Quiz 20: The Formation of Sales and Lease Contracts


In the case of Pride v. Mackey, a trial court would probably find that Pride was in possession and ownership of the Greenie product and therefore could not pass the liability on to the buyer. Before title and risk of loss can pass from the seller to the buyer the goods must be in existence and identified to the contract. The contract was formed upon Pride's promise to of prompt shipment but could title could not pass because the goods were not identified. Pride had not separated the goods for shipment and retained ownership until the carrier picked up the shipment from Pride's docks. The contract was a shipment contract as was evidenced by the F.O.B. Pride's city. The risk of loss would have passed to Mackey once Fast Freight assumed possession of the shipment. The elements for establishing a prima facie case under the Carmack Amendment are: 1. Delivery to the carrier in good condition. 2. Arrival in damaged condition. 3. The amount of damages. The exceptions are: 1. Acts of God. 2. The public enemy. 3. Acts of the shipper himself. 4. Public authority. 5. The inherent vice or nature of the goods. The freight term F.O.B. or free on board, means that the buyer pays for transportation charges from the destination. In this case, the destination is Pride's city. That means that the buyer, Mackey, would have assumed ownership of the shipment at the time that it was loaded upon the carrier. The shipment was never delivered to the carrier, so a prima facie case would not be established in favor of Pride.

When the crop of broccoli harvested in March of the following year, then it is identified to the contract under the Uniform Commercial Code because buyer or lessee would have interest in specific goods through seller or lesser only when goods are in existence and are identified as the same goods mentioned in the contract. Title of goods and risk of loss cannot be passed, unless the goods are identified to the contract, from the seller to buyer. Identification is significant as it gives the right of an insurable interest in the goods and right to recover damages from third parties to the buyer.

(a). Sikora's rights: Sikora has a contract that identifies the purchase of the specific suit. The contract did not indicate an agreement regarding the time when title or risk of loss would pass. Before title and risk of loss can pass from the seller to the buyer the goods must be in existence and identified to the contract. The contract was formed upon Carson's promise to alter Sikora's suit. The suit was to be delivered without physical movement of the suit by Carson and was not represented by a document of title. Hence, the title passed to Sikora when the contract was made, and the risk of loss did not pass to Sikora (buyer) from Carson (seller) because the transfer of risk did not occur until the buyer received the goods. In this case Sikora had not yet received the goods, so Carson bore the risk. (b). Person suffering from loss of the suit destroyed by fire: The same rule applies in this case as in part (a) - the title passes to the buyer on the making of the contract and risk of loss passes from a merchant seller to the buyer when the buyer receives the goods. Since Sikora had not yet received the goods, the risk was Carson's. In contract law, Acts of God void a contract and both parties are put back in their original position. The seller had possession of the goods, so Sikora would be refunded his payment and Carson would be expected to submit a claim to its insurance carrier for loss due to an Act of God.

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