Property: Inroduction, Personal Property, and Wills

Business Law, Sixth Edition
© 2019 BVT Publishing. All rights reserved.
S-1
Chapter 10:
Property: Introduction,
Personal Property, and Wills

S-2
Learning Objectives
• Distinguish between real and personal
property.
• Determine fixture status.
• Discern the various methods for acquiring
title to personal property.
• Recognize the types of bailment to personal
property.
• Understand the documents to title.
• Explain leases of personal property.
• Discuss wills and intestate succession.

S-3
10.0 In the News
Anna Nicole Smith Estate Dispute (6:35)
http://bvtlab.com/3FgA9
A federal court ruled that Texas oilman J. Howard
Marshall II never intended to bestow his fortune
on his wife Anna Nicole Smith.
• Who’s estate should have received the
inheritance? Why?
• Explain the requirements of a valid will.

S-4
10.2a Real Versus
Personal Property
Real property – The legal interests in
land and things attached to or growing
on land
Personal property –The rights,
powers, and privileges a person has in
things that are not real property

S-5
10.2b Real Property
Real estate
• Physical aspects of land and its
attachments
Real property
• Legal rights to real estate
Most important areas of law of real property
• Ownership interests
• Methods of acquiring title
• Transactions

S-6
10.2c Personal Property
Tangible
• Objects such as goods
Intangible
• Accounts receivable, patents, goodwill,
trademarks
Chattel
• Chattel real: interest in land
• Chattel personal: moveable personal
property
• Chattel personal in action: right to
possession

S-7
10.2d Reasons for Distinguishing
Between Real & Personal Property
(Slide 1 of 2)
Conflict of laws
• Real property
- The law of the state were the real property is
located determines legal issues (law of situs).
• Personal property
- May refer to the law of the owner’s domicile
- May refer to the law of the state with most
significant contacts with the property.
- May refer to the law of situs

S-8
Transfer of property
• Real property
- Requires deeds
- Bill of sale (but not required)
Taxes
• Real property
- Typically significant
- Less significant
10.2d Reasons for Distinguishing
Between Real & Personal Property
(Slide 2 of 2)

S-9
10.3a What is a Fixture?
Fixture
• An item of personal property attached or
annexed to real estate
• Generally treated as part of the real estate

S-10
10.3a Critical Thinking (Slide 1 of 2)
Case: Prospect Hill Acquisition
Under terms of a lease, the tenant was required to
remove “equipment, ducts, fixtures, materials, and
other property that are or might be contaminated.”
The landlord demanded that the tenant remove
the concrete floor, because of cyanide contained
in areas of the floor as a result of manufacturing
processes conducted in the building for many
years.

S-11
10.3a Critical Thinking (Slide 2 of 2)
• What was the argument Prospect Hill
made in support of having Tyco remove
the floor? What argument did Tyco
advance that it had no duty to remove
the floor?
• Based on the court’s opinion, what is
the definition of a fixture?

S-12
10.3b Reasons for Determining
Fixture Status
• Fixture is included in the value of real estate
for tax purposes.
• When sold, fixture title passes with the real
estate
• Fixture is a part of the security covered by a
mortgage.
• Fixture belongs to the landlord/owner, not to
the tenant, on termination of a lease.

S-13
10.4a Methods of Transfer of
Personal Property
• Sale
• Gift
• Will

S-14
10.4b Inter Vivos Gifts (Slide 1 of 2)
Gifts made voluntarily during life of
party transferring title
• Two parties required
– Donor: party making the gift
– Donee: party receiving the property
• Three elements required
– Donor’s intent to make a gift
– Delivery of possession by the donor
– Acceptance of the gift by the donee

S-15
10.4b Inter Vivos Gifts (Slide 2 of 2)
Gifts causa mortis
• A gift made in anticipation of death
• If the donor survives, the gift is revocable.
Conditional gifts
• Transfer of personal property is made
contingent on a potential donee doing an
act or refraining from doing an act.
• No gift occurs until the contingency is
satisfied.

S-16
10.4c Abandoned, Lost, and
Mislaid Property (Slide 1 of 2)
Abandoned property
• True owner discards property with no intent
to reclaim.
• Title transfers to the first person that takes
possession.
Lost property
• As a result of negligence, accident, or some
other cause, property is found at some place
other than that chosen by the owner.
• Title stays with true owner.

S-17
Mislaid property
• Owner has intentionally placed the
property but has forgotten where it was
placed and forgot to pick it up.
• Title stays with the true owner. Finder
must turn property over to the owner of
the real property where it was found,
and he returns it or holds for owner.
10.4c Abandoned, Lost, and
Mislaid Property (Slide 2 of 2)

S-18
10.5a Required Elements of Bailment
Bailment
• Delivery of personal property to another for
a special purpose
• Made under a contract, either expressed or
implied
Three distinct requirements
• Retention of title by bailor
• Possession and temporary control by bailee
• Possession to revert to bailor or designee.

S-19
10.5b Types of Bailment
• Benefit of bailor
• Benefit of bailee
• Mutual benefit

S-20
10.5c Degree of Care Owed by Bailees
Any loss or damage to the property bailed
falls on the bailor.
• Benefit of bailor: slight care
• Benefit of bailee: extraordinary care
• Mutual benefit: ordinary care

S-21
10.5d Common Carriers
as Bailees (Slide 1 of 2)
• Carriage of goods constitute a mutual
benefit bailment.
• Duty of care exceeds ordinary bailee.
• Absolute insurer of safe delivery under
common law

S-22
Five exceptions to absolute liability
• Act of God
• Action of an alien enemy
• Order of public authority
• Inherent nature of the goods
• Misconduct of the shipper
10.5d Common Carriers
as Bailees (Slide 2 of 2)

S-23
10.5d Critical Thinking (Slide 1 of 2)
Case: Nunez v. Professional Transit
Management of Tucson
The issue in this negligence action is whether a
common carrier has the duty to exercise the
highest degree of care practicable under the
circumstances or rather only the duty to
exercise reasonable care.

S-24
10.5d Critical Thinking (Slide 2 of 2)
• Why did the court reject the “common
carrier” heightened standard for duty of
care?
• The opinion criticizes the traditional rule for
being difficult to apply. Will the “reasonable
person under the circumstances” be easier
for a jury to apply? Why?

S-25
10.5e Innkeepers as Bailee (Slide 1 of 2)
• Mutual benefit bailment
• Duty of care exceeds ordinary bailee
• Insurer of the safety of the goods
under common law

S-26
10.5e Innkeepers as Bailee (Slide 2 of 2)
Exceptions to general rule
• Act of God
• Action of a public enemy
• An act of public authority
• Inherent nature of the property
• Fault of the guest
State statutes
• Notification of a safe, no liability
• Maximum liability to a stated amount or
value

S-27
10.6a General Concepts and
Definitions of Title (Slide 1 of 2)
Document used as evidence that person in
possession of document has right to goods
covered in the document
• Covered by Article 7 of Uniform
Commercial Code
• Serve as receipts for goods stored or
shipped
• Can be negotiable or nonnegotiable

S-28
Common terms:
Warehouse receipt: an acknowledgement issued by
a person engaged in the business of storing goods for
hire
Bill of lading: a document evidencing receipt of
goods for shipment
Issuer: a bailee who prepares the document
Consignor: the person named in a bill of lading as the
person from whom the goods have been received for
shipment
Consignee: the person named in a bill of lading as the
one to whom delivery is to be made
10.6a General Concepts and
Definitions of Title (Slide 2 of 2)

S-29
10.6a Negotiation and Transfer (Slide 1 of 3)
Documents of title must contain words of
negotiability in order to be negotiable.
• Nonnegotiable documents can be
assigned
• Order document
– Negotiated by endorsement and delivery
• Bearer document
– Delivery alone

S-30
Holder of negotiable instrument has
preferred status
• Must have necessary endorsement and
delivery
• Requirements are similar to holder in due
course of commercial paper.
oPurchased document in good faith
oPaid value for the document
oNegotiation in the regular course of business

S-31
No due negotiation
• Holder acquires title to the document.
• Holder acquires title to the goods.
• Holder has direct obligation of the issuer to
hold or deliver goods according to terms of
the document.

S-32
10.7a Basic Concepts Personal
Property Leases
• Treated similar to leases of real property
or bailments
• Governed by Article 2A of Uniform
Commercial Code

S-33
10.7b Application of the UCC to
Personal Property Leases
• Article 2A applies to all leases.
• Similar to how Article 2 treats sales
• Commercial lease occurs anytime the
lessee is an individual who enters into the
lease.
• Finance lease involves a lessor that does
not select, manufacture, or
supply the goods.

S-34
10.8a Terminology of Wills (Slide 1 of 4)
Will: document that expresses a person’s
intention as to the disposition of his/her
property on death
Guardian: person or persons appointed
by the court to look after the property
rights and person of a minor
Testator: person who has died leaving
a will

S-35
Executor: person whom the testator names
or appoints to administer the estate on death
and to dispose of it according to the
testator’s intention
Administrator: person to whom letters of
administration have been issued by a
probate court, giving such person authority
to administer, manage, and close the estate
of a person who died intestate

S-36
Devise: a gift by will of real estate
Bequest: a gift of personal property other than
money
Legacy: a gift of money
Specific gift (devise, bequest, or legacy): a
gift of particular property described to identify
and distinguish it from all other parts of the
deceased’s property

S-37
General gift (devise, bequest, or legacy:) does
not describe any particular property, and it may
be satisfied by delivery of any property of the
general kind described. A gift of a specified
sum of money is a general legacy.
Residuary gift: includes all the property not
included in the specific or general devises,
bequests, or legacies.

S-38
10.8b Testamentary Capacity
• Does require a minimum age,
typically 18
• Does not require perfect mind of
average intelligence
• Must have enough mental capacity to
comprehend property

S-39
10.8b Critical Thinking
Case: Priddy
Questions whether the testator had the capacity to
make a will where the testator evidenced irrational
behavior, was under heavy medication, and the
hand-written document left the estate only to his
estranged wife, ignoring his four children.
• What is the standard for testamentary capacity?
• What evidence indicates the testator in the above
case lacked such capacity?

S-40
10.8c Formalities of Execution
• Testator must sign the will.
• If incapacitated, someone can sign in the
presence and at direction of testator.
• Testator must watch the witness sign.
• Witnesses must testify that the testator
watched them sign.
• Formalities vary from state to state.

S-41
10.8d Intestate Succession
A person who dies without a valid will is
said to die intestate.
• Intestate succession law acts as an
alternative to a will.
• Statutes of intestacy vary from state to state.
• Typically, statutes provide that closest
relatives inherit the deceased’s assets.

Property: Inroduction, Personal Property, and Wills

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