Transcript Chapter 14
Chapter 14 Ownership and Risk of Loss in Sales Who may transfer the ownership of goods? •Brad stole an iPhone from Jack’s car. He then sold it to Ian, who knew it was stolen. •Did either Brad or Ian receive good title to the cassette player? - No, neither received title and Ian is guilty of receiving stolen property because he knew it was stolen - The true owner of goods is allowed to sell them for the buyer to have a good title. Definitions Title is defined as: A bundle of rights associated with the ownership of the goods in question. A Good Title is defined as: As goods transferred with the title or obtained in “Good Faith” meaning that the buyer obtained the goods but not the title but was not aware that the title was not passed to the buyer. Types of Goods Existing Goods: Goods that are currently in the ownership of the of the seller Identified Goods: Goods that are identified as existing goods and identified as the goods in the contract Future Goods: Goods that are not Existing or Identified are considered future goods, which means that it is to be contracted to sell not to be sold Fungible Goods: The UCC defines fungible goods that can be traded in equal value relative to another good, examples are gold, warehouses filled with the same canned goods What does Ownership Mean? The Owner is the one who legally owns the title and bears the risk of loss of sales, However this also gives the person the rights granted by the title: 1. Exclusive Possession 2. Exclusive Use and Enclosure 3. Acquisition 4. Conveyance, including bequest 5. Access Easement 6. Hypothecation 7. Partition Transfer of Ownership As a General Rule Only the Owner may legally transfer the Ownership of the goods. However there are exception to this general rule: ● Person Authorized to transfer ownership I.E Salespeople, Auctioneers or anyone with permission from the owner ● Innocent Third Party Buyers ● Holders of the Negotiable documents of the title I.E warehouse receipts, airbills, ship bills or any other bills proving transport of goods ● Merchants with possession of sold goods until pick up Transfer of Ownership Once the goods are existing and identified the contract normally determines when the title is passed and thus the risk of loss is transferred along the title Generally the title is passed when the contract is ratified however the contract can determine when the title is passed also some common situations determine when the title is passed Common Situations when title is passed ● Seller Delivers good to location The title is passed when the goods reach designated location ● Seller ships, but does not deliver, goods to destination The title is passed as soon as the goods are shipped off ● Seller delivers Document of Title The title is passed because the documents of the title is given ● Seller tenders goods at place of sale The title is passed when the goods is sold at the place of sale Transfer of Ownership If the contract does not determine when the title is passed then and an issue arises the situation is brought up to the UCC for a solution 13-2 Risk of Loss and Insurable Interest in Sales Who gets the responsibility of lost? Risk of Loss A term to define who bears the responsibility of the loss, It is the person who bears the title is subjected to the risk of loss. This does not necessarily mean that the buyer automatically bears the risk of loss as the person potentially did not have the title Examples of such Scenarios are: ● The Title is not passed to the buyer yet ● Holders of the Negotiable Documents of the Title Ownership and Risk of loss of Sales Goods Shipped By Carrier: FOB(Free on board) Seller agrees to ship it to a certain location as soon as it arrives the title is passed on to the buyer CIF(Cost, Insurance, Freight) Seller contracts for adequate insurance as soon as it reaches the shipper then the title is passed to the buyer Transferring Risk of Loss Contract breached after goods are identified: Seller delivers item so faulty that the buyer can reject it, seller still retains title until the defect is fixed Insurable Interest Buyer also have the right to have insurance on the goods being delivered when the goods is identified as her’s Transfer of Rights in Specific Sales Cash and Carry Sales -Most common sale, buyer pays for goods and gets title on payment and receives the goods COD sales -Title passes once the goods are paid for Bulk Transfer -Large transfer of Goods, requires notice to the UCC to prevent dishonest merchant Sale or Return -Completed sale in which the buyer has the option to return the goods Transfer of Rights in specific sales Sale on Approval -Buyer gains title upon approval of the goods Sale of an Undivided interest -Buyer gains title when the buyer pays a fraction interest of the cost Auction -Technically not a sale, but a reservation for the sale of the goods