Chapter 17 - Title of Goods and Risk of Loss

If a buyer breaches the contract before the risk of loss would normally pass to him..

then he bears the risk of any goods identified to the contract for a reasonable time and only for loss in excess of seller's insurance.

Sale of Goods by Non-owner

1. Entrustment Rule 2. Stolen Goods 3. Fraudulently obtained goods

Risk of Loss - No Breach if goods have been shipped via common carrier:

1. For shipment contracts, risk of loss is transferred to the buyer when the seller drops off the goods at a common carrier 2. For destination contracts, risk of loss is transferred when the goods are delivered.

Entrustment Rule

1. If owner entrusts goods to a merchant, the merchant has the power to transfer ALL rights in the property to a buyer in the ordinary course of business!! the real owner can't!! get the property back

When does title of goods pass from seller to buyer?

1. Parties specify a certain time for transfer that controls 2. Title passes once seller completes its delivery obligations!

Destination Contract

1. Requires seller to deliver goods to specific location (but doesn't matter how it gets to you) 2. Title transfer when the goods arrive 3. If no document of title, then title passes once contract is signed and goods are identified

Shipment Contract

1. Requires seller to ship goods via a common carrier 2. Title passes to buyer once goods are delivered to common carrier (once Amaozn drops off goods to UPS)

Delivery at Seller's Location

1. Title passes when seller delivers a document of title (bill of lading, warehouse receipt) 2. If no document of title, then title passes once contract is signed and goods are identified (these are 100 that are set apart and held for sale)

How many types of Risk of Loss?

1. Under Common Law 2. Under UCC

Under UCC (risk of loss)

Allows contracting parties to specify who bears the risk of loss at any given time --if parties don't specify, then the UCC has a set of rules that govern

Risk of Loss - No Breach if goods picked up at seller's location

If the seller isn't a merchant, risk of loss passes to buyer upon "tender of delivery" (it's ready, come and pay/pick it up.)

Under Common Law (risk of loss)

Party with title to goods bore the risk of loss if the goods are damaged or destroyed

Fraudulently obtained goods

Person who obtains goods through fraud has voidable title, but subsequent good faith purchaser who pays fair value has good title

Stolen Goods

Real owner can reclaim the goods (purchaser's title is void)

Sale on Approval

buyer gets to try out the goods before buying them -risk passes to buyer once she approves the goods

Sale or Return

buyer may return unsold/unused goods within a certain period of time -risk passes to buyer when she takes possession of the goods

If seller delivers nonconforming goods (defective/wrong)

seller bears the risk of loss until the defect/nonconformity is cured or the buyer accepts the nonconforming goods!

Consignment

seller delivers goods to a buyer for buyer to sell to 3rd party on seller's behalf (treated like a sale/return)

Tender of delivery

seller holds the goods for the buyer and notifies buyer they're ready for pickup