ownership and risk of loss chapter 13. possession vs. title to have possession means to hold or...
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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!