Title and Risk of Loss

1
Title and Risk of Loss
2
PASSAGE OF TITLE

• DETERMINES OWNERSHIP OF GOODS (seller or buyer)
• IMPORTANT WHEN COMPETING CLAIMS TO GOODS

3
IMPORTANCE OF IDENTIFICATION OF GOODS

• NO TITLE CAN PASS UNTIL GOODS ARE IDENTIFIED
• BUYER HAS INSURABLE INTEREST IN GOODS
• BUYER HAS SPECIAL PROPERTY RIGHT IN GOODS

4
CONTRACT TERMS RE PASSAGE OF TITLE

• AGREEMENT IS DETERMINATIVE AS TO WHEN TITLE
  PASSES
• BUT ANY RESERVATION OR RETENTION OF TITLE IS NOT
  EFFECTIVE ONLY A SECURITY INTEREST IS RETAINED
  BY SELLER

5
PASSAGE OF TITLE RULES

• Carrier contracts
• Shipment (FOB, place of shipment, CIF, CF) -
  seller duly delivers goods to carrier
• Destination (FOB, place of destination) - tender
  of goods to buyer at destination
• Warehouse
• Delivery warehouse receipt/delivery order
• All other contracts
• Pick-up - time/place of contract
• Non-carrier delivery - upon delivery

6
RISK OF LOSS

• WHO BEARS THE LOSS IF THE GOODS ARE DESTROYED,
  LOST, STOLEN OR DAMAGED?

7
CONTRACT TERMS RE RISK OF LOSS

• AGREEMENT IS DETERMINATIVE AS TO WHEN RISK PASSES
  
• IF NO AGREEMENT, UCC HAS DEFAULT RULES

8
PASSAGE OF RISK RULES

• Carrier contracts
• Shipment (FOB, place of shipment, CIF, CF) -
  seller duly delivers goods to carrier
• Destination (FOB, place of destination) - tender
  of goods to buyer at destination
• Warehouse
• Delivery warehouse receipt
• All other contracts
• Merchant seller buyer takes possession of goods
• Nonmerchant seller seller tenders delivery

9
SPECIAL RULES FOR BREACH RISK AND TITLE

• DELIVERY NONCONFORMING GOODS
• RISK DOES NOT PASS UNTIL ACCEPTANCE OR CURE
• TITLE REVESTS IN SELLER IF BUYER REJECTS OR
  REVOKES ACCEPTANCE OF GOODS

10
SPECIAL SALES

• Sale on approval
• Risk and title pass on express or implied
  approval of goods
• Return sellers risk/expense
• Sale or return
• Risk/title pass as in ordinary sale
• Return - buyers risk/expense

11
VOIDABLE TITLE RULE

• REQUIREMENTS
• Seller must have voidable (not void) title to
  goods
• Seller sells goods to a good faith purchaser for
  value
• EFFECT OF SALE
• Good faith purchaser gets title to goods (not
  voidable title)

12
VOIDABLE TITLE EXAMPLES

• Seller passed NSF check to purchase goods
• Seller committed fraud to secure goods
• Seller acquired goods from minor or insane person

13
ENTRUSTMENT RULE

• REQUIREMENTS
• Person entrusted goods to
• A merchant who deals in goods of that kind
• Merchant sells goods to a
• BIOC Buyer in ordinary course of business
• EFFECT OF SALE
• All rights of entrustor pass to BIOC