Quiz 16: Title and Risk of Loss

Business

Identification of goods in the contract occurs when the designation of specific goods expressed as the subject matter of a sales contract. Identification of goods is required before the seller's interest in specific goods passes on to buyer. Its significance lies in the fact that it creates an insurable interest of the buyer in the goods such that he/she can demand for recovery of damaged goods from the third party that damaged it.

(a)According to UCC, if the seller acquires goods from theft, the seller's title to the goods will be void. Suppose a buyer unknowingly purchases goods from such a seller who is not the original owner of the goods, the buyer's title to the goods is also void, just as was the title to the seller prior to the sale. In such a situation, the original owner can demand back the stolen goods from the buyer, even if the buyer is a "good faith purchaser" for value. In the given scenario, T had stolen D's mobile and sold it to B, who is an innocent purchaser. Since T stole the mobile from D, the B's title to the mobile is void, just as the title to the T prior to the sale. Thus, D being the true owner can recover the mobile from B because D has valid title and actual ownership of the mobile. B, however, despite of being an innocent purchaser, has void title and cannot hold the mobile back from D. (b)According to UCC, assigning goods to a merchant who deals in goods of such kind gives the merchant the authority power to transfer all rights to a "good faith purchaser in the ordinary course of business". In the given scenario, K takes her mobile for repair to O who is a merchant and sells new and used mobiles "in his ordinary course of business". That is, K entrusted her mobile with O, who sold that mobile "in his ordinary course of business". Thus, O had passed a valid title of the mobile to the buyer. However, entrustment only passes the rights of the entruster, and if K is not the actual owner of the mobile, then O cannot pass the title further. Apparently, K is the real owner and thus, O could pass the good title when he sold the mobile. Consequently, K's only action could be is to recover the damages from O.

(a)The broccoli is going to be harvested in the following year. Thus, it comprises of future goods. Since the contract calls for the sale of broccoli that have yet to be planted and harvested in accordance with the contract, identification of the goods would occur when the broccoli is shipped, marked, or otherwise designated by Glen for delivery to Mendoza. (b)The sales contract specified F.O.B. Willow Glen's field by Falcon Trucking. F.O.B. stands for "free on board" implying a shipment contract. A shipment contract requires the seller to ship the goods to the buyer by carrier. The seller is relieved from the liability for the goods once they are delivered to the carrier, and the title passes to the buyer at the time and place of shipment by the carrier. (c)There was a shipment contract between Mendoza and Willow. Once the goods are delivered to the carrier, the risk of loss passes on to the buyer. Since the Falcons truck overturned during the transit, the risk of the spilled load would be borne by Mendoza. (d)The goods received by Mendoza did not meet the requirements of the goods. The contract required her to receive FreshBest Broccoli, but she received FamilyPac broccoli instead. That is, the shipment delivered to Mendoza comprises goods that were sufficiently non-conforming. Since Mendoza refuses to accept the broccoli, risk of loss would be suffered by Willow.

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