Chapter 22: Title, Risk of Loss, and Insurable Interest

good title

title acquired from someone who already owns the goods free and clear

negotiable document

title and risk of loss transfer from seller to buyer as soon as that negotiable interest is endorsed over to the buyer

neither negotiable nor nonnegotiable document

title passes at time sales contract is executed but risk doesn't until bailee is notified of transaction

common-carrier delivery

goods are delivered to the buyer via a common carrier

nonnegotiable document

title passes with the instrument of title but the risk of loss doesn't pass to the buyer until the bailee is notified of the transfer or a reasonable time has passed since the transaction

void title

not good title, someone who purchases stolen goods, knowingly or unknowingly

goods-in bailment

purchased goods are in some kind of storage under control of a 3rd party, such as a warehouseman

simple-delivery

purchased goods are transferred to the buyer from the seller at either the time of sale or some later time

tender of deliver

the moment the goods were available for the buyer to take

encumbrance

the right to encumber goods as a collateral for debt

insurable interest

the right to ensure the goods against any risk exposure such as damage or destruction

buyer gets voidable title if:

-buyer has deceived the seller regarding his/her true identity -buyer has written a bad check for the goods -buyer has committed criminal fraud in securing the goods -buyer and seller agreed that title wouldn't pass until some time later -buyer is a minor

common-carrier delivery

-if the common-carrier delivery is an origin/shipment contract, the title and risk of loss passes to the buyer when the goods are turned over by the seller to the common carrier if the common-carrier delivery is a destination contract, title and risk of loss transfers from the seller to the buyer when the common carrier delivers the goods to the buyer -risk of loss transfers title -insurable interest is created when the buyer and or seller holds title or retains a risk of loss

Goods in Bailment

-negotiable document -nonnegotiable document -neither of the above

simple-delivery contract

-risk of loss transfers to buyer when buyer takes possession -insurable interest is created in the buyer when the goods are identified to the contract, in other words, at the same time title passes -if the seller is a merchant, the risk of loss remains with the seller until the goods are actually delivered to the buyer -if the seller isn't a merchant, risk of loss remains with buyer under tender of delivery

Types of Sales Contracts

-simple-delivery -common-carrier delivery -goods-in bailment -conditional sales

FAS

Free Alongside, seller, at seller's expense, delivers goods alongside the shipment before risk passes to the buyer

FOB

Free on Board, selling price includes transportation costs, seller carries risk of loss to either place of shipment or destination

voidable title

contract between the original parties would be void but the goods have already been sold to a third party

FOB (Buyer)

destination

conditional sales

sales itself is contingent upon approval

sale on approval

seller allows buyer to take the goods before deciding whether to complete the contract by making the purchase; title and ROL with seller until buyer approves

sale-or-return

seller and buyer agree that buyer may return goods at a later time (title and ROL with buyer)

FOB (Seller)

shipment