Law CH 22: Title, Risk of Loss, and Insurable Interest

The party with “_______” to the goods has ownership

good title

does title = possession?

no

Martin V. Melland’s Inc.

• israel martin bought a new haymoving machine from mellands. traded in his truck and old machine. he transferred the title of his old equipment to melland, but was allowed to keep them during the time it would take for the new equipment to be ready. The old equipment caught on fire and was destroyed during this time. Martin demanded his new equipment.

• establishes that even if title transfers, risk may not.

• court determined risk of loss had not transferred to Melland

• Both parties could claim an insurable interest, but loss fell on Martin.

• Tender of delivery would have been sufficient to transfer risk of loss. [ tender of delivery for merchants, and actual delivery for non-merchants

good title

tile that is acquired from someone who already owns the goods free and clear

void title

knowingly or unknowingly purchasing stolen goods = void title

voidable title

when the contract between original parties would be void but the goods have already been sold to a third party. OR if:

• the buyer has deceived the seller regarding true identity

• the buyer has written a bad check for the goods

• the buyer has committed criminal fraud in securing the goods

• the buyer and seller agreed that title would not pass until some later time

• the buyer is a minor

If someone with voidable title sells the goods to a good-faith third party, what kind of title do they receive?

good title

Landshire Food Service v. Coghill

• Coghill sold his rolls royce to daniel bellman who paid him with a forged check. He transferred the title.

• Bellman then turned around and advertised the sale of the car and sold it to barry hyken, transferring to hyken.

• Coghill reports the car missing and stolen. The police seized the car from Hyken.

• Coghill and Hyke now both claim title.

Good title was transferred to Hyken.

Deweldon, LTD v. Mckean

Felix DeWeldon, well-known artist, sold 3 paintings to Mckean. DeWeldon declared bankruptcy prior and DeWeldon LTD purchased all of his property. Then DeWeldon LTD entrusted the paintings to Felix DeWeldon. He sells them to Mckean.

Mckean took good title to the paintings because Felix is a merchant.

If you buy a couch from a furniture store and it gets destroyed in transit, who bears the loss?

the seller because they are a merchant. Title is transferred but not risk of loss.

4 different issues under the concept of title

1. ownership: when does title actually transfer?

2. encumbrance: the right to encumber goods as a collateral for a debt depends on who is holding title

3. Loss: When risk of loss is transferred

4. Insurable interest: the right to insure the goods

National Compressor Corp v. Carrow and McGee

Carrow and Mcgee sells compressor to Davis who sells to National Compressor. Title twasnt to pass to NC until it was removed for Carrow and Mcgees property. Prior to move, a fire destroyed the compres. NC already paid.

Issue: Did NC have any kind of insurable interest?

Ruling: Yes, NC had insurable interest, giving it standing to sue.

identification of goods: the specific good was identified in the contract

insurable interest demonstrates sufficient legal stake in property to bring a lawsuit if that property is damaged or destroyed.

simple delivery contract

when goods are transferred immediately or some time later by the seller’s delivery

Common-carrier delivery contract

when goods are delivered to the buyer via a common carrier, like a trucking line

Goods-in-bailment contract

when the purchased goods are in some kind of storage under the control of a third party

Conditional sales contract

when sale is contingent on something

Pileri Industries Inc v Consolidated Industries

Pileri industries shipped goods via a common carrier to Consolidated Industries Inc. Goods were lost prior to actual delivery. Pileri claims its a shipping contract and thus the risk of loss hadpassed. Consolidated Industries claims it was a destination contract and that the risk of loss remained with Pileri. Ruled in favor of Consolidation Industries. Dissenting opinion:

Where no such term is employed and there has been no specific agreement otherwise, the contract for the transportation of goods by carrier will be presumed to be a shipping contract.