Section 13.1
Ownership and Risk of Loss in Sales
or Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Section 13.1 Assessment
Reviewing What You Learned
1. When do you use the law of sales?
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Section 13.1 Assessment
Reviewing What You Learned
Answer
For the sale and lease of goods.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Section 13.1 Assessment
Reviewing What You Learned
2. What special rules apply to sales
contracts?
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Section 13.1 Assessment
Reviewing What You Learned
Answer
Must be in good faith; may be
supplemented with methods of dealing and
usage of trade; may result from the parties’
conduct; offer may be accepted by any
reasonable means;
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Section 13.1 Assessment
Reviewing What You Learned
Answer
acceptance may include terms different
than those in offer; consideration not
required for firm offer; price need not be
settled; out put and requirement contracts
allowed; may be modified without
consideration.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Section 13.1 Assessment
Reviewing What You Learned
3. When must sales contracts be in
writing? What are the exceptions?
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Section 13.1 Assessment
Reviewing What You Learned
Answer
For sale of goods for $500. Exceptions:
oral contracts between two merchants
when a confirmation is sent and no
objection made; oral contracts for specially
manufactured goods; admissions in court;
executed oral contracts.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Section 13.1 Assessment
Reviewing What You Learned
4. What are some rules for auctions
and bulk sales?
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Section 13.1 Assessment
Reviewing What You Learned
Answer
In an auction with reserve, the auctioneer
need not accept the highest bid. In an
auction without reserve, the auctioneer
must accept the highest bide.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Section 13.1 Assessment
Reviewing What You Learned
Answer
The UCC rules require that the buyer of
bulk goods in a bulk transfer notify all of the
seller’s creditors at least ten days before
the transfer will take place.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2
Ownership and Risk of Loss in Sales
or Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Title
The right of ownership to goods is
known as title.
People who own goods have title to
them.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Title
A bill of sale is formal evidence of
ownership.
You receive this document when
you buy goods.
It only proves that you once had
title, not that you still own the
goods.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Elements of a Bill of Sale
Price
Name and address of buyer and of
seller
Receipt
Goods sold
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Elements of a Bill of Sale
Warranty
Date
Signature of seller
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Voidable Title
Anyone who obtains property as a
result of another’s fraud, mistake,
undue influence, or duress holds only
voidable title to the goods.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Voidable Title
Voidable title means title that may be
voided if the injured party elects to do
so.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Buying from a Merchant
The UCC has a special rule that
allows merchants who have no title to
goods to pass on good title to their
consumers.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Buying from a Merchant
This occurs when you entrust your
own goods to a merchant who sells
them in the ordinary course of
business.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Buying from a Merchant
This gives consumers confidence
that they will receive good title when
buying from a merchant.
This rule does not apply to stolen
goods. Only the rightful owner has
title to stolen property.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Passage of Title and Risk of Loss
Sometimes it is necessary to
determine who has title to goods—the
seller or the buyer.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Passage of Title and Risk of Loss
Similarly, it is sometimes necessary to
determine who must bear the risk of
loss, or the responsibility for loss or
damage to goods.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Passage of Title and Risk of Loss
This is because goods may be stolen,
damaged, or destroyed after the sales
contract has been entered but before
the transaction is completed.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Passage of Title and Risk of Loss
Title to goods cannot be transferred
under a sales contract until the
goods have been identified.
Identified goods are goods that
presently exist and that have been
set aside for a contract.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Passage of Title and Risk of Loss
Goods that are not both existing
and selected are known as future
goods, such as crops not yet grown
or items not yet manufactured.
No one can have title to future
goods.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Ed Johnson goes to the Buy-a-Heap
car dealership and buys a used car.
Later, the police pull him over and tell
him that the car was stolen.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Assuming the police are correct, does
Johnson have ownership of the car?
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
ANSWER
No. Only the rightful owner has title to
stolen property.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Shipment Contract
A shipment contract is one in which
the seller turns the goods over to a
carrier for delivery to a buyer.
A carrier is a transportation company.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Shipment Contract
Both title and risk of loss pass to the
buyer when the goods are given to the
carrier.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Shipment Contract
The term f.o.b., or free on board,
means that goods will be delivered
free to the designated place.
The buyer must pay the freight
charges from the shipping point to the
destination.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Destination Contract
When a contract requires the seller to
deliver the goods to a destination, it is
a destination contract.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Destination Contract
Both title and risk of loss pass to the
buyer when the seller leaves the
goods at the place of destination.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
No Delivery
When no delivery is required and the
contract calls for the buyer to pick up
the goods, title passes to the buyer
when the contract is made.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
No Carrier
When goods are not to be shipped by
carrier, the passage of risk of loss
depends on whether the seller is a
merchant or not.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
No Carrier
If the seller is a not a merchant, the
risk of loss passes to the buyer when
the seller delivers the product, or the
seller offers to turn the goods over to
the buyer.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
No Carrier
If the seller is a merchant, the risk of
loss is transferred from the seller to
the buyer when the buyer receives the
goods.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Documents of Title
Sometimes when you buy goods you
receive a document of title, rather than
the actual goods.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Documents of Title
A bill of lading is a receipt for
shipment of goods given by a
transportation company, or carrier, to a
shipper when the carrier accepts
goods for shipment.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Documents of Title
A warehouse receipt is a document
given to a customer by the warehouse
that is storing his or her goods.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Remedies for Breach
of Sales Contract
The UCC prescribes specific remedies
for both the buyer and the seller when
there is a breach of a sales contract.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Seller’s Remedies
1. Cancel the contract.
2. Withhold delivery of goods.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Seller’s Remedies
3. Stop delivery of any goods that are
still in the possession of the carrier.
4. Resell any goods that have been
rightfully withheld.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Seller’s Remedies
5. Bring a claim against the buyer for
the difference between the agreed
price and the market price or for the
price of any goods that were
accepted by the buyer.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Buyer’s Remedies
1. Cancel the contract.
2. Bring a claim against the seller for
the return of any money that has
been paid or for the difference
between the agreed price and the
market price.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Buyer’s Remedies
3. Refuse to accept the goods if they
do not conform to the contract.
4. Cover the sale.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Buyer’s Remedies
5. Give notice to the seller that the
goods have been accepted but that
they do not conform to the contract.
6. Revoke the acceptance and return
the goods.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Section 13.2 Assessment
Reviewing What You Learned
1. When does title pass from the seller
to the buyer in a sales contract?
When does the risk of loss pass?
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Section 13.2 Assessment
Reviewing What You Learned
Answer
Shipping contract: title and risk of loss
pass to buyer when goods are given to
carrier. Destination contract: title and risk of
loss pass to buyer when goods reach
destination.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Section 13.2 Assessment
Reviewing What You Learned
Answer
If buyer must pick up goods, title passes
when contract is made. If seller is a
merchant, risk of loss passes when buyer
receives goods. If not, risk passes to buyer
when seller tenders goods.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Section 13.2 Assessment
Reviewing What You Learned
2. What remedies are available when
a seller breaches a sales contract?
When a buyer breaches a contract?
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Section 13.2 Assessment
Reviewing What You Learned
Answer
When buyer breaches, seller may cancel
contract, withhold delivery, stop delivery,
resell goods and bring claim for difference
between agreed prices and market price or
bring claim for any goods that were
accepted by buyer.
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Section 13.2 Assessment
Reviewing What You Learned
Answer
When seller breaches, buyer may cancel
contract, bring claim against seller for
return of money paid or for difference
between agreed and market price,
Understanding Business and Personal Law
Contracts for the Sale of Goods
Section 13.2 Ownership and Risk of Loss
in Sales or Goods
Section 13.2 Assessment
Reviewing What You Learned
Answer
reject nonconforming goods, cover the
sale, accept nonconforming goods and
bring claim against seller if no adjustment
is made, or revoke acceptance.
Understanding Business and Personal Law
Contracts for the Sale of Goods
End of Section 13.2
Ownership and Risk of Loss in Sales
or Goods