Title, Risk, Insurable Interest

Chapter 20

Identification

For an interest in goods to pass from seller to buyer the goods must

(1) exist and (2) be identified as the goods subject to the contract.

Identification is designation of the goods as

the

subject matter of the contract.

Identification

Identification gives the buyer

(1) the right to obtain insurance and

(2) the right to obtain the goods from

the seller.

Transfer of Title and Risk of Loss

Parties can agree on when and under what conditions title will pass. If they do not specify a time, title passes on delivery [UCC 2-401(2)].

Delivery terms determine when this occurs.

Delivery

Delivery with Movement of the Goods

Delivery without Movement of the Goods

Goods Held by the Seller.

Goods Held by a Bailee. (Third Party)

Delivery with Movement of the Goods

1.Goods transported form Seller to Buyera. Shipment contract, F.O.B.(Seller’s place of business.1. Requires seller to deliver goods to carrier and make arrangement for transport.2. Title and Risk transfer when goods are delivered to carrier.

Delivery with Movement of the Goods

b. Destination Contract, F.O.B.(Buyer’s place of business)

1. Requires seller to tender goods at destination

2. Title and Risk transfer when goods are tendered

Delivery without Movement of the Goods (Risk of Loss) Goods Held by the Seller.

a. If the seller is a merchant, risk of loss to goods held by the seller passes to the buyer when the buyer actually takes physical possession of the goods.

b. If the seller is not a merchant, the risk of loss to goods held by the seller passes to the buyer on tender of delivery.

Delivery without Movement of the Goods (Risk of Loss) When a bailee is holding goods for a person

and goods are to be delivered without being moved, the goods are usually represented by a

negotiable or nonnegotiable document of title (a bill of lading or a warehouse receipt).

Risk of loss passes to the buyer when (1) the buyer receives a negotiable document of title for

(2) the bailee acknowledges the buyer's right to possess the goods, or

(3) the buyer receives a nonnegotiable document of title and has had a reasonable time to present the document to the bailee and demand the goods.

Delivery without Movement of the Goods (Title) Title passes at the time and place the sales

contract is made, if the goods have already been identified. If the goods have not been identified, title does not pass until identification occurs.

Example. Rogers sells lumber to Bodan. It is agreed that Bodan will pick up the lumber at the yard. If the lumber has been identified(segregated, marked, distinguished from all other lumber), title passes to Bodan when the contract is signed. If the lumber is still in storage bins at the mill, title does not pass to Bodan until the particular pieces of lumber to be sold under this contract are identified

Delivery without Movement of the Goods (Title)Third Party) Document of Title When a document of title is required,

title passes to the buyer when and where the

document is delivered. Thus, if the goods are stored in a warehouse, title passes to

the buyer when the appropriate documents are delivered to the buyer.

Delivery without Movement of the Goods (Title)Third Party) No document of Title

Goods Identified:When no documents of title are required, and delivery is made without moving the

goods, title passes at the time and place the sales contract is made, if the goods have already been identified.

Goods not Identified: If the goods have not been identified, title does not pass until identification occurs.

Conditional Sales

Sale or Return. Contract by which the buyer purchases the goods but has a conditional right to return the goods within a specified time period.

Title and risk of loss remain with the buyer until the buyer returns the goods to the seller within the time period specified.

Conditional Sales

Sale on Approval. Buyer takes the goods on a trial basis

Title and risk of loss remain with the seller until the buyer accepts the offer.