BL-Chapter 19 - 1 CHAPTER 19 TITLE TO GOODS AND RISK OF...

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CHAPTER 19 TITLE TO GOODS AND RISK OF LOSS Introduction to Performance of Sales and Lease Contracts -Under common law, the rights and obligations of the buyer, the seller, and third parties were determined base on who held technical title to the goods -Article 2 of the UCC establishes rules for determining the passage of title in sales contracts -Common law placed the risk of loss to goods on the party who held title to the goods -Article 2 of the UCC rejects this and adopts concise rules for risk of loss that are not tied to title -It also gives the parties to the sale contract the right to insure the goods against loss if they have “insurable interest” in the goods Identification and Passage of Title Identification of Goods Goods named in contract distinguished from seller/lessor’s other goods E.g., carton marked with buyer’s name. Risk of loss cannot pass until goods identified in a sales or lease contract. Title cannot pass until goods are identified in the sales contract. In a lease transaction, title to the leased goods remains with the lessor or third party, it doesn’t pass to the lessee Parties can agree to time and manner of identification. 1
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Existing goods identified when the contract is made and when the specific goods are named. -Ex. A boat is identified when its serial number is listed on a sales or lease contract -Goods that are part of a larger mass of goods are identified when the specific merchandise is designated -If a contract needs 150 cases of orange from a farmer who has 1,000 cases, the buyer’s goods are identified when the seller explicitly separates or tags the 150 cases Future goods identified when born, planted, shipped, marked, or designated. -Ex. Unborn young animals, crops to be harvested, etc -Future goods other than crops and unborn animals are identified when the goods are shipped, marked, or otherwise designated by the seller or lessor as the goods to which the contract refers Passage of Title 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. Shipment and Destination Contracts Shipment Contract Requires the seller to ship the goods to the buyer via a common carrier Seller should make proper shipping arrangements. 2
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Deliver the goods into the carrier’s hands. Title passes to the buyer at the time and place of shipment Destination Contract Seller delivers goods either to buyer’s place of business or another destination specified in sales contract. Title passes to the buyer when the seller tenders delivery of the goods at the specified destination Delivery of Goods Without Moving Them Buyer is required to pick up goods from seller If document of title (i.e. a warehouse receipt) or bill of lading is required, title passes when and where the seller delivers the document If the goods named in a sales contract are located at a warehouse, title passes
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BL-Chapter 19 - 1 CHAPTER 19 TITLE TO GOODS AND RISK OF...

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