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Essentials of Business Law -- 4th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Click your mouse
anywhere on the
screen when you are
ready to advance the
text within each slide.
After the starburst appears behind the blue
triangles, the slide is completely shown.
You may click one of the blue triangles to
move to the next slide or the previous slide.
Essentials of Business Law -- 4th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
19
“Great deeds are usually
wrought at great risk.”
Herodotus,
Greek historian
19
Essentials of Business Law -- 4th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
 The Code must sometimes determine
the rightful owner when more than one
person claims to own something.
 Existence and Identification
• Goods must exist before title can pass.
• Goods must be identified to the contract
before title can pass.
• The parties may agree in their contract how
and when they will identify the goods.
Essentials of Business Law -- 4th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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 Passing of Title
• Title may pass in any manner on which the
parties agree.
 Insurable Interest: a legal right in
something
• A buyer obtains an insurable interest when
the goods are identified to the contract.
• The seller retains an insurable interest in
goods as long as she has either title to the
goods or a security interest in them.
Essentials of Business Law -- 4th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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 Bona Fide Purchaser
• A void title is no title at all.
• A voidable title gives limited rights in
the goods, inferior to those of the
owner.
• A person with voidable title has power
to transfer valid title for value to a good
faith purchaser, generally called a bona
fide purchaser or BFP.
Essentials of Business Law -- 4th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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 Entrusting means delivering goods to a
merchant or permitting the merchant to
retain them.
• Entrusting to a merchant who deals in
goods of that kind gives him power to
transfer all rights to a buyer in the ordinary
course of business.
• The entrusting provision protects the
innocent buyer, who buys goods ONLY of
the type normally sold by that merchant, not
knowing that they belong to someone else.
Essentials of Business Law -- 4th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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 Ordinary Sales
• A buyer in the ordinary course of business
may take the goods free and clear of the
security interest.
 Bulk Sales: one that includes most or all
of the inventory in a store
• Article 6 requires that:
– The seller supply the buyer with a complete list
of his creditors, and
– the buyer notify all creditors of the bulk sale
before it takes place, so that the creditors may
protect their security interest.
Essentials of Business Law -- 4th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
19
 Sale on Approval
• When a buyer takes goods intending to use
them herself but has the right to return.
• In a sale on approval, the goods are not
subject to the buyer’s creditors until the
buyer accepts them.
 Sale or Return
• When a buyer takes goods intending to
resell them, but has the right to return them.
• The goods are subject to the claims of the
buyer’s creditors.
Essentials of Business Law -- 4th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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 The parties may allocate the risk of loss
any way they wish.
 Many merchants specify who bears the
risk of loss by using common shipping
terms such as those on the next slide.
 If parties fail to allocate the risk:
• When neither party has breached, the risk of
loss generally passes from seller to buyer
when the seller has transported the goods as
far as he is obligated to.
• When a party has breached, the risk of loss
generally lies with that party.
Essentials of Business Law -- 4th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
19
 FOB place of shipment (seller is at risk




until goods are in carrier’s hands)
FOB place of destination (seller is at
risk until goods are at the destination)
FAS a named vessel (seller is at risk
until goods are delivered to that vessel)
CIF (cost includes insurance and
shipping)
C&F (cost does not include insurance)
Essentials of Business Law -- 4th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
19
 Bailment means that one person or
company is legally holding goods for
the benefit of another.
 If the contract requires a bailee to hold
the goods for the buyer, the risk passes
when the buyer obtains documents
entitling her to possession, or when the
bailee acknowledges her right to the
goods.
Essentials of Business Law -- 4th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a
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19
 Seller Breaches and Buyer Rejects
• The risk remains with the seller until he cures
the defect or the buyer accepts the goods.
 Seller Breaches and Buyer Accepts, but
Then Revokes Acceptance
• The risk remains with the seller to the extent
the buyer’s insurance will not cover the loss.
 Buyer Breaches
• Buyer assumes the risk of loss to the extent
the seller’s insurance is deficient.
Essentials of Business Law -- 4th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Essentials of Business Law -- 4th Edition
© 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password-protected website for classroom use.