978-1285770178 Lecture Note BL ComLaw 1e IM-Ch17 Part 3

subject Type Homework Help
subject Pages 13
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subject Authors Roger LeRoy Miller

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18 INSTRUCTOR’S MANUAL FOR BUSINESS LAW: COMMERCIAL LAW FOR ACCOUNTANTS
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whole or in part.
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CHAPTER 17: TITLE, RISK, AND INSURABLE INTEREST 21
the defect is cured.
 DEBATE THIS 
The distinction between shipment and destination contracts for the purpose of deciding who will
bear the risk of loss should be eliminated in favor of a rule that always requires the buyer to buy
insurance for the goods being shipped. One thing is certain if this rule was put into effect and that is that
courts would no longer have to grabble with trying to determine whether the movement of purchased goods
involved a shipment or a destination contract. Commerce would become more certain and more fluid. Buyers
would always know that they are responsible for buying insurance on any goods that they have bought, no
matter who is responsible for the shipment and where the goods are to be delivered.
If buyers always had to buy insurance to cover losses during the shipment of goods they had purchased,
buyers would sometimes pay too much for insurance because sellers might, for example, use carriers with
poor accident records. Moreover, buyers might not be able to insure purchased goods if those buyers had no
control over how, when, and where the good were to be shipped.

EXAMPREP
 ISSUE SPOTTERS 
1. Adams Textiles in Kansas City sells certain fabrics to Silk & Satin Stores in Oklahoma City.
Adams packs the fabric and ships it by rail to Silk. While the fabric is in transit across Kansas, a
tornado derails the train and shreds and scatters the fabric across miles of cornfields. What are the
consequences if Silk bore the risk? If Adams bore the risk? Buyers and sellers can have an insurable
interest in identical goods at the same time. If the buyer (Silk & Satin) bore the risk, it must pay and seek
reimbursement from its insurance company. If the seller (Adams Textiles) bore the risk, it must seek
reimbursement from its insurance company and may still have an obligation to deliver the identified goods
(the fabric) to Silk & Satin.
2. Karlin takes her television set for repair to Orken, a merchant who sells new and used television
sets. By accident, one of Orken’s employees sells the set to Grady, an innocent purchaser-customer,
who takes possession. Karlin wants her set back from Grady. If Karlin files a lawsuit, will she prevail?
Why or why not? When a person “entrusts” goods to a merchant (a person who deals in goods of that kind),
the merchant has the power to transfer a good title to any purchaser who acquires the goods in the ordinary
course of business. Karlin entrusted her set to merchant Orken. Orken deals in goods of that kind. Therefore,
Orken could pass good title to the set sold to a customer (Grady) because Grady purchased the goods in the
ordinary course of business. Consequently, Karlin cannot get the set back from Grady. (But the merchant is li-
able to the true owner, Karlin, for the equivalent value of the set).

page-pf5
whole or in part.
page-pf6
whole or in part.
page-pf7
whole or in part.
whole or in part.
CHAPTER 17: TITLE, RISK, AND INSURABLE INTEREST 21
the defect is cured.
 DEBATE THIS 
The distinction between shipment and destination contracts for the purpose of deciding who will
bear the risk of loss should be eliminated in favor of a rule that always requires the buyer to buy
insurance for the goods being shipped. One thing is certain if this rule was put into effect and that is that
courts would no longer have to grabble with trying to determine whether the movement of purchased goods
involved a shipment or a destination contract. Commerce would become more certain and more fluid. Buyers
would always know that they are responsible for buying insurance on any goods that they have bought, no
matter who is responsible for the shipment and where the goods are to be delivered.
If buyers always had to buy insurance to cover losses during the shipment of goods they had purchased,
buyers would sometimes pay too much for insurance because sellers might, for example, use carriers with
poor accident records. Moreover, buyers might not be able to insure purchased goods if those buyers had no
control over how, when, and where the good were to be shipped.

EXAMPREP
 ISSUE SPOTTERS 
1. Adams Textiles in Kansas City sells certain fabrics to Silk & Satin Stores in Oklahoma City.
Adams packs the fabric and ships it by rail to Silk. While the fabric is in transit across Kansas, a
tornado derails the train and shreds and scatters the fabric across miles of cornfields. What are the
consequences if Silk bore the risk? If Adams bore the risk? Buyers and sellers can have an insurable
interest in identical goods at the same time. If the buyer (Silk & Satin) bore the risk, it must pay and seek
reimbursement from its insurance company. If the seller (Adams Textiles) bore the risk, it must seek
reimbursement from its insurance company and may still have an obligation to deliver the identified goods
(the fabric) to Silk & Satin.
2. Karlin takes her television set for repair to Orken, a merchant who sells new and used television
sets. By accident, one of Orken’s employees sells the set to Grady, an innocent purchaser-customer,
who takes possession. Karlin wants her set back from Grady. If Karlin files a lawsuit, will she prevail?
Why or why not? When a person “entrusts” goods to a merchant (a person who deals in goods of that kind),
the merchant has the power to transfer a good title to any purchaser who acquires the goods in the ordinary
course of business. Karlin entrusted her set to merchant Orken. Orken deals in goods of that kind. Therefore,
Orken could pass good title to the set sold to a customer (Grady) because Grady purchased the goods in the
ordinary course of business. Consequently, Karlin cannot get the set back from Grady. (But the merchant is li-
able to the true owner, Karlin, for the equivalent value of the set).

whole or in part.
whole or in part.
whole or in part.

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