978-1285770178 Solution Manual BL ComLaw 1e SM-Ch17

in whole or in part.

4 UNIT FOUR: DOMESTIC AND INTERNATIONAL SALES AND LEASE CONTRACTS

in whole or in part.

ANSWERS TO QUESTIONS IN THE REVIEWING FEATURE

AT THE END OF THE CHAPTER

1A. Identification

Identification takes place when specific goods are designated as the subject matter of a

contract. If a sale involves crops that are to be harvested within twelve months (or during the

next harvest season occurring after contracting, whichever is longer), identification takes place

when the crops are planted or begin to grow. Identification is significant because it gives the

buyer or lessee the right to insure (or to have an insurable interest in) the goods and the right to

F.O.B. place is the place from which the goods are shipped—in this case Willow Glen field—the

contract is a shipment contract and the title passes to the buyer at the time of shipment.

3A. Risk of loss

If a seller is required or authorized to ship goods by carrier but is not required to deliver them to

deliver the FreshBest broccoli to Falcon Trucking, after which the risk of loss would pass to

Mendoza. If Willow Glen delivered the wrong grade of broccoli to Falcon, Willow Glen failed to

perform its obligation and breached the contract. Consequently, Willow Glen would bear the

loss, at least until the defect is cured.

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

CHAPTER 17: TITLE, RISK, AND INSURABLE INTEREST 5

in whole or in part.

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.

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 in–

surance 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)

“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

17-1A. Risk of loss

(Chapter 17—Page 331)

Neither of Pride’s contentions is correct. Before title and risk of loss can pass from the seller to

the buyer, the goods must be in existence and identified to the contract. Although the Greenie

peas were in existence, until the 1,000 cases were separated from Lot A, the peas were not

in whole or in part.

accident. In the actual case on which this problem is based, the court concluded that G.E. was

shipment of pharmaceuticals for Ethicon, Inc., the seller—were jointly liable for the loss. In a

destination contract, the risk of loss passes to the buyer when the goods are tendered at the

specified destination [UCC 2–509(1)(b)].

In this problem, Ethicon contracted with UPS to transport pharmaceuticals. Under a

contract with UPS’s subsidiary, WDS, the drivers were provided by IMSCO. During a shipment

carriers are ultimately liable.

In the actual case on which this problem is based, Ethicon’s insurer filed a suit in a

federal district court against UPS and the others. The court held that under a contractual

limitation-of-liability clause, UPS and WDS were liable for only $250,000 in damages. But

IMSCO’s liability was not restricted because its contract with WDS did not include a limitation–of–

thus Roberts, who obtained the car for value and in good faith, retained ownership of it. On

West’s appeal, a state intermediate appellate court upheld this decision, and on West’s further

appeal, the Colorado Supreme Court affirmed the lower court’s ruling.

The state supreme court concluded that UCC 2–403(1) applies to transactions, such as

those in this case, that do not involve merchants, “[b]ecause subsection 2-403(1) does not refer

obtained contact information for Wilson. Hence, we conclude that West’s transfer of the Corvette

and its title in exchange for a cashier’s check, even though a worthless counterfeit, constitutes a

voluntary transaction.” Under UCC 2–403(1) “when goods have been delivered under a

CHAPTER 17: TITLE, RISK, AND INSURABLE INTEREST 9

in whole or in part.

transaction of purchase, the purchaser has such power to transfer good title to a good faith

purchaser for value even though the delivery was in exchange for a check which is later

dishonored, or the delivery was procured through fraud.”

Here, “Wilson obtained voidable title to the car despite the fact that he paid with a

fraudulent cashier’s check. As such, Roberts, a subsequent good faith purchaser for value,

obtained good title to the Corvette.”

(b) The Colorado Supreme Court acknowledged that the rule under UCC 2–403 that

applied in this case can result in a loss to an innocent party. “But a determination that West is

person, the loss must fall on the party who by his conduct created the circumstances which

enabled the third party to perpetuate the wrong. The original seller is better positioned to take

precautions to prevent loss than a later purchaser. For example, West could have insisted upon

cash or ensured that the check would clear before relinquishing the car and title. On the other

hand, to place the onus on the good faith purchaser to fully investigate every purchase in order

Court of Appeals of Washington, 2013.

2013 WL 663726

(a) Issue: What document was at the center of this case? The document at the center

of this case was the contract of sale for a horse named Toby between Tammy Herring and

Stacy and Gregory Bowman. The agreement was titled “Bill of Sale—Purchase Agreement,” and

between the parties. If the seller is a merchant, risk involving the goods held by the seller

passes to the buyer when the buyer actually takes physical possession of the goods.

In this case, the risk passed from Bowman to Herring at the time of the sale, according to

the terms and statements in the contract between the parties. For example, although the

Bowmans would not provide Toby’s registration papers to Herring until she paid in full, the