Good Faith Purchase of Stolen or Lost Goods

1
Good Faith Purchase of Stolen or Lost Goods

• Owner Thief (Middle Person)-Buyer
• (Problem)
• How should we allocate the theft risk among
  parties involved?

2
Schrier v. Home Indemnity Company

• Pennsauken--(Unknown)?Wholesaler
  (N.Y.)

Silver Hill(Md.)
Home Indemnity Co.
Schrier
3
Voidable v. Void Title U.C.C. 2-403(1)

• Purchaser from a con artist (with voidable
  title) may be protected, while purchaser from
  thief (with no title at all) not.

4
Entrustment 2-403 (2)

• entrustment of goods
• to merchant who deals in goods of that kind.
• buyer in ordinary course of business (see, U. C.
  C. 1-201) is protected
• ? Again, one who purchased from thief is not
  protected.

5
J.C.C. 192-194 etc.

• 192 The good faith purchaser from anyone who
  has a possession of goods gets title.
• 193 Exception Original owner of stolen or
  lost good can recover for 2 years from good faith
  purchaser.
• 194 Original owner should compensate under a
  certain condition. (exception to 193)
• Original owner do not have to compensate to used
  goods dealer for one year even if he satisfied
  C.C.194.

6
The rule 2 J.C.C. etc. contd

• Recovery by the owner is limited for 2 years.
• Owner needs to compensate to the good faith
  purchaser in some cases.

7
Other countries

• Non assignment rule (like the U.S.) ---e.g.,
  Germany
• The rule similar to Japan---e.g., France,
  Switzerland
• More protection for good faith purchaser---e.g.,
  the U.K. (before 1994)

8
UNIDROIT Convention

• Time limitation of recovery three years from the
  claimant knew the location of the goods and the
  identity of the possessor or
• 50 years from the time of theft (Art. 3 (3))
• Good faith purchaser can require compensation
  (Article 4 (1))

9
Corrective Justice (or Fairness) Argument

• Perhaps not promising
• because
• we are now allocating the risk between innocent
  parties.

10
Economic Perspective (primitive version)

• Prevention
• Which party is in the better position to avoid
  theft ?
• Risk bearing
• Which party is in the better position to insure
  the risk

11
An Additional Question

• If it is difficult to determine who is in the
  better position to prevent theft categorically,
  why dont we adopt case-by-case approach to
  determine who is the least cost avoider in each
  particular case ?
• see, contributing negligence (or last clear
  chance test) in tort law

12
Additional Questions (contd)

• Is it sensible to give real owner a protection if
  and only if he/she has made a reasonable
  precaution (e.g., investment against theft) ?
• Neither the U.S. and Japan adopts such an
  approach and perhaps very few in the world does.
  Why ?