CHAPTER 21: TRANSFER OF TITLE
AND RISK OF LOSS
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TOPICS COVERED CHAPTER 21:
TRANSFER OF TITLE AND RISK OF LOSS
A. Transfer of Title.
B. Risk of Loss.
C. Bulk Sales.
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TRANSFER OF TITLE
 Transfer of title is fundamental to a
sale of goods.
 But title cannot pass to a buyer until
the goods have been identified
according to contract terms.
 Title does not pass in a lease.
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TRANSFER OF TITLE
 Identification is a designation of
specific goods as goods to which a
contract of sale refers.
• Security Interest – an interest in personal
property or fixtures that ensures
payment or performance of an
obligation. 
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TRANSFER OF TITLE
 Identification.
• Insurable Interest – buyer obtains an
insurable interest and specific remedies
in the goods by identification of existing
goods as goods to which the contract of
sale refers.
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TRANSFER OF TITLE
 Passage of Title—title passes when
the parties intend it to pass; when the
parties do not specifically agree, the
UCC provides rules to determine
when title passes. 
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TRANSFER OF TITLE
 Passage of Title.
• Physical Movement of the Goods – when
delivery is to be made by moving the
goods, title passes at the time and place
where the seller completes his
performance with reference to delivery.
• Shipment Contract.
• Destination Contract.
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TRANSFER OF TITLE
 Passage of Title.
• No Movement of Goods. Unless agreed
otherwise, title passes when goods are
identified and:
• (1) upon delivery of a document of title, or
• (2) at the time and place of contracting.
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TRANSFER OF TITLE
 Power to Transfer Title.
• The purchaser of goods obtains such
title as her transferor either has or had
the power to transfer. To encourage and
secure good faith acquisitions of goods,
it is necessary to protect third parties in
certain circumstances. 
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TRANSFER OF TITLE
 Power to Transfer Title.
• Void Title – no title can be transferred.
• Voidable Title – the good faith purchaser
acquires good title. 
• ROBINSON V. DURHAM (1988).
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VOID TITLE
Transferor
A
Transferee
voidable transfer of goods
B
goods
$
C
Good faith purchaser
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VOIDABLE TITLE
Transferor
A
Transferee
void transfer of goods
B
goods
$
C
Good faith purchaser
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
IDENTIFICATION
 Power to Transfer Title.
• Entrusting Goods to a Merchant –
buyers in the ordinary course of business
acquire good title when buying from
merchants.
• HEINRICH V. TITUS-WILL SALES, INC. (1994).
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RISK OF LOSS
 Definition – allocation of loss
between seller & buyer where goods
are damaged, destroyed, or lost
without the fault of either party. 
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RISK OF LOSS
 Risk of Loss Where There Is a Breach.
• Breach by the Seller – if the seller ships
to the buyer goods that do not conform,
the risk of loss remains on the seller
until the buyer has accepted the goods
or until seller has remedied the
defect.
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RISK OF LOSS
 Risk of Loss Where There Is a Breach.
• Breach by the Buyer – the seller may
treat the risk of loss as resting on the
buyer for a commercially reasonable
time to the extent of any deficiency in
the seller's effective insurance coverage.
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RISK OF LOSS
 Risk of Loss in Absence of a Breach.
• Agreement of the Parties – the parties
may by agreement allocate the risk of
loss.
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RISK OF LOSS
 Risk of Loss in Absence of a Breach.
• Trial Sales.
• If the goods are primarily for buyer's use,
transaction is a sale on approval (risk of
loss remains with the seller until
“approval” or acceptance of the goods by
the buyer). 
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RISK OF LOSS
 Risk of Loss in Absence of a Breach.
• Trial Sales.
• Consignment: If the goods are primarily
for resale, it is a sale or return (the risk of
loss is on the consignee until she returns
the goods).
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RISK OF LOSS
 Risk of Loss in Absence of a Breach.
• Contracts Involving Carriers – seller bears the
risk of loss and expense until the goods are
delivered to the carrier for shipment; in
destination contracts, the seller bears the
risk of loss and expense until tender of the
goods at a particular destination.
• WINDOWS, INC. V. JORDAN PANEL SYSTEMS, CORP.
(1999).
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RISK OF LOSS
 Risk of Loss in Absence of a Breach.
• Goods in Possession of Bailee: depends on
contract and when title passes to bailee.
• All Other Sales – for merchant seller, risk of
loss passes to buyer on the buyer's receipt of
the goods; for nonmerchant seller, risk of loss
passes to buyer upon tender of goods. 
• MARTIN V. MELLANDS, INC. (1979).
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BULK SALES
 Definition – transfer, not in the course
of the transferor's business, of a major
part of his inventory.
 Requirements of Article 6 – transfer is
ineffective against any creditor of the
transferor, unless certain requirements
are met.
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