chapter 17 title and risk of loss in sales of goods title and risk of loss in sales of goods...

Chapter 17Chapter 17

Title and Risk of Loss in

Sales of Goods

Title and Risk of Loss in

Sales of Goods

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

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Learning Objectives

1. Contrast voidable title with void title.2. Discuss the rights of the parties when goods that

are entrusted to merchants are sold to others in the ordinary course of business.

3. Determine, in a given case, when title to goods passes from the seller to the buyer.

4. Decide, in different situations, whether the buyer or the seller of goods must bear the risk of loss.

5. Compare a sale on approval with a sale or return.6. Describe when buyers and sellers of goods have

insurable interests in those goods.

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Question?

What is the right of ownership to goods?

A. Bill of sale

B. Title

C. Designation

D. Lien

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Void and Voidable Title

• Title – the right of ownership to goods

• Bill of sale – a written statement evidencing the transfer of

personal property from one person to another

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Voidable Title

• Voidable title– title that may be voided if the injured party elects

to do so– Also received when goods are bought from a

minor or a person who is mentally impaired

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Entrusting Goods to a Merchant

• People often entrust goods that belong to them to merchants

• When this occurs, if the merchant sells the goods in the ordinary course of business to a third party who has no knowledge of the real owner’s rights, the third party receives good title to them.

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The Passage of Title and Risk of Loss

• Identified goods – specific goods that have been selected as the

subject matter of the contract.

• Once goods are identified, title passes to the buyer when the seller does whatever is required under the contract to deliver the goods.

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Shipment Contracts

• Shipment contract – one in which the seller turns the goods over to a

carrier for delivery to the buyer

• f.o.b.– “free on board.”

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Shipment Contracts

• When goods are sent f.o.b. the place of shipment, they will be delivered free to the place of shipment.

• The buyer must pay all shipping charges from there to the place of destination.

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Abbreviations

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Question?

___________ means an offer to turn the goods over to the buyer.

A. Tender

B. Salesmanship

C. Vending

D. Barter

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Destination Contracts

• Destination Contracts– the contract requires the seller to deliver goods to

a destination

• Tender – to offer to turn the goods over to the buyer.

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Destination Contracts

• With contracts designated by f.o.b. the place of destination goods shipped belong to the seller until they have been delivered to the destination shown on the contract

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Destination Contracts

• c.o.d. (collect on delivery) – instructs the carrier to retain possession until the

carrier has collected the cost of the goods

• c.i.f. (cost, insurance, and freight) – instructs the carrier to collect all charges and fees

in one lump sum

• f.a.s. vessel (free alongside vessel) – requires sellers to deliver the goods, at their own

risk, alongside the vessel or at a dock designated by the buyer

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Passage of Title and Risk of Loss

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Question?

What are “goods of which any unit is, by nature or usage of trade, the equivalent of any like unit”?

A. Tangible goods

B. Intangible goods

C. Dynamic goods

D. Fungible goods

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Fungible Goods

• Fungible Goods – “goods of which any unit is, by nature or usage of

trade, the equivalent of any like unit.”

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Question?

A _____________ is a paper giving the person who possesses it the right to receive the goods named in the document.

A. Document of ownership

B. Document of title

C. Vendor document

D. Document of possession

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Documents of Title

• Document of title – A paper giving the person who possesses it the

right to receive the goods named in the document– Bills of lading, warehouse receipts

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Agreement of the Parties

• The parties may, if they wish, enter into an agreement setting forth the time that title and risk of loss pass from the seller to the buyer

• With one exception, title and risk of loss will pass at the time and place agreed upon

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Revesting of Title in Seller

• Buyers, after entering into sales contracts, sometimes refuse to accept the goods that are delivered or are otherwise made available to them

• In all such cases, title to the goods returns to the seller

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Question?

What type of sale allows goods to be returned even though they conform to the contract when the goods are primarily for the buyer’s use?

A. Sale on return

B. Sale on arrival

C. Sale on disproval

D. Sale on approval

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Sales with Right of Return

• Sale on approval – sale that allows goods to be returned even though

they conform to the contract when the goods are primarily for the buyer’s use.

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Sale or Return

• Sale or return – sale that allows goods to be returned even though

they conform to the contract when the goods are delivered primarily for resale

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Question?

What is the financial interest that an insured party has in the insured property?

A. Insurable interest

B. Lien interest

C. Factored interest

D. Quantum interest

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Insurable Interest

• Insurable interest – the financial interest that an insured party has in

the insured property