UCC Insurable Interest and Risk of Loss

Question 1

UCC Concept of Title

Insurable Interest

Seller’s + Buyer’s Interests

Answer 1

Under the UCC, if the seller has title or a security interest in the goods, then seller has an insurable interest.

Under the UCC, if the goods have been identified under teh contract, then buyer has an insurable interest.

1. Identified - occurs at time of contract formation if the specific goods already in existence.
2. Unborn Animals - if sale of unborn animals to be born within one year, then identification at conception.
3. Crop - if sale of crop to be harvested within one year, then identification at planting.
4. Goods Generally - identifications occurs when goods designated by seller as those to be delivered under the contract

Question 2

UCC Concept of Title

Risk of Loss

General

Answer 2

* Risk of Loss - shift of responsibilitgy of loss or damage to property from seller to buyer

a. Non-Carrier

Under the UCC, if the seller is not a merchant and the goods are not shipped by carrier, then the risk of loss passes to buyer after the seller has tendered the goods.

Under the UCC, if the seller is a merchant and the goods are not shipped by carrier, then the risk of loss passes to buyer when buyer takes physical possession of the goods.

b. Carrier (Shipment)

Under the UCC, if the contract is a shipment contract, then risk of loss shifts to buyer when seller gives possession of the goods to the carrier, makes an appropriate conttract for shipment, and notifies the buyer that the goods have been shipped.

c. Carrier (Destination)

Under the UCC, if the contract is a destination contract, then the risk of loss shifts to buyer when seller tenders the goods to the buyer at the destination.

d. Goods Held By Bailee

Under the UCC, if the goods are held by a bailee, then the risk of loss psses to the buyer on the buyer’s receipt of a negotiable document of title covering the goods.

Question 3

UCC Concept of Title

Risk of Loss

Exceptions

Answer 3

Under the UCC, if a seller tenders nonconforming goods, then the risk of loss does not pass to the buyer UNLESS i) any defect is cured or ii) buyer accepts the goods despite the nonconformity.

Under the UCC, if a seller justifably revokes acceptance, then the risk of loss remains with the seller BUT only to the extent the buyer’s insurance does not cover the loss.

Under the UCC, if buyer repudiates or breaches before the risk of loss has passed to him, then the seller may treat the risk of loss as being on the buyer for a commercially reasonable time.

Question 4

Passage of Title

Carrier + Noncarrier

Answer 4

1. Carrier Cases

Under the UCC, if the contract is a destination contract, then title passes when the goods are tendered at the destination. IN ALL OTHER CASES, title passes at the place and time of shipment.

2. Non-carrier Cases

Under the UCC, if the seller must deliver a document of title to complete the sale, then title passes upon delivery of that document.