Chapter 19 Performance of Sales and Lease Contracts

1. Chapter 19 Performance of Sales and Lease Contracts © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

2. Identification of Goods • Distinguishing goods named in contract from seller’s or lessor’s other goods • Seller or lessor retains risk of loss until goods identified • Title cannot pass until goods identified © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

3. Identification of Goods (continued) • Parties can agree to time and manner of identification • Existing goods are identified by naming specific goods • Future goods are identified when born, planted, shipped. Marked or designated © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

4. Passage of Title • The passing of title from a seller to a buyer for a price. • Title cannot be passed until goods exist and have been identified. • Title passes upon terms agreed to in contract. • If no terms are stated, title passes when delivery is completed. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

5. Shipment and Destination Contracts • Shipment Contract • Seller should make proper shipping arrangements • Deliver the goods into the carrier’s hands • Destination Contract • Seller delivers goods either to buyer’s place of business or another destination specified in sales contract © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

6. Shipment and Destination Contracts (continued) • Delivery of Goods without Moving Them • Buyer is required to pick up goods from seller • May require document of title or bill of lading © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

7. Risk of Loss: No Breach of Sales Contract • Carrier Cases: Movement of Goods • Shipment Contracts - Risk of loss passes to buyer when seller delivers the conforming goods to the carrier • Destination Contracts - Risk of loss passes to buyer when seller delivers the conforming goods to the specified destination © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

8. Risk of Loss: No Breach of Sales Contract • Noncarrier Cases: No Movement of Goods • Merchant Seller - Risk of loss passes to buyer when buyer receives the goods • Nonmerchant Seller - Risk of loss passes to buyer upon ‘tender of delivery’ of the goods: - When seller places or holds the goods available for the buyer to take delivery and notifies the buyer of this fact © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

9. Risk of Loss: No Breach of Sales Contract (continued) • Goods in Possession of a Bailee - Risk of loss passes to buyer when: - buyer receives a negotiable document of title covering the goods - The Bailee acknowledges the buyer’s right to possession of the goods or, - The buyer receives a nonnegotiable document of title or other written direction to deliver and has a reasonable time to present the direction to the bailee and demand the goods © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

10. Risk of Loss: Conditional Sales • Sale on Approval - There is no sale unless and until the buyer accepts the goods • Sale on Return -Sale is considered final only if the buyer fails to returnthe goods within the specified time © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

11. Risk of Loss: Conditional Sales • Consignment - Seller (consignor) delivers goods to buyer (consignee) to sell - Consignor is paid a fee if he/she sells the goods on behalf of the consignor © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

12. Risk of Loss: Breach of Sales Contract • Seller in Breach - If seller delivers nonconforming goods to the buyer • Buyer in Breach - If buyer refuses to take delivery of conforming goods, repudiates the contract or otherwise breaches the contract © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

13. Risk of Loss: Lease Contracts • Risk of loss is retained by the lessor. In case of finance lease, risk of loss passes to the lessee • If a tender of delivery of goods fails to conform to the lease contract, the risk of loss remains with the lessor or supplier until cure or acceptance © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

14. Sales by Nonowners • Void Title and Lease: Stolen Goods - Purchase of lease of stolen goods do not result in transfer of title of the goods and the lessee does not acquire any leasehold interest in the goods. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

15. Sales by Nonowners (continued) • Voidable Title - Purchaser has voidable title if goods were obtained by fraud, if a check is later dishonored, or if he/she impersonates another person © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

16. Sales by Nonowners (continued) • Entrustment Rule • If an owner entrusts the possession of his/her goods to a merchant who deals in goods of that kind, the merchant has the power to transfer all rights/title in the goods to a buyer in the ordinary course of business. • The real owner cannot reclaim the goods from this buyer © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman