1. Be able to identify the general principles of personal property ownership.

a. Discuss the nature of personal property

b. Explain the ownership issues for personal property

c. Define "gifts" and how they are made

d. Cover the ownership rights with respect to lost property

e. Define escheat

f. Discuss ownership issues and transfer of personal property

g. Define tenancy in common

h. Discuss joint tenancies

i. Cover tenancy by entirety

j. Explain community property rights

2. Be able to identify the general characteristics of bailments.

a. Define bailment

b. List the elements of a bailment

c. Describe the various types of bailments

d. Distinguish a bailment from a lease

e. List the duties of the bailee

f. List the duties of the bailor

g. List the rights of the bailor

h. Describe the liability of the bailment parties to third parties

Personal property is property that is movable or intangible such as rights in inventions, trademarks and writings.

Title to personal property can be acquired by gift. To constitute a valid gift, there must be the intent to make a gift and either actual or constructive delivery. Gifts causa mortis are gifts in contemplation of death and are not final unless the party dies.

Title to personal property can also be transferred through the finding of lost property with certain statutory exceptions for holding periods before title passes to the finder. Title to abandoned personal property can also be transferred if the owner relinquishes possession with the intent to abandon. Title to personal property can escheat to the state if no one steps forward for unclaimed property.

Title to personal property can be held by more than one person with various interests and rights. The forms of multiple ownership are tenancy in common, joint tenancy, tenancy by entirety and community property. There are various requirements for creation of these interests.

A bailment is the temporary transfer of possession of personal property from one party to another. The bailor is the party who owns the property or transfers possession and the bailee is the party who accepts possession.

A bailment exists when there is the intent to create a bailment, an agreement for the bailment and a transfer of possession. The transfer occurs by delivery and acceptance of the personal property.

There are several forms of bailments. An extraordinary bailment is one in which the law imposes a higher duty such as the strict liability of a common carrier. Ordinary bailments are those in which no special statutory duties are imposed. A bailment can be for compensation or can be done gratuitously. Constructive bailments result when property comes into possession of another without the owner’s consent but is legitimate, as when lost property is found.

The bailee has a duty of care with respect to the property which varies in certain circumstances. The bailee also has a duty to return possession of the property. The bailor has a responsibility of responsible care for the condition of the property and the right to demand the return of the property.

I. What are the General Principles of Personal Property Ownership?

A. Property is a bundle of rights

B. Real property is land and its attachments such as buildings and trees

C. Personal property

1. Whole or fractional rights in things that are tangible and movable

2. Claims and debts (chooses in action)

3. Intangible proprietary rights: copyrights, patents, trademarks, licenses

D. Limitations on ownership

1. Absolute ownership is all possible rights

2. Can transfer rights in segments

3. Government entities can tax property rights

4. Cannot infringe unreasonably on the rights of others

E. Title to Personal Property

F. Acquisition by gift

1. Voluntary act of owner without receiving anything

a. Donor is the one who makes the gift

b. Donee is recipient

2. Inter vivos gifts (See Figure 21-1 in text)

a. Gift between two living persons

b. Elements

i. Intent to transfer title at that time, not in the future; not something lent

ii. Delivery - actual (donee takes possession) or symbolic or constructive (only donee has access)

iii. Donor’s death - if gift requirements not completed before death, attempted gift fails; executor cannot complete

3. Gifts causa mortis

a. In contemplation of imminent death

b. Taking effect if donor dies

c. If donor revokes before death or does not die, gift does not take effect

d. If donee dies before donor, the gift does not take effect

4. Gifts and transfers to minors

a. Uniform acts allow property to be transferred to the custodian to hold for the benefit of the minor

b. The gift is final; irrevocable for tax purposes

c. Distribution is at age 21

5. Conditional gifts

a. Consider California Civil Code 1590, which states:

Where either party to a contemplated marriage in this state makes a gift of money or property to the other on the basis or assumption that the marriage will take place, in the event that the donee refuses to enter into the marriage as contemplated or that it is given up by mutual consent, the donor may recover such gift or such part of its value as may, under all of the circumstances of the case, be found by a court or jury to be just.

b. Engagement rings as conditional gifts

6. Anatomical gifts

a. The Uniform Anatomical Gift Act

i. Persons 18 or older may make gifts

ii. Consent must not be under pressure Acquisition by finding of lost property

1. The owner does not know where it is, but intends to retain title

2. Finding in public place - the finder is to give the item to the proprietor or manager

3. Statutory change

H. Transfer of title by non-owner

1. No title is transferred by a thief

2. Automobiles usually require a certificate of title

3. Exceptions include authorization to sell given to an agent

I. Occupation of personal property

1. Wild animals

a. Not owned by anyone until dominion or control

b. Could be statutory restrictions on capture

2. Abandoned personal property

a. Question of intent to give up title

b. Title is transferred by possession

J. Escheat

1. Unclaimed property can be transferred to the state

K. Multiple ownership of personal property

1. Tenancy in Common

a. Co-owners of property

b. Need not be equal interests

c. Owners can transfer inter vivos or by will and mortgage

2. Joint Tenancy

a. Four unities of ownership

i. Time - acquire interests at the same time

ii. Title - acquire the same title

iii. Interest - parties have equal interests

iv. Possession - have equal rights of possession

b. It may be transferred, but this severs joint tenancy, e.g., A, B and C are joint tenants. C transfers to D. D is a 1/3 tenant in common

c. "With right of survivorship" shows intent

3. Tenancy by Entirety

a. Same four unities plus additional unity of person

b. Must be husband and wife

4. Community Property

a. Husband and wife only

b. Marital property right system

II. What are the General Characteristics of Bailments?

A. Definition

1. Delivery of personal property by a bailor to a bailee to be dealt with as agreed

2. Transfer of possession as opposed to title

B. Elements of bailment (See Figure 21-2)

1. Agreement

a. Can be expressed or implied

b. Examples: jewelry repair; bowling shoes rented

2. Delivery and acceptance

a. Actual - bailor hands it to bailee

b. Constructive - bailor tells bailee where to get property

C. Nature of the parties’ interests

1. Bailor’s interest

a. Usually title

b. May be physical possession

2. Bailee’s interest

a. Possession

b. Consistent with agreement

D. Classification of bailments

1. Ordinary - most bailments; those other than extraordinary

2. Extraordinary (or special)

a. Statutory duties

b. Innkeepers, common carriers

3. Contract or bailments for hire

4. Gratuitous (no compensation, but duties are the same)

5. Sole-benefit bailor - Fred keeps Mary’s furniture for her

6. Mutual benefit - renting a video

7. Sole-benefit bailee - you borrow a lawnmower from a neighbor

E. Constructive bailments

1. Possession not transferred knowingly

2. Finder of lost property

F. Renting of space distinguished

1. No delivery to owner of space, no bailment

2. Parking lots or luggage locker in an airport

G. Bailment of contents of container

1. Is checking a coat a bailment of what’s in the pockets?

2. Bailee can disclaim responsibility for contents

H. Duties and rights of the bailee

1. Performance as called for in the contract

2. Care of property

a. Sole benefit of the bailee - highest care; bailee liable for slightest negligence

b. Sole benefit of the bailor - least care; bailee required to exercise only slight care

c. Mutual benefit - ordinary care; bailee liable for ordinary negligence. (The existence of a bailment does not make the bailee an insurer of the goods. The bailee cannot be held liable for damage to or destruction of the goods in the absence of some degree of fault on the part of the bailee.)

d. Standard of care - care must be reasonable under the circumstances

e. Contract modification of liability - the contract may limit liability but not eliminate it

f. Insurance - generally, a bailee is not under any duty to insure the property for the benefit of the bailor

1. What are the legal aspects of warehousing?

a. Know definitions of relevant terms

b. Discuss the rights and duties of the parties in a warehouse arrangement

c. Explain warehouse receipts

d. Define field warehousing

e. Discuss the extent of liability of warehousers

2. What are the legal responsibilities of common carriers?

a. Define "common carrier"

b. Discuss bills of lading

c. Cover the rights, duties and liabilities of a common carrier

3. What are the legal responsibilities of hotelkeepers?

a. Define hotelkeeper

b. Discuss the liability of hotelkeepers to guests

c. Cover the hotelkeeper’s lien

A warehouser is a person or entity in the business of storing others’ goods for compensation. The rights and duties of a warehouser are the same as the rights and duties of a bailee in a mutual benefit bailment. Article 7 of the UCC governs the rights and duties of warehousers. Warehousers have liens on the goods they store for reasonable storage charges. The lien may be enforced by sale.

Warehousers issue warehouse receipts which are written acknowledgments of receipt of goods. Warehouse receipts are memoranda of the contract between the issuer, the warehouser and the depositor. A warehouse receipt is a document of title and can be bought and sold or used as security for a loan. A warehouse receipt can be negotiable or non-negotiable. A negotiable warehouse receipt can be negotiated with due negotiation. Due negotiation transfers both title to the document and the goods. Due negotiation gives the holder of the warehouse receipt rights superior even to those of the depositor. Defenses to holders of a duly negotiated warehouse receipt are that the goods in the warehouse are stolen goods. Warranties are made by transferors of warehouse receipts.

Field warehousing is the use of the warehouse system for control of title through the placement of an agent in an area where the warehouser has the goods. Field warehousing allows the owner of the goods to pledge the goods as security with creditors’ reassurance through the agent’s presence.

Common carriers are public transporters of goods. Consignors or shippers deliver goods to the carrier and consignees are the parties to whom the goods will be shipped.

Bills of lading are documents of title used to provide rights and control similar to those provided under warehouse receipts. A bill of lading can be negotiable or non-negotiable. One of the few defenses to a claim under a negotiable bill of lading is that the underlying goods were stolen.

Common carriers are absolutely liable for the goods from start of shipment until delivery with a few exceptions for losses caused by acts of God, war, public authority, fraud by the shipper or the natural properties of the goods. Carriers may limit their liability for reasonable amounts. A factor is a bailee who sells consigned goods. Title remains with the consignor until a sale occurs.

Hotelkeepers have a bailee’s liability with respect to property entrusted to them by guests. Hotelkeeper liability applies to operators of hotels, motels and tourist homes. Hotelkeepers, at common law, have a bailee’s liability for their guests’ property. However, most states have statutes that permit hotelkeepers to limit liability by requiring guests to place their property in a safe. Hotelkeepers have liens on guests’ property for payment for accommodations.

I. What are the Legal Aspects of Warehousing?

A. Definitions

1. A warehouser is a person engaged in the business of storing goods for others for compensation

2. Need not be a building; e.g., storing boats outdoors

B. Rights and duties of warehousers

1. For the most part, same as for mutual benefit bailment

2. Statutory regulation

a. Regulated by UCC Article 7

b. Also local regs on fees, etc.

3. Lien of warehouser

a. For reasonable storage charges

b. Can be enforced by sale

C. Warehouse receipts (See Figure 22-1 in text)

1. Written acknowledgment that warehouser (bailee) has received property from depositor (bailor)

2. Depositor and issuer (warehouser who prepares receipt)

3. Also a document of title

a. Title to document and title to goods

b. Can sell and buy document

D. Rights of holders of warehouse receipts

1. Nonnegotiable warehouse receipts

a. Transferor transfers only transferor’s rights

b. Transferee’s rights subject to good faith purchaser

2. Negotiable warehouse receipts

a. Goods delivered to "bearer" or "order of"

b. Negotiation by endorsement or delivery (bearer)

c. Due negotiation

i. Good faith

ii. Value

iii. No notice of defenses

iv. Cannot be defeated except if goods are stolen or a bfp purchases

3. Warranties

a. Receipt is genuine

b. Transfer is effective and with authority

c. Transferor has no knowledge of any facts that would impair the receipt

E. Field warehousing

1. Receipts that owner uses as a pledge for loans

2. Warehouser controls room and property therein

F. Limitation of liability of warehouser

1. Liability by unit or weight is possible

2. Blanket limitations are not permissible

3. General contract principles on fairness

II. What are the Legal Responsibilities of Common Carriers?

A. Definitions

1. Carrier - transportation of goods

2. Consignor/consignee - deliverer of goods; buyer is consignee

3. Common carrier - public transporter

4. Contract carrier - individual contracts

5. Private carrier - shipper owns and operates

B. Bills of lading

1. Documents of title which provide rights to goods

2. UCC governs intrastate transportation; Federal Bills of Lading Act governs interstate

3. Contents of Bill of Lading

a. Interstate Commerce Commission regulations

b. Yellow = negotiable

c. White = non-negotiable

4. Negotiation

a. Negotiable: bearer or order

b. Nonnegotiable (straight): named person

c. Due negotiation = title to document and goods

5. Warranties in transferring

a. Genuine

b. Rightful transfer

c. No knowledge of facts that would impair validity

C. Rights of common carrier

1. Set rates and rules (subject to regulation)

2. Can charge demurrage or a charge for holding cars too long

D. Duties of common carrier

1. Receive and carry proper and lawful goods

2. Furnish facilities that are adequate for transportation

3. Follow directions of the shipper

4. Load and unload goods

5. Deliver goods according to contract

E. Liabilities of common carrier

1. Absolute liability, with a few exceptions

a. Acts of God

b. Act of public enemy

c. Act of public authority

d. Act of shipper (fraud)

e. Nature of goods – spoil

2. Carrier’s liability for delay

a. Carrier: liable for losses from unreasonable delay

b. Risk of ordinary, incidental delay assumed by shipper

3. Limitation of liability of carrier (Carmack Amendment)

a. Cannot exempt for own negligence

b. Can limit by pound or package

4. Notice of claim - generally within nine months

5. C.O.D. shipment

a. Cash on delivery

b. Carrier liable for bounced check

6. Rejected shipments

a. Carrier-turned-warehouser when goods rejected

b. Returned to carrier status when it receives shipping instructions

III. What are Factors?

A. Definitions

1. A bailee who sells the goods

2. Consignment

3. Commission or factorage

B. Factor who sells goods in good faith is protected from liability from third parties

IV. What are the Legal Responsibilities of Hotelkeepers?

A. Definitions

1. Hotelkeeper - operator of a hotel, motel or tourist home

2. Guest - transient: not present at the invitation of a guest or attending a banquet

B. Duration of guest relationship

1. Terminates when guest leaves

2. Terminates when guest becomes a resident

C. Hotelkeeper’s liability for guest’s property

1. At common law - hotel was strictly liable

2. Most state statutes limit liability

3. Statutes create liability only if guest surrenders valuables to the hotel

D. Hotelkeeper’s lien

1. Lien on luggage for value of reasonable accommodations

2. Lien ends if guest pays or luggage is returned

Boarders or lodgers - nontransient guests; the hotel owes only the duty of an ordinary mutual benefit bailee

1. What is the nature of contracts for the sale of goods?

a. Explain the subject matter in contracts for the sale of goods

b. Distinguish sales from other transactions

c. Explain the applicable law on sales and discuss contract formation

d. Discuss bulk transfers

2. What is the form of contracts for the sale of good?

a. Explain when a sales contract must be in writing

b. List the exceptions to the requirement of a written contract

c. Define bill of sale

3. What is the uniform law for international sales or the CISG?

a. What is the scope of the CISG

b. Discuss the provisions of the CISG

4. How are leases of goods different from sales?

a. List the types of leases

b. Explain the rights and warranties of the parties in a lease agreement

Contracts for the sale of goods are governed by Article 2 of the Uniform Commercial Code. Article 2 does not cover investment securities, promissory notes or real estate. Article 2 covers the sale of tangible personal property either in existence or to be manufactured.

Sales are not bailments (transfer of possession), gifts (gratuitous transfer), or options (right to buy). In those contracts in which there are both goods and services being furnished, the issue of whether Article 2 applies is determined by which is dominant. Buying parts to repair your own auto is a sale of goods. Taking your car in for repair work that requires new parts is the rendering of a service.

Offer and acceptance, or formation, under UCC has different rules from those of common law. The merchant’s firm offer is one such variation in that it was an offer that must be held open although consideration is not required. Acceptance is made easier under the UCC by its rules allowing formation even when there are variations in the terms in an acceptance. Other UCC differences are in the areas of output and requirement contracts, modification of contracts, and in usage of trade or course of dealing.

Contracts for the sale of goods for $500 or more must be authenticated under the UCC statute of frauds ($5,000 under revised UCC). Formal contracts are not required and a contract may be found by grouping several forms together or by electronic communication. The merchant’s confirmation memorandum provides an efficient way to handle the writing requirement in fast-paced business transactions. The exceptions to the authentication requirement include specially manufactured goods, part performance and admission under oath.

The UN Convention on Contracts for the International Sale of Goods (CISG) applies to contracts between parties of different nations. The parties can opt out of the CISG if the parties desire. There are significant differences between the CISG and the UCC.

Article 2A covers the lease of tangible, movable goods and provides specific rights with respect to warranties on the goods and defaults in lease payments.

I. What is the Nature of Contracts for the Sale of Goods?

A. Subject matter of sales

1. Article 2 of the Uniform Commercial Code governs contracts for the sale of tangible personal property; examples include cars, clothing, tread mills and Pop-Tarts

2. Anything movable at the time it is identified as the subject of the transaction

3. Distinguish goods from nongoods. Read UCC § 2-105 to learn terminology that will be important as the sales material progresses. Note that § 2-105(1) states that goods "also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty (Section 2-107)." Note UCC § 2-107 and the importance given to goods to be severed from real property. In addition, look at § 1-201(17) which defines fungible goods.

4. Nature of goods

a. UCC: both new and used

b. May be fluids or crops

5. Existing and future goods

a. UCC governs both

b. Future goods include those to be manufactured by the seller; e.g., custom-made furniture

B. Sale distinguished from other transactions

1. Bailment

a. Transfer of possession; e.g., valet parking, jewelry left for repair

b. Regulated by Article 2A of the UCC

2. Gift - gratuitous transfer of title

3. Contract for services (accountant hired for an audit) - governed by common law

4. Contract for goods and services

a. Mixture in one contract

b. Dominant element controls whether UCC applies; e.g., contract for parts vs. contract for repair

C. Formation of sales contract

1. Offer

a. Necessary detail: subject matter (quantity if more than one)

b. Same as common law on intent

c. Firm offers (rain checks)

i. In writing

ii. States it will be kept open

iii. Signed by merchant

2. Acceptance (See Figures 23-1 and 23-2 in text)

a. Manner of acceptance is any medium reasonable under the circumstances

i. Generally defined as using the same method of communication as used by the offeror or faster

ii. Many offers to purchase request prompt, immediate, or current shipment. What problems does the seller face when shipping nonconforming goods under UCC § 2-206(1)(b). Note it is possible for an acceptance to take place by beginning performance under § 2-206(2).

b. Acceptance timing rules - mailbox rule applies if offeree uses same method of communication or faster one to accept

c. Language of acceptance

i. Additional term in offer - does not result in counteroffer and rejection

ii. "Battle of the forms": changed and additional terms (2-207); can still have a contract

iii. Non-merchants - there is a contract without the additional terms

iv. Merchants - there is a contract with the additional terms unless those terms are material or objected to or the offer was limited to its terms only

v. Revised 2-207; if parties have a record, terms in record control; if no record, court looks at (1) terms in both contracts, (2) terms they agree on, (3) UCC terms

3. Defenses to formation

a. Article 2 incorporates all common law defenses (fraud, misrepresentation)

b. Unconscionability is also a defense - contract grossly unfair or signed with disclosure

c. Illegality

i. Product is illegal (drugs)

ii. Contract cannot be enforced

4. Terms in the formed contract

a. Determination of price

i. Reasonable value of goods or market price if no agreement

ii. Cost plus contracts - specified percentage above cost

b. Output and requirements contracts

i. Requirement of good faith

ii. Past records and needs determine range - purchasing fuel for winter heat, the weather dictates amount

c. Indefinite duration contract - may be terminated with notice

d. Modification of contract

i. No consideration needed

ii. Must be voluntary

iii. UCC § 2-209 imposes no obligation on one party to accept a modification proposed by the other party. Both parties are bound to perform the obligation as previously agreed unless both agree to the modification.

iv. Differs from common law

e. Interpreting contract terms

i. Parol evidence rule - once a contract is reduced to its final written form and it is complete and unambiguous, it cannot be contradicted by extrinsic evidence

ii. Usage of trade can be used for interpretation - Mohair example in text

iii. Course of dealing - how the parties have performed in the past can also be used

II. What is the Form of Contracts for the Sale of Goods?

A. Contracts for the sale of goods for $500 or more must be in writing ($5,000 – revised)

B. Nature of the writing required

1. Can be complete written contract or memo; can be electronic exchanges; verifications; some form of record

Review the case of Home Basket Co., LLC v. Pampered Chef, Ltd.

2. Terms

a. Sale or contract to sell

b. Quantity

c. Other missing terms can be supplied by UCC

3. Signature

a. May be initials - anything used with intent to authenticate

b. Merchant’s confirmation memo - one side’s signature binds

c. Repudiation of confirming letter within ten days required for recipient of memo to avoid being bound

4. Purpose of execution - can write after sale; for example, a letter written after goods are shipped is still valid writing

5. Particular writings - contract formed by grouping together papers

C. Effect of noncompliance: the contract cannot be enforced

D. Exceptions to requirement of a writing/record

1. Non-resellable goods or specially manufactured goods: the chair lift example - substantial beginning of performance

2. Receipt and acceptance: partial performance - enforceable contract to the extent of payment or acceptance

3. Payment (Wayne and Pamela example)

a. Full payment: contract enforced

b. Part payment for divisible units: partial enforcement

c. Part payment for indivisible unit: proof of contract permitted

4. Admission

a. By party against whom enforcement is sought

b. Under oath

E. Noncode requirements - consumer protection statutes

F. Bill of sale - a receipt

III. What is the Uniform Law for International Sales or the CISG?

A. Scope of the CISG

1. United Nations Convention on Contracts for the International Sale of Goods

2. Effective January 1, 1988, for ratifying countries

3. Parties can opt out

B. Irrevocable offers

1. States it is irrevocable

2. Need not have consideration

3. Must be in writing

C. Statute of frauds - the writing requirement is abolished unless countries require it

D. Mirror Image Rule under CISG – liberal UCC formation with additional terms does not apply under CISG

IV. How are Leases of Goods Different From Sales?

A. Types of leases

1. UCC Article 2A regulates

2. Leases that are consumer, commercial, finance, nonfinance and subleases

3. Consumer lease

a. Lessor is a merchant

b. Lessee is a natural person taking for personal, family, or household use c. $25,000 maximum total payment

4. Commercial lease - a nonconsumer lease

5. Finance lease - involves a lessor, a lessee, and a supplier

B. Form of lease contract

1. Must be a signed writing if total payments are $1,000 or more

2. Must be signed by lessee

C. Warranties

1. The usual warranties are made, except the finance lessor makes only express warranties

2. Supplier warranties are passed to lessee

D. Irrevocable promises: commercial finance leases

1. Review the "hell or high water" clause - lessor gets paid regardless of conformity

2. Finance lease nonconformity - must sue supplier

E. Default

1. Judgment

2. Notice of default not required