Transcript No Slide Title

COPYRIGHT © 2010 South-Western/Cengage Learning.
Who Owns It??
• The Code must sometimes determine the
rightful owner when more than one
person claims to own something.
• Existence and Identification
– Goods must exist before title can pass.
– Goods must be identified to the contract
before title can pass.
– The parties may agree in their contract how
and when they will identify the goods.
Who Owns It??
• Passing of Title
– Title may pass in any manner on which the
parties agree.
• Insurable Interest: a legal right in
something
– A buyer obtains an insurable interest when
the goods are identified to the contract.
– The seller retains an insurable interest in
goods as long as she has either title to the
goods or a security interest in them.
When the Seller Has Imperfect
Title
• Bona Fide Purchaser
– A void title is no title at all.
– A voidable title gives limited rights in the
goods, inferior to those of the owner.
– A person with voidable title has power to
transfer valid title for value to a good faith
purchaser, generally called a bona fide
purchaser or BFP.
Entrustment
• Entrusting means delivering goods to a
merchant or permitting the merchant to
retain them.
– Entrusting to a merchant who deals in goods
of that kind gives him power to transfer all
rights to a buyer in the ordinary course of
business.
– The entrusting provision protects the
innocent buyer, who buys goods ONLY of the
type normally sold by that merchant, not
knowing that they belong to someone else.
Creditor’s Rights
• Ordinary Sales
– A buyer in the ordinary course of business
may take the goods free and clear of the
security interest.
• Bulk Sales: one that includes most or all of
the inventory in a store
– Article 6 requires that:
• The seller supply the buyer with a complete list of
his creditors, and
• the buyer notify all creditors of the bulk sale
before it takes place, so that the creditors may
protect their security interest.
Returnable Goods
• Sale on Approval
– When a buyer takes goods intending to use
them herself but has the right to return.
– In a sale on approval, the goods are not
subject to the buyer’s creditors until the
buyer accepts them.
• Sale or Return
– When a buyer takes goods intending to resell
them, but has the right to return them.
– The goods are subject to the claims of the
buyer’s creditors.
Risk of Loss
• The parties may allocate the risk of loss
any way they wish.
• Many merchants specify who bears the
risk of loss by using common shipping
terms such as those on the next slide.
• If Parties Fail to Allocate the Risk:
– When neither party has breached, the risk of
loss generally passes from seller to buyer
when the seller has transported the goods as
far as he is obligated to.
– When a party has breached, the risk of loss
generally lies with that party.
Shipping Terms
• FOB place of shipment (seller is at risk until
goods are in carrier’s hands)
• FOB place of destination (seller is at risk until
goods are at the destination)
• FAS a named vessel (seller is at risk until goods
are delivered to that vessel)
• CIF (cost includes insurance and shipping)
• C&F (cost does not include insurance)
• Proposed Article 2 revisions will eliminate the
standard definitions of these terms.
Bailment
• Bailment means that one person or
company is legally holding goods for
the benefit of another.
• If the contract requires a bailee to hold
the goods for the buyer, the risk passes
when the buyer obtains documents
entitling her to possession, or when the
bailee acknowledges her right to the
goods.
When One Party Breaches
• Seller Breaches and Buyer Rejects
– The risk remains with the seller until he cures the
defect or the buyer accepts the goods.
• Seller Breaches and Buyer Accepts, but
Then Revokes Acceptance
– The risk remains with the seller to the extent the
buyer’s insurance will not cover the loss.
• Buyer Breaches
– Buyer assumes the risk of loss to the extent the
seller’s insurance is deficient.