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IDENTIFICATION OF GOODS
Definition: title- the right of ownership.
Concept: transfer of title from one party to another.
Before any interest in specific goods can pass from seller to buyer
or from lessor to lessee (but here title remains with the lessor), two conditions
must be met:
(1) the goods must be in existence, and
(2) the goods must be identified as the specific goods designated in the contract.
Identification is significant because it permits the buyer or
lessee to insure the goods and to recover from third parties who damage
the goods (in transit or otherwise). (more on this later)
If the contract calls for the sale or lease of goods that already
exist in their final form, then identification occurs at the time the contract
is made.
If the contract calls for the sale or lease of goods that have yet
to be completed or modified in accordance with the contract, or for the
sale of fungible goods, identification occurs when the goods are shipped,
marked, or otherwise designated by the seller or lessor for delivery to the
buyer or lessee.
Fungible Goods: Goods that are alike by physical
nature, by agreement, or by trade usage (e.g., grains of wheat,
barrels of like-grade oil).
PASSAGE OF TITLE
The U.C.C. provides that, unless a contrary agreement is explicitly
made, title passes to the buyer at the time the goods are physically delivered to
the buyer. [4735] Think about it, you go to the bookstore, buy a book, and you
then own it.
to ship buyer via carrier and (ii) relieves the seller of liability for the goods once
they have been delivered to the carrier. Title passes to the buyer once the goods
are given to the carrier. For example, FOB Huntsville and shipped to Dallas.
For example, I buy a TV from a major company, who had paid for the shipment
of TVs with a bad check (honestly or otherwise). How was I to know?
Contrast: I buy a TV from a dude selling a few off of his truck in a shady
lane in downtown Houston. I dont think I am a good faith purchaser
here!
FOB Dallas
Goods Held by the Seller: If the seller is a merchant, risk of loss passes to the buyer at
the time he or she takes physical possession of the goods.
If the seller is a non-merchant, risk of loss passes to the buyer
when the seller tenders the goods to the buyer.
Goods Held by a Bailee: Risk of loss passes to the buyer when
(i) the buyer receives the title document
from the seller,
(ii) the bailee (warehouseman) acknowledges
the buyers right of possession, or
(iii) the buyer receives a nonnegotiable title
document and has had a reasonable period of time to demand the goods from the
bailee.
consignee. Prior to sale by the consignee, the consignor holds title to the
consignors goods and the consignor bears the risk of loss. For example,
taking some kids clothes to a kids slightly used clothes store and the store
selling it for us.
Sale on Approval: A conditional sale where the buyer may take
possession of the goods on a trial basis. The sale becomes final only when the
buyer approves of the goods being offered. Title and risk of loss remain with the
seller until the buyer accepts or approves the offered goods. If the buyer does not
accept, the goods will be returned at the sellers expense and risk of loss.
(ii)
BULK TRANSFERS
Consider: assume the SHSU bookstore changes hands. The seller does not wish to
move all the books. The new owner is willing to obtain the books. This is an
example of a bulk transfer.
Bulk Transfer: Any transfer, not made in the ordinary course of the
transferors business, of a major part of the transferors material, supplies,
merchandise, or inventory. In order for a buyer to acquire title free and clear of
all claims from the sellers creditors:
(1) The seller must furnish the buyer with a sworn list of the sellers
creditors, including the names, business address, and amounts owed,
including amounts in dispute;
(2) The buyer and seller must prepare a schedule of the property to be
transferred;
(3) The buyer must preserve the sellers list of creditors and the
property schedule for up to six months and must (a) permit inspection of
the list by any of the sellers creditors or (b) must file the list and
schedule with the appropriate recording agency; and
(4) The buyer must give notice of the proposed bulk transfer to the
sellers creditors at least ten (10) days before taking possession or making
payment, whichever comes first.