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CHAPTER 18
TRANSFER OF TITLE AND RISK IN SALES CONTRACTS
Answers to Learning Objectives
1. It is important to determine when ownership and risk of loss pass in order to know whether creditors
of the buyer or seller have any right to seize the goods; whether the buyer, seller, or both have an
insurable interest in the goods; and who bears the loss if the goods are damaged.
Lesson Outline
1. Three types of problems may arise as a result of sales transactions:
a. Creditors of the buyer or seller may seize the goods.
b. The question may arise as to whether the buyer and/or seller have an insurable interest in the
goods.
4. The title to existing goods that are identified at the time of contracting and that are not to be
transported passes to the buyer at the time and place of contracting.
5. When negotiable documents represent existing goods identified at the time of contracting, the buyer
does not ordinarily acquire title until the documents are received.
6. Even if the seller marks future goods for the buyer, neither title nor risk of loss passes to the buyer
until some event, such as a shipment or delivery, occurs. When title and risk of loss pass upon
8. When goods are sold at auction, title to a lot passes when the auctioneer announces the auction is
completed as to that lot.
9. When good are sold f.o.b., the seller bears the risk and expense until the goods are delivered to the
f.o.b. point.
10. The CIGS incorporates Incoterms which could apply to an international sales contract if the parties
to the contract are from countries which have ratified it.
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14. There are certain instances when the law permits a greater title to be transferred than the seller
possesses. These include a sale by an entrustee; a consignment sale; an estoppel; and when
documents of title, recording and filing statutes, or a voidable title are involved.
Comments on Cases
(p. 200) The court pointed out that because the contracts were all destination contracts, Canfor had the
obligation to deliver the lumber. Tender of delivery entitled Canfor to payment and risk of loss
and title did not transfer until the lumber reached the point designated by Payless. In re Payless
Cashways, 306 B.R. 243 (Bankr. 8th Cir.)
(p. 202) If Bartlett had specified in the contract the land on which the corn was growing the corn would
have been identified. However since it just agreed to sell “corn” without specifying which
corn, it was unidentified. ConAgra, Inc. v. Bartlett Partnership, 540 N.W.2d 333 (Neb.)
Answers to Questions
(Page 207)
1. When there is a question about who the owner of goods is creditors of either the seller or buyer may
seize them on the theory that they belong to the seller or buyer. The question of ownership is also
important in connection with resale by the buyer, liability for or computation of certain kinds of
5. a. Title and risk of loss pass to the buyer of future goods when shipment or delivery occurs.
b. A buyer has a property interest in future goods and the right to insure them once the seller
marks, tags, labels, or otherwise indicates to the shipping department or the seller that certain goods
are the ones to be sent or delivered to the buyer under the contract.
Answers to Case Problems
(Page 207)
1. No. The court said that even though the consignment arrangement allowed Jackson to retrieve the
paper from Stonewall after the receivership and so circumvent the claims of creditors, Jackson was
perfectly within its rights to supply the paper on consignment. Best Cartage, Inc. v. Stonewall
Packaging, LLC, 727 S.E.2d 291 (N.C. Ct. App.)
(Fla. Dist. Ct. App.)
5. No. West had voluntarily transferred the car to Wilson and Roberts was a good faith purchaser of
the car for value. It did not matter that Wilson’s purchase was fraudulent. West v. Roberts, 143
P.3d 1037 (Colo.)
6. Yes. While Thompson made more purchase than sales he did make some sales. The court stated
that since Thomson was acting as a middleman in the cattle trade, the question was whether he was
regularly engaged in cattle transactions rather than just sales. Hammer v. Thompson, 129 P.3d 609
(Kan. Ct. App.)
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