Delivery Terms and Title Issues

• Author: autor
• Pages: 135-152

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Chapter 10. Delivery Terms and Title Issues

10.1. Delivery Terms.

10.1.1. Identification of Goods. UCC § 2-501 discusses the concept of “identification of

goods.” Recall that way back in Chapter 2, we saw that § 2-105 defines goods as things which

are movable “at the time of identification to the contract for sale.” It is at this point in time at

which the buyer acquires certain property rights in the goods, but not necessarily title to or

possession of the goods. The buyer might, for example, have an insurable interest in the goods on

identification.

This concept is also important in other UCC provisions to determine the rights of sellers and

buyers in the goods. For example:

 Replevin of goods in the seller’s hands under §§ 2-502 and 2-716(3)

 Destruction of goods in the seller’s hands under § 2-613

 Breach by buyer and seller is unable to sell the goods under § 2-709

 Breach by buyer and seller can identify goods in his control at the time of breach under

§ 2-704

10.1.1.1. Establishing the point in time at which “identification of the goods” occurs

depends, in part, upon the type of goods which are the subject matter of the contract. For

example, the subject of the sale may be:

10.1.1.1.1. A particular thing in existence at the time the contract is formed. For

example, at the Charlie Russell Art Auction I walk into an artist’s room and point

out a particular painting I want to purchase.

10.1.1.1.2. The item may be part of a larger stock of similar items held at some

other location by the seller. For example, Bighorn Sports may have a canoe

dangling from the ceiling as part of its sales display, and I want to buy that model

of canoe. I won’t actually buy the one dangling from the ceiling; the store has a

stock of the canoes in its warehouse a few blocks away.

10.1.1.1.3. The goods may not even be in existence yet. For example, I walk into a

jewelry store and ask the jeweler to design and make a ring for me.

10.1.1.1.4. The goods may be crops not yet planted or unborn animals. For

example, Anheuser-Busch may enter into an agreement in September 2015 for a

farmer’s 2016 barley crop which has not yet been planted.

10.1.1.2. The process of designating a particular good as the good “to which the contract

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refers” is “identification.” Identification gives the buyer “a special property interest and

an insurable interest” in the goods, but not the full bundle of rights that goes with full

ownership of the goods.

10.1.2. When Does Identification Occur? UCC § 2-501(1)(a)-(c) provides the framework for

determining when identification occurs. These sections apply only in the absence of an

agreement otherwise.

10.1.2.1. The first rule: look at the agreement of the parties to determine if it specifies

when identification of the goods occurs. For example, if an artist has made 50 numbered

prints of a particular piece of art, the contract may specify a particular methodology for

determining which of the 50 prints will be delivered to the buyer. Also remember that

usage of trade, course of dealing and course of performance may establish some of the

terms of the agreement. For example, if it is customary in the trade to provide the lowest

available numbered print, then identification of the print is established by usage of trade.

10.1.2.2. Absent a contractual provision otherwise, § 2-501(1)(a) states that in the context

of a contract for the sale of goods already existing and identified, identification occurs

when the contract is made.

10.1.2.2.1. At the Charlie Russell Art Auction, when a buyer walks into an artist’s

room and points out a particular painting and offers to purchase it for $150, and

the artist accepts that offer, the identification of the goods occurs when the artist

accepts the offer. At that point in time, the buyer acquires certain rights in the

painting, even if the buyer does not take possession of the painting immediately.

10.1.2.2.2. A buyer walks into a drugstore, picks out a can of hairspray, and takes

it to the check-out stand. When the check-out person accepts the buyer’s money,

the contract is formed and identification of the goods occurs at the cash register.

10.1.2.3. What about the situation where I see a canoe dangling from the ceiling in the

store, and I tell the salesman I want to buy a canoe of that model? When is the particular

canoe that is the subject of the contract identified? Is it when the stocker pulls out one of

the several canoes of that model in storage? Is it when the stocker loads it on top of my

car? Is it when I pay the purchase price at the cash register?

10.1.2.3.1. Note that § 2-501(1)(b) refers to identification “when goods are

shipped, marked or otherwise designated by the seller.” However, § 2-501(1)(b)

only applies to future goods, and thus it is not applicable to this situation, where

goods are in existence (see § 2-105(2) for the definition of “future goods”).