Exam 21: Transfer of Title and Risk of Loss

Title to existing, identified goods can pass whenever the parties agree it will pass.

A "buyer in the ordinary course of business" is necessarily a "good faith purchaser for value."

Mary orders a dress for $1,000. The designer sends the wrong size. Mary doesn't inspect the dress on arrival and therefore doesn't discover the nonconformity until the day before she is to wear it to her first board meeting as president of Tri-State Engineering. She calls the designer and sends the dress back, but it is lost in the mail. Mary's insurance would cover $400 of the loss. The designer's insurance would cover $900. Who is liable?

Darren ordered 1,200 sq. ft. of sea foam green carpet from DalCar Company. In error, DalCar Company shipped 1,200 sq. ft. of sea side blue carpet. In this case, the risk of loss remains with the seller until the seller remedies the defect or until Darren accepts the sea side blue carpet.

Under a shipment contract, title passes to the buyer at a time and place the seller contracts with the carrier to ship the goods.

Goods that have been entrusted to a merchant may be sold by that merchant even when the merchant has been told not to sell the goods, and when a merchant sells such goods to a buyer in the ordinary course of business, that buyer has title that is superior to the title of the original owner who entrusted them to the merchant.

The parties, by agreement, may divide the risk and shift the allocation of risk.

The UCC "risk of loss" rules assign the loss according to who has ownership of the goods.

The 2001 Revised UCC Article 1 defines good faith as honesty in fact and the observance of reasonable commercial standards of fair dealing.

Brett contracts to purchase a particular Chevrolet from Johnson's car lot. Brett obtains a "special property interest" in the car when: