Chapter 21: Title, Risk, and Insurable Interest

Entrustment Rule

Turning over goods to a merchant who deal in goods of that kind gives the merchant the power to transfer all rights to a buyer in the ordinary course of business

Voidable Title

1. Goods are obtained by fraud 2. Goods were paid for with a check that was later dishonored 3. Goods were purchased on credit when the seller was insolvent

Buyer in the ordinary course of business

1. he/she buys goods in good faith 2. the goods are purchased without knowledge that the sale violates the rights of another person in the goods 3. the goods are purchased in the ordinary course from a merchant (other than pawnbroker) in a business of selling goods of that kind 4. sale to that person comports with the usual or customary practices in the kind of business in which the seller is engaged

Bill of Lading

A receipt for goods that is signed by a carrier and serves as a contract for the transportation of the goods

Warehouse Receipt

A receipt issued by a warehouser for goods stored in a warehouse

Future Goods

Any goods not in existence at the time of contracting

Good Faith Purchaser

Individual who buys without knowledge of circumstances that would make an ordinary person inquire about the validity of the seller's title to the goods

Shipment Contract

The seller is required or authorized to ship goods by carrier; generally all contracts are assumed to be this type of contract if nothing to the contrary is stated

Destination Contract

The seller is required to deliver the goods to a particular destination, usually directly to the buyer, sometimes to another party designated by the buyer

Document of Title

Used to indicate change in ownership of goods in a sales contract

Leasehold Interest

When a lessee acquires a right to possess or use specified goods

Identification

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