Ownership Ownership and and

Risk of LossRisk of LossChapter 13Chapter 13

Possession vs. TitlePossession vs. TitleTo have To have possessionpossession means means

to hold or occupy with or to hold or occupy with or without rights of ownershipwithout rights of ownership

To hold To hold titletitle means to have means to have ownershipownership

Buying a used car? Don't just take the Buying a used car? Don't just take the seller's word about the car's history.seller's word about the car's history.

Car Title CaseCar Title Case

http://www.youtube.com/watch?v=UwFe3F4fO_4http://www.youtube.com/watch?v=UwFe3F4fO_4 Used Car ScamUsed Car Scam

http://www.youtube.com/watch?v=sS9jANqRpxQhttp://www.youtube.com/watch?v=sS9jANqRpxQ&feature=related&feature=related

Who is Authorized to sell Goods?Who is Authorized to sell Goods?

The The ownerowner of the goods of the goods In retail stores, In retail stores, SalespeopleSalespeople have authorization have authorization

to sell goods/represent the brandsto sell goods/represent the brands Auctioneers and sheriffsAuctioneers and sheriffs are authorized under are authorized under

Court Orders to sell stolen and repossessed Court Orders to sell stolen and repossessed goods or foreclosed propertiesgoods or foreclosed properties http://www.youtube.com/watch?v=wZltPkANed4http://www.youtube.com/watch?v=wZltPkANed4 http://www.youtube.com/watch?v=FUwv1C975Hhttp://www.youtube.com/watch?v=FUwv1C975H

00

Buying stolen goodsBuying stolen goods

Misdemeanor – value under$2000Misdemeanor – value under$2000

Felony - if value over $2000Felony - if value over $2000

When a buyer When a buyer is induced by fraud:is induced by fraud:

If the owner of goods is induced by fraud to sell their If the owner of goods is induced by fraud to sell their goods, The transfer of title is voidable by the seller goods, The transfer of title is voidable by the seller

The seller can cancel the contract and recover their The seller can cancel the contract and recover their good UNLESS there is a good UNLESS there is a Good Faith Purchaser Good Faith Purchaser involvedinvolved An innocent active third-party participant in a fraudulent An innocent active third-party participant in a fraudulent

salesale In this case, the Good Faith Purchaser had legal rights to In this case, the Good Faith Purchaser had legal rights to

the goods and the the goods and the original Seller must seek damages original Seller must seek damages from the original fraudulent buyerfrom the original fraudulent buyer

Buyer does receive title if…Buyer does receive title if… HAD HAD nono have reason to suspect have reason to suspect

fraud; innocent buyerfraud; innocent buyer

Buyer Doesn’t receive title Buyer Doesn’t receive title if…if…Purchases stolen goods Purchases stolen goods

(regardless of innocence)(regardless of innocence)

Requirements for Ownership Transfer: Requirements for Ownership Transfer: goods must be goods must be existing and identifiedexisting and identified1.1. Existing GoodsExisting Goods – physically in – physically in

existenceexistence2.2. Identified GoodsIdentified Goods – designated – designated

specifically as the subject matterspecifically as the subject matter If goods are not existing and If goods are not existing and

identified, they are:identified, they are: Future GoodsFuture Goods – good involved in a – good involved in a

““contract to sellcontract to sell” ”

Title is exchanged when there Title is exchanged when there is a is a Tender of DeliveryTender of Delivery – – seller seller places places (or authorizes a carrier to (or authorizes a carrier to place) the proper goods at the buyer’s place) the proper goods at the buyer’s disposal and disposal and notifiesnotifies the buyer so that the the buyer so that the delivery can be receiveddelivery can be received

If contract says that the sellers ships If contract says that the sellers ships goods, but not delivers goods, title passes goods, but not delivers goods, title passes as soon as goods are shipped.as soon as goods are shipped.

Judge JudyJudge Judy

Ebay Scammer:Ebay Scammer: http://http://www.youtube.com/watch?vwww.youtube.com/watch?v==

nzGOJJmrPNo&featurenzGOJJmrPNo&feature=related=related

When does Ownership Transfer?When does Ownership Transfer?

Common Situations:Common Situations:

Seller delivers good to destinationSeller delivers good to destinationSeller ships goods to destinationSeller ships goods to destinationSeller delivers document of titleSeller delivers document of titleBuyer takes possession at place of Buyer takes possession at place of salesale

Risk of LossRisk of Loss

If Seller Ships Goods by CarrierIf Seller Ships Goods by Carrier

Risk of loss passes to Risk of loss passes to the buyer the buyer at the at the destination destination upon upon tender of deliverytender of delivery

FOB – Free on BoardFOB – Free on Board agreement that goods agreement that goods will be carried to a will be carried to a specific spotspecific spot

transfer of ownership transfer of ownership occurs at that pointoccurs at that point

CIF – Cost, Insurance, FreightCIF – Cost, Insurance, Freight contract for adequate contract for adequate

insurance and proper shipmentinsurance and proper shipment Risk of loss passes when Risk of loss passes when

seller delivers goods to the seller delivers goods to the carriercarrier

COD (Collect on Delivery)COD (Collect on Delivery)

Carrier collects price and Carrier collects price and delivery charges upon delivery delivery charges upon delivery and transmits to the sellerand transmits to the seller

If buyer does not pay, goods If buyer does not pay, goods are not transferredare not transferred

Cash and Carry SalesCash and Carry Sales Buyer pays cash for goods and Buyer pays cash for goods and

takes immediate possessiontakes immediate possession Transfer of risk and title occurs Transfer of risk and title occurs

immediately!immediately! Sales on credit do not affect Sales on credit do not affect

the passing of riskthe passing of risk

BaileeBailee – individual that – individual that takes temporary takes temporary possession of another possession of another person’s goods person’s goods

(ie. Public warehouse/ (ie. Public warehouse/ transporter)transporter)

Insurable InterestInsurable Interest – gives the – gives the buyer the right to buy buyer the right to buy insurance on goods being insurance on goods being delivereddeliveredKeeps risk of loss with seller Keeps risk of loss with seller

OR carrier (ie. UPS, Fed Ex.)OR carrier (ie. UPS, Fed Ex.)Protects YOU, as a buyer, from Protects YOU, as a buyer, from

lossloss

Sale on ApprovalSale on Approval ““on trial” or based on satisfactionon trial” or based on satisfaction

for example, companies give a 30 day for example, companies give a 30 day “risk-free” trial“risk-free” trial

Risk of loss does not transfer until the Risk of loss does not transfer until the buyer approves goods and accepts titlebuyer approves goods and accepts title

While in possession, buyer is responsible While in possession, buyer is responsible for damages due to negligencefor damages due to negligence

Sale of an Undivided InterestSale of an Undivided Interest

Selling a fraction of Selling a fraction of interest in a good or realtyinterest in a good or realty

Creates partial ownershipCreates partial ownership

AuctionAuction – public sale to – public sale to highest bidderhighest bidder

Most auction sales are Most auction sales are handled “handled “with reservewith reserve” ” meaning an auctioneer may meaning an auctioneer may withdraw goods anytime withdraw goods anytime before finalizing salebefore finalizing sale

Bulk TransferBulk Transfer – the transfer of all or – the transfer of all or a major part of the goods of a a major part of the goods of a business in one unit at one timebusiness in one unit at one time

ExEx. Materials, supplies, merchandise, . Materials, supplies, merchandise, equipmentequipment

A good faith buyer who buys some or A good faith buyer who buys some or all of the goods from a bulk transfer all of the goods from a bulk transfer gets good title!gets good title!