Sales and Leases | 113
1. General Rule That Goods Must Be Identified for Title to Pass and Buyer’s Special Property Interest Under any contract for the sale of goods, title to the goods cannot pass before the goods are identified to the contract. As goods must exist to be identified to the contract, it follows that title cannot pass to future goods. Once the goods are identified to the contract, and unless otherwise agreed explicitly, the buyer thereby acquires a special property interest, as limited by the UCC. That special property interest embraces Article 2’s rules on (1) the rights of the seller’s creditors, (2) good-faith purchase, (3) the buyer’s rights to the goods if the seller becomes insolvent, and (4) the buyer’s entitlement to replevin or specific performance. [U.C.C. § 2-401(1), cmt. 3 (1951); Identifying Goods to the Contract, Future Goods, supra .] 2. Seller’s Retention or Reservation of Title in Goods Shipped or Delivered to the Buyer The seller may purport to retain or reserve title in goods shipped or delivered to the buyer. Despite this purported retention or reservation, title passes to the buyer. The effect of the retention or reservation is for the seller to retain a security interest in the goods. UCC Article 9 governs that security interest and the parties’ resulting rights and duties. For more exhaustive treatment of Article 9, please see Quimbee’s Secured Transactions Outline. [U.C.C. § 2-401(1) (1951); 2 Hawkland UCC Series § 2-401:2, Westlaw (database updated June 2021).] 3. Default Rules on Passage of Title Subject to UCC Article 9, which governs security interests in goods, as well as the rule limiting the effect of the seller’s reservation or retention of title to goods shipped or delivered to the buyer to the reservation of a security interest, the parties may agree on precisely when title passes from the seller to the buyer. Insofar as the parties do not agree on the subject, § 2-401 articulates default rules to determine when title passes to the buyer. [ See U.C.C. § 2-401(1) (1951); 2 Hawkland UCC Series § 2-401:2, Westlaw (database updated June 2021).] a. Passage of Title if Goods Are to Be Moved to Effectuate Delivery Unless otherwise agreed explicitly, if the goods are to be moved to effectuate delivery to the buyer, title passes from the seller to the buyer when the seller completes her performance concerning physical delivery of the goods. Section 2-503, discussed below, generally controls when the seller has fulfilled these obligations. This rule applies despite any reservation of a security interest, and even if any relevant documents of title are to be delivered at a different place or time. There are more specific rules that apply if the contract is a shipment contract or a destination contract. These specific rules apply notwithstanding any reservation of a security interest in any bill of lading. Also, special rules apply if the buyer rejects the goods or revokes acceptance. [U.C.C. § 2-401(2)-(4) (1951); Seller’s Tender of Delivery and Shipment of Goods, infra .]
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