sale of mining drill bits. The contract indicates that the price includes transportation costs to a specific destination by including the term

Household Appliance retains title to the goods.

Household Appliance Corporation sells Ideal-brand vacuum cleaners to Jolly Discount Stores and other retailers. Household Appliance will have an insurable interest in the players as long as

insolvent

Under the Uniform Commercial Code, a term describing a person who ceases to pay "his debts in the ordinary course of business or cannot pay his debts as they become due or is insolvent within the meaning of federal bankruptcy law" [UCC 1-201(23)].

Define and describe a "bailee."

A bailment is a temporary delivery of personal property, without passage of title, into the care of another, called a bailee.

buyer in the ordinary course of business

A buyer who, in good faith and without knowledge that the sale violates the ownership rights or security interest of a third party in the goods, purchases goods in the ordinary course of business from a person in the business of selling goods of that kind.

destination contract

A contract in which the seller is required to ship the goods by carrier and deliver them at a particular destination. The seller assumes liability for any losses or damage to the goods until they are tendered at the destination specified in the contract.

shipment contract

A contract in which the seller is required to ship the goods by carrier. The buyer assumes liability for any losses or damage to the goods after they are delivered to the carrier. Generally, all contracts are assumed to be shipment contracts if nothing to the contrary is stated in the contract.

sale on approval

A type of conditional sale in which the buyer may take the goods on a trial basis. The sale becomes absolute only when the buyer approves of (or is satisfied with) the goods being sold.

sale or return

A type of conditional sale in which title and possession pass from the seller to the buyer; however, the buyer retains the option to return the goods during a specified period even though the goods conform to the contract.

insurable interest

An interest either in a person's life or well-being or in property that is sufficiently substantial that insuring against injury to (or the death of) the person or against damage to the property does not amount to a mere wagering (betting) contract.

a shipment contract.

Business Banners, Inc., and Cam's Auto & Truck Sales Dealership enter into a contract for a sale of thirty advertising banners emblazoned with Cam's logo. The terms do not explicitly or clearly indicate whether it is a destination or shipment contract. A court would normally presume that it is

a sale on approval.

Effortless Workouts, Inc., offers to sell a treadmill to Farouk and sends it to him on a trial basis. This is

Differentiate between the shipping terms FOB, FAS, and CIF (or CC&F).

FOB (Free on Board) : indicates that the selling price of goods includes transportation costs to the specific FOB place named in the contract. The seller pays the expenses and carries the risk of loss to the FOB place named. If the named place is the place from which the goods are shipped, the contract is a shipment contract. If the named place is the place to which the goods are going to be shipped, the contract is a destination contract. FAS (Free Alongside) : requires that the seller, at his or her own expense and risk, deliver the goods alongside the carrier before risk passes to the buyer. An FAS contract is essentially an FOB contract for shipment. CIF or C&F (cost, insurance, and freight or cost and freight) : requires among other things, that the seller "put the goods in possession of a carrier" before risk passes to the buyer.

has taken place.

Foster contracts with Golf Carts Unlimited, Inc. to buy five golf carts. The contract lists the five carts as GC001, GC002, GC003, GC004, GC005. Identification

Gas & Wood.

Gas & Wood Stove Shop receives Hearthwarm-brand stoves from Independent Dealer, Inc., under a sale or return agreement. While the stoves are in Gas & Wood's possession, title is held by

fungible goods

Goods that are alike by physical nature, by agreement, or by trade usage. Examples of fungible goods are wheat, oil, and wine that are identical in type and quality.

Explain how Identification takes place with both existing and future goods, and goods that are part of a larger mass.

If the contract calls for the sale or lease of specific and ascertained goods that are already in existence, identification takes place at the time the contract is made. Any goods that are not in existence at the time of contracting are known as future goods. If a sale or lease involves unborn animals to be born within 12 months after contracting, identification takes place when the animals are conceived. If a sale involves crops that are to be harvested within 12 months (or the next harvest season occuriring after contracting, whichever is longer), identification takes place when the crops begin to grow. In the sale or lease of any other future goods, identification occurs when the seller or lessor ships, marks, or otherwise designates the goods as those to which the contract refers.

How is risk of loss affected when the seller breaches? When the buyer breaches?

If the goods are so nonconforming that the seller breaches contract and the buyer has the right to reject them, the risk of loss does not pass to the buyer. The general rule is that when a buyer or lessee breaches a contract, the risk of loss immediately shifts to the buyer or lessee. However, the seller or lessor must have already identified the contract goods, the buyer or lessee bears the risk for only a commercially reasonable time after the seller has learned of the breach, and the the buyer is liable only to the extent of any deficiency in the seller's insurance coverage.

identification

In a sale of goods, the express designation of the specific goods provided for in the contract.

under any circumstances.

Johan steals Krispin's car and sells it to Lemar. Krispin can recover the car from Lemar

Sal's Clothing Shop physically delivers the dresses to the department store.

Megan, an agent for a department store, orders one hundred dresses from Sal's Clothing Shop for the Spring Blossom Sale. There is no specific agreement in the sale contract indicating when title will pass to the department store. The title will pass to the department store when

Motor Vehicles to the extent of a deficiency in Parts & Tools' insurance coverage.

Motor Vehicles Service Company orders NoBounce-brand shock absorbers from Parts & Tools, Inc., to be delivered by the seller. Before Parts & Tools' truck arrives with the goods, Motor Vehicles tells Parts & Tools it will not pay. The shock absorbers are destroyed in transit. The loss is suffered by

when Omni Stores receives the bill of lading.

Moving & Storage Company holds goods for National Distribution Corporation, which contracts to sell them to Omni Stores, Inc. The goods are to be delivered without being moved and are represented by a negotiable bill of lading. The risk of loss passes to Omni Stores

Organicos Café.

Organicos Café orders five gallons of PureMaid-brand transfat-free olive oil from Quico Cooking Supplies, Inc. Quico mistakenly ships soy oil, which Organicos keeps, despite the nonconformity. The oil is destroyed in a fire. The loss is suffered by

a shipment contract.

Outdoor Outfitters Store contracts to buy fifty tents from Pitched Camp, Inc. Unless the contract states otherwise, it is assumed to be

document of title

Paper exchanged in the regular course of business that evidences the right to possession of goods (for example, a bill of lading or a warehouse receipt).

Quality gives Pipes & Culverts a warehouse receipt for the drives.

Pipes & Culverts Company orders six irrigation pumps from Quality Plumbing, Inc. The pumps are stored in Restorers Warehouse. Under the terms of the order, Quality must give Pipes & Culverts a warehouse receipt for the goods, which the buyer will then pick up. Title to the goods passes to Pipes & Culverts when

Quaff n' Quench.

Quaff n' Quench Café buys twenty-five crates of oranges from Reynaldo Produce, Inc. The parties agree to ship the oranges "F.O.B. Quaff n' Quench " via Swiftline Trucking Company. The oranges rot in transit. The loss is suffered by

Sports Merchandise.

Quest Outdoor Store orders RiverRun-brand kayaks from Sports Merchandise, Inc. Sports Merchandise mistakenly ships kayaks of the wrong size, which Quest rejects and returns via Trans-State Shipping Company. During the re-turn, the kayaks are lost. The loss is suffered by

a negotiable document of title.

QuickFreeze Storage, a bailee, holds goods for Restaurant Purveyor, Inc., which has contracted to sell the goods to Seafood Dining Company. The goods are to be delivered without being moved. The risk of loss will pass to Seafood Dining when it receives

Define and describe "risk of loss" and how it applies to shipment and destination contracts.

Risk of loss bears the question, "who suffers the financial loss if goods are damaged, destroyed, or lost in transit?" Under the UCC, risk of loss does not necessarily pass with title. When risk of loss passes from a seller or lessor to a buyer or lessee is generally determined by the contract between the parties. Like risk of loss, the risk of liability that arises from the goods does not necessarily require the passage of title. And like risk of loss, when this risk passes from a seller to a buyer is generally determined by the contract between the parties. In a shipment contract, the risk of loss passes to the buyer or lessee when the goods are delivered to the carrier. In a destination contract, the risk of loss passes to the buyer or lessee when the goods are tendered to the buyer or lessee at the specified destination.

receives the negotiable warehouse receipt.

Roadtrip County Fairs Corporation orders from Stuffed Animal Sales, Inc., goods that are stored in a Toy Box Maxi-Storage warehouse. Roadtrip pays for the goods, delivery is via the transfer of a negotiable warehouse receipt, and Roadtrip moves the goods out of the warehouse. The risk of loss passes to the buyer when it

Describe the different types of conditional sales.

Sales on Approval: a type of conditional sale in which the buyer may take the goods on a trial basis. The sale becomes absolute only when the buyer approves of (or is satisfied with) the goods being sold. Sale or Return: a type of conditional sale in which title and possession pass from the seller to the buyer; however, the buyer retains the option to return the goods during a specified period even though the goods conform to the contract.

Differentiate between shipment contracts and destination contracts.

Shipment contract: a contract in which the seller is required to ship the goods by carrier. The buyer assumes liability for any losses or damages to the goods after they are delivered by the carrier. Generally, all contracts are assumed to be shipment contracts if nothing to the contrary is stated in the contract. Destination contract: a contract in which the seller is required to ship the goods by carrier and deliver them at a particular destination. The seller assumes liability for any losses or damage to the goods until they are tendered at the destination specified in the contract.

Stubbs.

Stubbs buys a Tred-brand bicycle from his brother, Uriah. Uriah agrees to keep the bike at his house until Stubbs picks it up. During a storm, a tree falls from Victor's yard onto Uriah's garage and destroys the bike. The loss of the bike is suffered by

entrustment rule

The transfer of goods to a merchant who deals in goods of that kind and who may transfer those goods and all rights to them to a buyer in the ordinary course of business [UCC 2-403(2)].

When does title pass between seller and buyer?

Unless otherwise explicitly agreed, title passes to the buyer at the time and place the seller performs by delivering the goods.

Differentiate between void and voidable title.

Void Title: a title that does not legally exist, usually due to the seller being a thief. A seller has a voidable title to goods obtained by fraud, paid for with a dishonored check, purchased from a minor, or purchased on credit with the seller was insolvent.

a bailee.

With a bill of lading, Interstate Transport Company acknowledges possession of certain goods and contracts to deliver them. Interstate Transport is

April, when the calves are conceived.

has taken place. Big Beef, Inc. raises calves to sell. Big Beef breeds its cows in April, and the cows calve in February of the following year. In January, Andrea contracts with Big Beef to buy fifty calves. Identification takes place in

Explain the "entrustment" rule.

the transfer of goods to a merchant who deals in goods of that kind and who may transfer those goods and all rights to them to a buyer in the ordinary course of business.