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Title, Risk and  Insurable Interest
Introduction <ul><li>Sale of goods requires different rules than real property transactions: risk should not always pass w...
§1: Identification <ul><li>For any interest to pass to buyer, goods must be: </li></ul><ul><ul><li>In existence. </li></ul...
Identification  [2] <ul><li>Gives the buyer the right: </li></ul><ul><ul><li>To obtain insurance on the goods. </li></ul><...
§2: When Title Passes <ul><li>Title can pass: </li></ul><ul><ul><li>Upon  physical  delivery, or </li></ul></ul><ul><ul><l...
Delivery Without  Movement of Goods <ul><li>Title passes when agreed by the parties, or </li></ul><ul><li>With  document o...
Sales or Leases  By Non-Owners <ul><li>Void Title: true owner gets goods back. </li></ul><ul><li>Voidable Title: good fait...
§3: Risk of Loss <ul><li>ROL does not necessarily pass with title. ROL is important because of insurance concerns. </li></...
ROL: Delivery With Movement <ul><li>Shipment  Contracts. </li></ul><ul><ul><li>ROL passes to Buyer when tendered to Carrie...
ROL: Shipping Terms Term Definition F.O.B. Free on Board. Sales price includes shipping to specific place in contract.  Ex...
ROL: Delivery Without  Movement of Goods <ul><li>Goods Held by  Seller : </li></ul><ul><ul><li>Document of Title is genera...
ROL: Conditional Sales <ul><li>Sale on Approval. </li></ul><ul><ul><li>ROL passes when buyer approves expressly or implici...
ROL: Breach of Contract <ul><li>Generally breaching party bears ROL. </li></ul><ul><li>Seller’s  Breach. </li></ul><ul><ul...
§4: Insurable Interest <ul><li>Buyer has an insurable interest in goods that have been identified. </li></ul><ul><li>Selle...
§5: Bulk Transfers <ul><li>Covered by Article 6 of the Uniform. Commercial Code. </li></ul><ul><li>A bulk transfer is defi...
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Contract risk and insureble interst

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Contract risk and insureble interst

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Contract risk and insureble interst

  1. 1. Title, Risk and Insurable Interest
  2. 2. Introduction <ul><li>Sale of goods requires different rules than real property transactions: risk should not always pass with title. </li></ul><ul><li>UCC replaces title with identification, risk, and insurable interest. </li></ul>
  3. 3. §1: Identification <ul><li>For any interest to pass to buyer, goods must be: </li></ul><ul><ul><li>In existence. </li></ul></ul><ul><ul><li>Identified as specific goods in the sales contract (by serial numbers and/or physically separated from others. Except for fungible goods which do not need separation). </li></ul></ul>
  4. 4. Identification [2] <ul><li>Gives the buyer the right: </li></ul><ul><ul><li>To obtain insurance on the goods. </li></ul></ul><ul><ul><li>To recover from third parties who damage the good. </li></ul></ul><ul><li>Identification occurs: </li></ul><ul><ul><li>If goods are designated when contract is made. If goods are not designated when contract is made, then identified at time of designation. </li></ul></ul>
  5. 5. §2: When Title Passes <ul><li>Title can pass: </li></ul><ul><ul><li>Upon physical delivery, or </li></ul></ul><ul><ul><li>When agreed to by the parties, or </li></ul></ul><ul><ul><li>If no agreement, depends on whether contract is shipment or destination contract: </li></ul></ul><ul><ul><ul><li>Shipment : title passes at time and place of shipment. </li></ul></ul></ul><ul><ul><ul><li>Destination : title passes when goods are tendered at the destination. </li></ul></ul></ul><ul><li>Case 20.1: In re Stewart (2002). </li></ul>
  6. 6. Delivery Without Movement of Goods <ul><li>Title passes when agreed by the parties, or </li></ul><ul><li>With document of title: when and where document delivered. </li></ul><ul><li>Without document: when sales contract is made, if goods have been identified or when identification occurs if they have not been identified. </li></ul>
  7. 7. Sales or Leases By Non-Owners <ul><li>Void Title: true owner gets goods back. </li></ul><ul><li>Voidable Title: good faith purchaser keeps goods. </li></ul><ul><ul><li>Case 20.2: Memphis Hardwood v. Daniel (2000). </li></ul></ul><ul><li>Entrustment rule: good faith purchaser keeps goods. </li></ul><ul><li>Seller’s Retention of Sold Goods: good faith purchaser wins. </li></ul><ul><ul><li>Sham transactions or preferential transfers. </li></ul></ul>
  8. 8. §3: Risk of Loss <ul><li>ROL does not necessarily pass with title. ROL is important because of insurance concerns. </li></ul><ul><li>Unless agreed otherwise, ROL passes to Buyer depending on whether delivery is with or without movement of the goods. </li></ul>
  9. 9. ROL: Delivery With Movement <ul><li>Shipment Contracts. </li></ul><ul><ul><li>ROL passes to Buyer when tendered to Carrier. If goods damaged in transit, Buyer’s loss. </li></ul></ul><ul><li>Destination Contracts. </li></ul><ul><ul><li>ROL passes to Buyer when goods tendered at particular Destination. </li></ul></ul><ul><li>Case 20.3: Windows Inc. v. Jordan Panel System Corp. (1999). </li></ul>
  10. 10. ROL: Shipping Terms Term Definition F.O.B. Free on Board. Sales price includes shipping to specific place in contract. Example: FOB Chicago. F.A.S. Free Along Side. Requires seller to deliver goods alongside the ship before ROL passes to buyer. C.I.F. Cost, Insurance and Freight. Seller puts the goods in possession of a carrier. Delivery Ex-Ship Deliver from Carrying shipping vessel. ROL passes to buyer when goods leave the ship or unloaded.
  11. 11. ROL: Delivery Without Movement of Goods <ul><li>Goods Held by Seller : </li></ul><ul><ul><li>Document of Title is generally not used. </li></ul></ul><ul><ul><li>If Seller is a merchant, ROL passes when buyer takes physical possession of goods. </li></ul></ul><ul><li>Goods Held by Bailee (Warehouse). ROL passes when: </li></ul><ul><ul><li>Buyer receives document of title; bailee acknowledges Buyer’s right to goods and buyer receives title and has reasonable time to pick up. </li></ul></ul>
  12. 12. ROL: Conditional Sales <ul><li>Sale on Approval. </li></ul><ul><ul><li>ROL passes when buyer approves expressly or implicitly. </li></ul></ul><ul><li>Sale or Return. (Consignment is sale or return unless it complies with Art. 9.) </li></ul><ul><ul><li>ROL passes to buyer with possession. </li></ul></ul>
  13. 13. ROL: Breach of Contract <ul><li>Generally breaching party bears ROL. </li></ul><ul><li>Seller’s Breach. </li></ul><ul><ul><li>Rejection - risk stays with seller. </li></ul></ul><ul><ul><li>Revocation of acceptance - risk passes back to seller to the extent that buyer’s insurance does not cover the loss. </li></ul></ul><ul><li>Buyer’s Breach. Goods are identified, risk passes to buyer for a reasonable amount of time after seller learns of the breach, to the extent that seller’s insurance does not cover loss. </li></ul>
  14. 14. §4: Insurable Interest <ul><li>Buyer has an insurable interest in goods that have been identified. </li></ul><ul><li>Seller has an insurable interest in goods as long as they retain title or a security interest. </li></ul><ul><li>Both buyers and sellers can have an insurable interest at the same time. </li></ul>
  15. 15. §5: Bulk Transfers <ul><li>Covered by Article 6 of the Uniform. Commercial Code. </li></ul><ul><li>A bulk transfer is defined as: </li></ul><ul><ul><li>Major part of seller’s inventory. </li></ul></ul><ul><ul><li>Not made in the usual course of business . </li></ul></ul><ul><li>UCC 6 is becoming obsolete and has been repealed by many states. </li></ul>

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