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Business Law_ Ch 14 - sheffield.k12.oh.us

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Business Law: Ch 14
Ownership and Risk of Loss in Sales
Who May Transfer Ownership?
Only the true owner of goods may legally transfer ownership of those goodsExceptions:Person’s authorized to do so may transfer another’s titleBuyers in a sale induced by the fraud of the seller may transfer better title than they have to an innocent third-party purchaser
Who May Transfer Ownership?
Exceptions:Holders of negotiable documents of title may transfer better title than they haveMerchants who keep possession of goods they have sold may transfer better title then they have
Who May Transfer Ownership?
Authorized PersonsPerson may sell what they do not own if the owner has authorized then to do soSalespeopleAuctioneers and Sheriffs under court order or when empowered by statute, stolen or repossessed goods or foreclosed property
Who May Transfer Ownership?
Buyers in a Sale Induced FraudIf an owner of goods is induced by fraud to sell the goods, the transfer of title is voidable by the sellerUpon discovering the fraud, the seller may cancel the contracts and recover the goods unless an innocent third party already has given value and acquired rights in themGood Faith Purchaser– Innocent Third Party
Who May Transfer Ownership?
Buyers in a Sale Induced FraudBuyer with voidable title resulting from a sale induced by fraud may transfer valid title to good faith purchaserTo act in good faith, the purchaser must not have reason to suspect the person who has the voidable titleA person who buys stolen goods from a thief receives possession, but no title
Who May Transfer Ownership?
Holders of Negotiable Documents of TitleIn business, certain documents are used as a substitute for title to goodsWarehouse receipt– issued by public warehouses when goods are stored thereBills of lading and Air bills– issued by common carriers when goods are shipped by them
Who May Transfer Ownership?
Holders of Negotiable Documents of TitleIn business, certain documents are used as a substitute for title to goodsDocuments may be negotiable or nonnegotiableNegotiable– Goods are to be delivered to thebearer(Person in possession of the document, or to the order of a party named by the document)
Who May Transfer Ownership?
Holders of Negotiable Documents of TitleHolder– Person deemed to have title to the goodsMay transfer title of the goods by merely transferring the document
Who May Transfer Ownership?
Merchants with Possession of Sold GoodsBuyers will allow the merchant seller to temporarily retain possession of the goods after the saleIf the merchant resells and delivers these goods to a good faith purchases, the latter receives good titleThe merchant must replace the resold goods or be liable to the original owner
Requirements for Ownership Transfer
For ownership of goods to be transferred in a sale, the goods must be both existing and identicalExisting Goods– Physically in existence and owned by the sellerNeed not be in a fully assembled and immediately deliverable condition
Requirement for Ownership Transfer
Identical Goods– Existing goods that have been designated specifically as the subject matter of a particular sales contractThe identification of such goods may be done by the buyer, the seller, both, or my mutually agreed-upon third partyThe identified goods are marked, separated, or in some way made distinct from similar goods
Requirement for Ownership Transfer
Future Goods– Goods that are not both existing and identifiedAny contract for the sale of future goods is a contract to sell
Requirement for Ownership Transfer
Exception to the process of identificationFungible goods– Goods of homogeneous or essentially identical natureBy nature or trade usage, each unit is regarded as equal to every other unit
Requirement for Ownership Transfer
When Does Ownership Transfer?Common SituationsSeller delivers goods to their destinationTitle passes when the goods are tendered at their specified destinationTender of Delivery– Means that the seller places the proper goods are the buyers disposal and notifies the buyer so that delivery can be received
Requirement for Ownership Transfer
When Does Ownership Transfer?Common SituationsThe time, manner, and place for tender are determined by the agreement and the UCCWhen additional work is required – title does not pass until such work is completed
Requirement for Ownership Transfer
When Does Ownership Transfer?Common SituationsSeller ships, but does not deliver goods to their destinationTitle transfers to the buyer at the time and place of shipment (when possession is transferred to the carrier)
Requirement for Ownership Transfer
When Does Ownership Transfer?Common SituationsSeller delivers document of titleSeller tenders goods at place of sale
Ch 13 Test
Reminder that tomorrow, Tuesday, May 15, we will be taking the Ch 13 test. Please look at your handouts for the chapter.
14-1 Assessment
Complete the 14-1 Assessment Questions on page 246.Complete the 14-1 HandoutTurn in your answer with the handout
When Does Risk of Loss Transfer
If Seller Ships Goods by CarrierSeller is required to deliver goods to a particular destinationRisk of loss passes to the buyer at the destination, upon tender of deliveryTo place the goods at the buyers disposal or to give notice to the buyer that delivery can be receivedSeller not required to deliver goods to a particular destinationRisk of loss passes to the buyer when the goods are delivered to the carrier
When Does Risk of Loss Transfer
Commercial buyersFOB – means “free on board”Seller agrees to delivery the goods no further then destinationTitle and risk of loss transfers at that point
When Does Risk of Loss Transfer
Shipments from foreign countriesSeller quotes a CIF (cost, insurance, freight)Seller contracts for adequate insurance and for proper shipmentAdds these costs to the price or cost of the goodsRisk of loss transfers to the buyer when the seller delivers goods to the carrier
When Does Risk of Loss Transfer
If the goods are held by abaileeBailee– Temporary possession of another persons goods, holding them in trust for a specified purposeRisk of loss transfers to the buyerWhen the buyer receives a negotiable document of title covering the goods (warehouse receipts)When thebaileeacknowledges the buyers rights to possession of the goodsAfter the buyer receives a non-negotiable document of title or other written directions to abaileeto deliver goods
When Does Insurable Interest Transfers
Buyers obtain certain rights in goods at the time of their identification to a sales contract.One right isInsurable Interest– Gives the buyer the rights to buy insurance on the goodsNecessary because the buyer may lose money should be goods be destroyed and the buyer cannot find then elsewhere.
When Does Insurable Interest Transfers
In addition to the insurable interest, the buyer has the following rights:To inspect the identified goods at a reasonable hourTo compel delivery if the seller wrongfully withholds deliveryTo collect damages from third persons who take or injure the goods
Transfer of Rights and Risks in Specific Sales
Cash-and-Carry SalesThe buyers in a sales contract is a consumer who pays cash and takes immediate delivery, title passes to the buyer at the time of the transactionRisk of loss passes upon the buyer’s receipt of the goods from a merchant and on tender of goods by a casual seller
Transfer of Rights and Risks in Specific Sales
Cash-and-Carry SalesSeller may insist on payment in legal tenderChecks are commonly used but are not legal tender.Acceptance of checks by the seller is not considered payment until the check is paid at the bankAcceptance of the check does not affect the risk of loss
Transfer of Rights and Risks in Specific Sales
Sales on CreditSale that, by agreement of the parties, calls for payment for the goods at a later date.Ownership and risk of loss transfers even though payment is delayed.
Transfer of Rights and Risks in Specific Sales
COD SalesCOD– Collect on DeliveryCarrier collects the price and transportation charges upon delivery and transmits this amount to the seller.If buyer does not pay, the goods are not deliveredBuyer loses right to inspect the goods before paymentOwnership and risk of loss transfers as though there was not provisions
Transfer of Rights and Risks in Specific Sales
Sale or ReturnCompleted sale in which the buyer has an option of returning the goodsWhen goods are delivered to a merchant buyer, the ownership and risk of losspassesto the buyer upon deliveryIf the buyer returns the goods (original condition) within the fixed or a reasonable amount of time, ownership and risk of loss passes back to the sellerNot the same as a return privilege granted to customers of retail stores
Transfer of Rights and Risks in Specific Sales
Sale on ApprovalGoods delivered to the buyer “on trial” or “on satisfaction”Ownership and risk of loss does not pass until the prospective buyer approves the goodsWhen in possession of the goods, the prospective buyer is liable for any damages to them caused by their negligence
Transfer of Rights and Risks in Specific Sales
Sale of an Undivided InterestA person sells a fractional interest in a single good or in a number of goods that are to remain togetherOwnership and risk of loss pass to each buyer at the time of the sale of each undivided interest
Transfer of Rights and Risks in Specific Sales
AuctionPublic sale to the highest bidderAuctioneer accepts the bid on behalf of the owner of the goodsOwnership passes to the buyer at that timeRisk of loss passes when payment is receivedAuction sales “With Reserve” – Auctioneer may withdrawal the good at anytime before completion“Without Reserve” – Item must be sold to the highest bidder
Transfer of Rights and Risks in Specific Sales
Bulk TransferTransfer of all or a major part of the goods of a business in one unit at a timeUCC requires that notification to the sellers creditors is made before the bulk transfer is madeThe buyer is required to notify those creditors of the forthcoming transfer of ownership and to pay their claims or to make other arrangement with them
14-2 Assessment and Handouts
14-2 Assessment on page 25314-2 Handout

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Business Law_ Ch 14 - sheffield.k12.oh.us