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Chapter 19

Title to Goods and

Risk of Loss

Identification of Goods and Passage of Title

Identification of goods: Distinguishing of the goods named in a contract from the seller’s or lessor’s other goods

Already existing goods are identified when a contract is made and names the specific goods sold or leased

Goods that are part of a larger mass of goods are identified when the specific merchandise is designated

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Identification of Goods and Passage of Title

Future goods: Goods not yet in existence Identified when the goods are shipped, marked, or

otherwise designated by the seller or lessor as the goods to which the contract refers

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Identification of Goods and Passage of Title

Title: Legal, tangible evidence of ownership of goods Passage of title to goods

Title cannot pass until goods exist and have been identified

Title passes upon terms agreed to in contract If no terms are stated, title passes when delivery is

completed

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Identification of Goods and Passage of Title

Shipment Contract

The seller is required to:

Make proper shipping arrangements

Deliver the goods into the carrier’s hands Destination Contract

Seller delivers goods either to buyer’s place of business or another destination specified in sales contract

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Identification of Goods and Passage of Title

Delivery of goods without moving them

Buyer is required to pick up the goods from the seller

If the document of title or bill of lading is required, the title passes when the seller delivers the document

If no document of title and goods are identified, the title passes at the time of contracting

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Risk of Loss Where There is No Breach of the Sales Contract

Carrier cases: Movement of Goods

Shipment Contracts

Risk of loss passes to buyer when seller delivers the conforming goods to the carrier

Destination Contracts

Risk of loss passes to buyer when seller delivers the conforming goods to the specified destination

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Risk of Loss Where There is No Breach of the Sales Contract

Noncarrier Cases: No Movement of Goods Merchant Seller

Risk of loss passes to buyer when buyer receives the goods

Nonmerchant Seller Risk of loss passes to buyer upon tender of

delivery

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Risk of Loss Where There is No Breach of the Sales Contract

Goods in possession of a bailee The buyer receives negotiable document of title, or The bailee acknowledges buyer’s right to

possession, or The buyer receives a nonnegotiable document of

title and has reasonable time to demand goods

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Risk of Loss Where There is a Breachof the Sales Contract

Seller in breach of a sales contract Seller retains risk of loss on the delivery of

nonconforming goods to the buyer The risk of loss remains on the seller until:

The defect or nonconformity is cured, or The buyer accepts the nonconforming goods

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Risk of Loss Where There is a Breachof the Sales Contract

Buyer in breach of a sales contract A buyer breaches a sales contract if he or she:

refuses to take delivery of conforming goods repudiates the contract otherwise breaches the contract

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Risk of Loss in Conditional Sales

Sale on Approval No sale unless and until the buyer accepts the

goods Risk of loss and title pass when the goods are

accepted by the buyer

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Risk of Loss in Conditional Sales

Sale or Return Buyer may return goods unsold after a period of

time Risk of loss and title pass to buyer when buyer has

possession of goods

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Risk of Loss in Conditional Sales

Consignment Seller (consignor) delivers goods to buyer

(consignee) to sell Consignor paid a fee for selling goods on behalf

of the consignor Treated as sale or return

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Risk of Loss: Lease Contracts

In ordinary lease, risk of loss retained by lessor In case of finance lease, risk of loss passes to lessee If tendered goods are nonconforming, risk of loss

remains with the lessor or the supplier until cure or acceptance

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Sale of Goods by Nonowners

Void title: A situation in which a thief acquires no title to goods he or she steals

Buyer does not obtain good title to stolen goods Lessee has no leasehold interest in stolen goods Rightful owner can reclaim

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Sale of Goods by Nonowners

Fraudulently Obtained Goods A seller or lessor has voidable title or voidable

leasehold interest to goods obtained by: Fraud A check that is later dishonored Impersonation of another person

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Sale of Goods by Nonowners

Entrustment rule: If the owner entrusts the possession of his/her goods to a merchant who deals in goods of that kind, the merchant has the power to transfer all rights in the goods to a buyer in the ordinary course of business The real owner cannot reclaim the goods from this

buyer

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Case 19.1: Entrustment Rule

Case Lindholm v. Brant 925 A.2d 1048, Web 2007 Conn. Lexis 264 (2007) Supreme Court of Connecticut

Issue

Is Brant a buyer in the ordinary course of business who has a claim of ownership to Red Elvis that is superior to that of the owner Lindholm?

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Electronic Communications and Signatures

E-signatures are legally effective and can be enforced against contracting parties

Electronic record or electronic signature is attributable to a person if it was act of that person or his or her electronic agent

Electronic communication is effective even if no individual aware of its receipt

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