Download - Chapter 24 Title and Risk of Loss
Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning
Chapter 24Title and Risk of
Loss
Twomey JenningsAnderson’s Business Law and the Legal Environment, Comprehensive 20e
Anderson’s Business Law and the Legal Environment, Standard 20eBusiness Law: Principles for Today’s Commercial Environment 2e
2Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning
Types of Potential Problems
• Damage to Goods: What if neither Buyer nor Seller is responsible?– What liability does a Carrier have?
• Creditors’ Claims or Seizure of Goods.• Insurable Interest.
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Determining Rights: Identification of Goods
• Existing Goods: physically present and owned by Seller at the time of contract.– When Seller or Buyer selects goods, they are
“identified.”• Future Goods: do not exist or not owned by
seller at the time of contract.• Fungible Goods: indistinguishable.• Identification Gives Buyer an Insurable
Interest.
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Determining Rights: Document of Title
• Document of Title: facilitates transfer of ownership without actually moving the goods.– A warehouser stores the goods of
others for compensation and has the rights and duties of a bailee in an ordinary mutual benefit bailment.
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Determining Rights: Document of Title
• Warehouse receipt given to the depositor (bailor) of the goods.
• Bill of Lading: carrier accepts goods for shipment.
• Now includes electronic documents of title.
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Passage of Title in Bailments
• Generally, a seller can only sell what he owns.
• Stolen Property: finder of stolen property (or a thief) cannot pass good title to a third party, even if the buyer purchased in good faith.
• Estoppel.• Voidable Title.
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• Unless otherwise agreed, the Seller is only required to make shipment to the Buyer, i.e., place the goods in a carrier’s possession.
• FOB Place of Shipment.• FOB Place of Destination.• FAS.• CF and CIF.• COD.
Delivery and Shipment Terms
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Passage of Title in Shipment Contracts
• FOB Place of Shipment Contract.– Title passes from S B when S places
goods with carrier.• FOB Place of Destination Contract.
– Title passes from S B when goods are tendered to the Buyer.
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Determining Rights: Risk of Loss
• ROL determines who must pay if the goods are damaged or destroyed.
• Non-Shipment Contracts.– Merchant Seller: ROL passes from S B
upon B’s actual receipt of goods.– Non-Merchant Seller: ROL passes from S B upon tender of goods.
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Determining Rights: Risk of Loss
• Shipment to Buyer: ROL passes from S B when tendered to carrier for shipment.
• Contract for Delivery: ROL passes from S B when goods tendered at destination by carrier.
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Determining Rights: Damage or Destruction of Goods
• Identified Goods Before ROL passes.– If total loss, contract is cancelled by law.– If partial loss, B has option to accept or reject.
• Identified Goods After ROL passes.– Buyer’s loss (insurable interest).
• Un-Identified Goods.– No ROL to Buyer, Seller’s loss.
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Risk of Loss in Shipment Contracts
• Rights of Common Carriers.– Security lien interest on goods that it
transports.– Right to compensation per agreement.
• Duties of Common Carriers.– Deliver the goods as agreed.
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Risk of Loss in Shipment Contracts
• A common carrier is absolutely liable for loss or damage to the goods.
• Exceptions:– Loss was caused solely by an act of God, – Act of a public enemy, – Act of a public authority, – Act of the shipper, or – Inherent nature of the goods.
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Risk of Loss in Shipment Contracts
• Seller is Liable for Damages from Delay.• Limitation of Carrier Liability.
– Unless prohibited by law, carriers can contractually limit their liability.
– Example: Airbills limit liability to $100, unless insurance is purchased.
• If Seller ships non-conforming goods and Buyer reject, ROL stays with Seller.
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Damage / Destruction of Goods
• Damage to Identified Goods before Risk of Loss Passes: Depends on facts.
• Damage to Identified Goods after the Risk of Loss Passes: Buyer sustains loss.
• Damage to Unidentified Goods: no risk to buyer.
• Effect of Seller’s Breach in ROL.
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Determining Rights: Special Situations
• Returnable Goods Transactions: Sale on Approval, Sale or Return.
• Consignments and Factors: A factor is a special type of bailee who has possession of someone else’s property for the purpose of selling it. – This arrangement is commonly called selling on
consignment, and the owner is called a consignor.– The factor, or consignee, receives a commission on the
sale.
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Determining Rights: Special Situations
• Self-Service.• Auction Sales.