II. PASSAGE OF TITLE
1. According to the Parties’ Agreement
Parties can agree on when and under what conditions title will pass.
2. At the Time and Place at Which the Seller Performs
If the parties do not specify a time, title passes on delivery [UCC 2–401(2)]. The delivery termsdetermine when this occurs.
a. Shipment Contracts
If the seller is required or authorized to ship goods by carrier, title passes at time and place of shipment [UCC 2–401(2)(a)]. All contracts are shipment contracts unless they say otherwise.
b. Destination Contracts
If the seller is required to deliver goods to a certain destination, title passes when the goods aretendered there [UCC 2–401(2)(b)].
c. Delivery without Movement of the Goods
If a buyer is to pick up goods, passing title turns on whether a seller must give a document of title (bill of lading, warehouse receipt).
1) When a Document of Title Is Required
Title passes when and where the document is delivered. The goods do not need to move (forexample, they can stay in a warehouse).
2) When No Document of Title Is Required
If the goods have been identified, title passes when and where the contract was made. If thegoods have not been identified, title does not pass until identification [UCC 2–401(3)].
Generally, a buyer acquires whatever title the seller has to the goods sold [UCC 2–402, 2–403]. A lesseeacquires whatever title a lessor could transfer, subject to the lease [UCC 2A–303, 2A–304, 2A–305].
1. Void Title
If the seller or lessor stole the goods, the buyer or lessee acquires nothing; the real owner can reclaimthe goods.
2. Voidable Title
A seller or lessor has voidable title if goods were obtained by fraud, paid for with a check that is laterdishonored, bought on credit when the seller was insolvent, or bought from a minor.
a. The Real Owner Can Reclaim the Goodsb. Exception—Good Faith Purchaser or Lessee for Value
The real owner cannot recover the goods [UCC 2–403(1)].
3. The Entrustment Rule
Entrustment includes both delivering goods to a merchant and leaving goods with the merchant forlater delivery or pickup [UCC 2–403(3)].
a. Entrusting Goods to a Merchant Who Deals in Goods of the Kind