ch21
what are the consequences of voidable title? (LEASE)
- A lessor with voidable title has the power to transfer a valid leasehold interest to a good faith lessee for value. - the real owner can also receive all proceeds arising from the lease - the owner can also obtain a transfer of the rights that lessor had under the lease, including the right to the return of the goods when the lease expires
in case of void title, what are the consequences? (lease)
- the lessee acquires no leasehold interest - the real owner can reclaim the goods from the buyers
in case of void title, what are the consequences? (sales)
-the buyer acquires no title - the real owner can reclaim the goods from the buyer e.g.) Saki steals diamonds and sells it to another person. The real owner of the diamonds can reclaim the diamonds from the person and no title transfers.
negotiable document of title (3 roles): - and the negotiable document of title must be ___
1. a receipt for the goods from the carrier 2. contract of the carriage between the shipper (seller) and the carrier (bailee) 3. the document of title to the goods described in it signed
under the UCC, a person is a buyer in the ordinary course of business if... (4)
1. buys goods in good faith 2. the goods are purchased without acknowledge that the sale violates another person's rights/security interest in the goods. 3. the goods are purchased in the ordinary course from a merchant in the business of selling goods of that kind 4. the sale to that person comports (perform) with the usual or customary practices in the kind of business in which the seller is engaged.
in most situations, the UCC has replaced the concept of title with three other concepts:
1. identification 2. risk of loss 3. insurable interest
when goods are held by a bailee, risk of loss passes to the buyer when one of the following occurs (3)
1. the buyer receives a negotiable document of title for the goods 2. the bailee acknowledge the buyer's right to possess the goods 3. the buyer receives a nonnegotiable document of title, and the buyer has had a reasonable time to present the document to the bailee and demand the goods
with nonconforming goods, the risk of loss does not pass to the buyer until either: (2)
1. the effects are cured (the goods are repaired, replaced or discounted in price by the seller) 2. the buyer accepts the goods in spite of their defects = waiving the right to reject
21-2c sales or lease by non-owners: voidable title: in the following circumstances: (3)
1. the goods were obtained by fraud 2. the goods were paid for with a check that was later dishonored (returned for insufficient funds) 3. the goods were purchased on credit when the seller was insolvent (cannot pay debts as they become due)
(in example) Li Wan and Boyd both live in San Francisco. In San Francisco, Li Wan contracts to sell Boyd five used trucks, which both parties know are located in a Chicago warehouse. If nothing more is specified in the contract, the place of delivery for the trucks is ___. Li Wan may tender delivery by ___. Alternatively, Li Wan may ___.
Chicago: (the location of the goods), giving Boyd either a negotiable or a nonnegotiable document of title, obtain the bailee's (warehouser's) acknowledgment that Boyd is entitled to possession
fungible goods
Goods that are alike by physical nature, agreement, or trade usage. e.g.) specific grades or types of wheat, petroleum, and cooking oil which usually are stored in large containers. --> title and risk of loss can pass to the buyer without actually separating the goods
entrustment rule
The rule that entrusting goods to a merchant who deals in goods of that kind gives that merchant the power to transfer those goods and all rights to them to a buyer in the ordinary course of business. e.g.) if Jan leaves her watch to the jeweler to be repaired and the jeweler sells it to Kim, then Kim would obtain good title against Jan.
when a bailee is holding goods that are to be delivered under a contract, the goods are usually represented by ___
a document of title
when the seller keeps the goods for pickup, ___ 1) when the seller is not merchant, risk of loss to goods passes to the buyer ___ --> the seller bears the risk of loss until ___, and ___ e.g.) 友達同士の売買 2) if the seller is a merchant, risk of loss to gods passes to the buyer __ --> merchant bears the risk of loss e.g.) 伊沢クリーニング
a document of title usually is not used on tender of delivery, he or she makes the goods available to the buyer notifies the buyer that the goods are ready to be picked up. e.g.) ubereats: the seller is responsible for risk of loss until they notify the buyer that the goods are ready to be picked up between the time the contract is formed and the time the buyer picks up the goods e.g.) 伊沢クリーニング: Hiroki is responsible for risk of loss until the customer picks up their clothes
21-2b delivery without movement of the goods: bill of landing
a receipt for goods that is signed by a carrier(ヤマト) and serves as a contract for the transportation of the goods
21-2b delivery without movement of the goods: warehouse receipt
a receipt issued by a warehouser for goods stored in a warehouse
a sale on approval is made when ___
a seller offers to sell goods to a buyer and permits the buyer to take the goods on a trial basis.
what are the consequences of voidable title? (SALES) and why?
a seller with voidable title has the power to transfer good title to a good faith purchaser. (one who buys without knowledge of circumstances) --> because one who purchased goods for value gives legally sufficient consideration for the goods purchased.
21-3b delivery without movement of the goods (risk of loss): bailment
a temporary delivery of personal property, without passage of title, into the care of another, called bailee (warehousing company or tracking company ) e.g) have someone look after for safekeeping
what if a buyer accepts a shipment of goods and later discovers a defect? what does it allow the buyer to do? imagine you bought something amazon and accepted s shipment but later you discovered a defect.
acceptance can be revoked, too pass the risk of loss back to the seller (at least to the extent that the buyer's insurance does not cover the loss)
21-2b delivery without movement of the goods: when a document of title is required: --> title passes to the buyer when ___ e.g.) if the goods are stored in a warehouse, title passes to the buyer when ___
and where the document is delivered, the appropriate documents are delivered to the buyer
insurable interest (leases) the lessor retains an insurable interest ___
as long as he or she retains ownership (unless the lessee exercise an option to buy)
21-4b insurable interest of the seller or lessor: a seller has an insurable interest in goods ___. *a seller who has a security interest (a right to secure payment) in the goods ____
as long as he or she retains title to the goods, still has an insurable interest even after title passes to a buyer
21-2b delivery without movement of the goods: when a document of title is NOT required: --> (when goods are identified) title passes to the buyer ___ --> (when goods have not been identified) title ___
at the time and place the sales contract is made, does not pass until identification occurs
without an explicit agreement, title passes to the buyer ___
at the time and the place the seller perform by delivering the goods
Existing goods: if the contract calls for the sale or lease of already-existing goods, identification takes place ___
at the time the contract s made
21-2a destination contract: the seller is required to __ and title passes to the buyer when ___
deliver the goods to a particular destination, usually directly to the buyer, the goods are tendered at that destination.
entrustment rule basically allows innocent buyers to obtain legitimate title to goods purchased ___
even if the merchants do not have good title
insurable interest
for a party to seek insurance against a potential loss
exception to the goods that are part of a larger mass: involves ___
fungible goods
sale on approval: if a person files for bankruptcy within the trial period and still has a good in his possession, his ___ may not yet seize the good, because ___
he has not accepted it
the parties can agree in their contract on when ___ will take place, but does not effectively pass title and risk of loss on future goods such as ____
identification unborn animals
when the buyer or lessee breaches: the risk of loss ___
immediately shifts to the buyer or lessee
a buyer or lessee has an ___ in identified goods even ___
insurable interest, before the risk of loss has passed
21-4 insurable interest: what determines sufficiency of interest in the insured item to obtain a valid policy?
insurance laws
in case of a bailee holding goods and a title document is required, the title document___ imagine amazon
may be in written on paper or evidenced by an electronic record
sale or return: the sale is completed but the buyer has an option to return the goods and undo the sale. -->usually arises when a ___ --> he has the right to ___ if ___ * title and risk of loss passes to the buyer at the time of the sale and remain with the buyer ___ .
merchant purchases goods primarily for resale, return part or all of the goods in lieu of payment, the goods fail to be resold, unless the goods are returned
non-negotiable (non-transferrable) document of title --> the transferee __
obtains only the rights that the party transferring it had, subject to any prior claims
21-2c sales or lease by nonowners:
occurs when goods are sold by a person who is not the owner without the owner's permission
fungible goods are not simply that they are alike, but they are ___
of an identical grade or type
sale on approval: sale here means, ___ because only ___ to sell has been made, along with a ___ created by the ___
offer, offer, bailment, buyer's possession
when the seller or lessor breaches: if the goods are nonconforming (different from what is promised), the buyer has the right to ___ and ___ e.g.)amazon
reject them, the risk of loss does not pass to the buyer
nonconforming goods (leases): if the tender or delivery of goods is nonconforming then the lessee has the ___ and, ___.. if the lessee accepts the goods and then rightfully revoke acceptance, ___
right to reject them the risk of loss remains with the lessor (or the supplier) until cure or acceptance the risk of loss passes back to lessor to the extent that the lessee's insurance does not cover the loss
shipment contracts (risk of loss)
risk of loss in a shipment contract passes to the buyer or lessee at the time and place of shipment (same as delivery without movement of the goods) e.g.) when conforming goods are properly placed in the possession of the carrier
destination contracts (risk of loss)
risk of loss passes to the buyer or lessee when the goods are tendered to the buyer or lessee at the specified destination e.g.) when the carrier tendered(shipped) goods to the buyer
21-3c conditional sales: the UCC states that if the goods are for the buyer to use, the transaction is ___. If the goods are for the buyer to resell, the transaction is a ___.
sale on approval, sale or return
21-2a shipment contract: the seller is required and authorized only to___ and title passes to the buyer ___
ship goods by carrier (a trucking company), at the time and place of shipment
21-3a delivery with movement of the goods-carrier cases: (risk of loss) when the contract does not specify when risk of loss passes, the courts first look for ___ --> if the contract does not even specify it, the courts must decide ___
specific delivery terms in the contract, whether the contract is a shipment or destination contract
21-1 Identification
takes place when specific goods are designated as the subject matter of a sales or lease contract
what if the buyer is not a good faith purchaser?
the actual owner can reclaim the goods from the buyer
21-2 When Title Passes: usually under the UCC, once goods exist and are identified, ___
the buyer and the seller can reach an explicit agreement as to when title will pass
sale on approval: if the buyer does not wish to accept...
the buyer must notify the seller and the return is made at the seller's expense and risk
passage of title in example: - a person buys cattle at a livestock auction, title will pass to the buyer when ___ - a person buys a cattle at a livestock auction with explicit agreement, title will pass to the buyer when ___
the cattle are physically delivered to him, he agreed
21-3 Risk of Loss: when risk of loss and liability passes from a seller or lessor to a buyer or lessee is generally determined by___
the contract between the parties
title and risk of loss cannot pass to the buyer from the seller unless ___
the goods are identified to the contract
21-1c goods that are part of a larger mass: are identified when ___ e.g.) 10,000 pairs of jeans
the goods are marked (separated), shipped, or somehow designated by the seller or lessor as the particular goods to pass under the contract.
leasehold interest
the property rights granted to a tenant (lessee) by a landlord (lessor)
title
the right of ownership to goods
what is the bailee refuses to honor the document after the buyer presented it and demanded the goods?
the risk of loss remains with the seller
entrusting
turning over goods to the merchant and leaving purchased goods with the merchant for later delivery or pickup e.g.) leaving watch to a jeweler for repair
Future goods: the goods that are not in existence at the time of contracting --> rules applied to identification of future goods 1/3: 1. If a sale or lease involves unborn animals to be born within ___, then ___
twelve months after contracting, identification takes place when the animals are conceived.
in lease contract, a lessee does not acquire ___, rather the lessee acquires a ___
whatever title the lessor has to the goods, a right to possess and used the goods = leasehold interest
21-2c sales or lease by nonowners: void title
when a buyer unknowingly purchase goods from a seller who is not the owner of the goods. = no title exists e.g.) buying goods from a thief
rules applied to identification of future goods 3/3: 3. In a sale or lease of any other future goods, identification occurs ___. Future goods that fall into this category might include solar panels that are to be designed and manufactured after a contract is signed for their purchase.
when the seller or lessor ships, marks, or otherwise designates the goods as those to which the contract refers.
21-2b delivery without movement of the goods: when a sales contract does not call for the seller to ship or deliver the goods--> the passage of title depends on ___
whether the seller must deliver a document of title e.g.) a bill of lading or a warehouse receipt
sale on approval: conditional sale: title and risk of loss remain ___ until ____. ___ can be made expressly or ___ will be considered acceptance.
with the seller, the buyer accepts (approves) the offer, acceptance, the buyer's decision not to return the goods within the trial period e.g.) if a person decides to keep the good, then the sale is complete
rules applied to identification of future goods 2/3: 2. If a sale involves crops that are to be harvested ___ or ___, whichever is ___ identification takes place ___. If the sales contract does not refer to crops by when they will be harvested, then identification takes place ___.
within twelve months, in the next harvest season occurring after contracting, longer, when the crops are planted, when the crops begin to grow.
if goods are fungible, title and risk of loss can be passed to the buyer ___
without actually separating the goods
can both parties have an insurable interest in identical goods at the same time?
yes
the rule applies to leases?
yes, EXCEPT in a finance lease (in which the lessor acquires goods to supply the lessee)
