Title

Introduction

Read the overview below and complete the activities that follow.

Before beginning this interactive, you should review LO 15-6 in your text. Pay particularly close attention to the differences among the three types of titles that can arise when a buyer purchases goods: good titles, void titles, and voidable titles.

CONCEPT REVIEW:

Neither businesses nor individuals can own or sell goods unless you have good title to them. The Uniform Commercial Code (UCC) defines a sale as the passing of title from the seller to the buyer for a price.

Mini-Case:

Read the scenario below and answer the following questions relating to the sale of a title.

Hugo, a 21-year-old man, is birthday shopping for his mother over the online classifieds. While browsing the Internet for sale ads, he notices a particularly good deal on a 14-carat gold necklace with matching 1/3-carat diamond earrings. The seller says the jewelry is brand new, still in the box, and wants only $359 for the entire set. Hugo immediately e-mails the seller and arranges for the purchase of the jewelry. Hugo pays the seller, receives the necklace and earrings, and intends to give them to his mother for her birthday.

1.) What is the sale of a title?

Multiple Choice

A.) The passing of title from the seller to the buyer for a price.

B.) When insurance on goods can be purchased.

C.) When the goods become part of the buyer's inventory and can serve as collateral for a loan.

D.) When the original parties would be void but the goods have already been sold to a third party.

E.) When a buyer can sell goods to a third party.

2.) Suppose that the reason the jewelry was brand new and at such a bargain price online was because the seller actually stole the jewelry. If the jewelry were stolen, what type of title would Hugo hold when he purchased the jewelry?

Multiple Choice

A.) Entrustment.

B.) Both void and voidable.

C.) Voidable.

D.) Void.

E.) Good.

3.) Once again, let's assume the jewelry was stolen. But suppose that Hugo did not know the jewelry was stolen. He bought the stolen jewelry, and then gave the gift to his mom in good faith. What kind of title does his mom now possess?

Multiple Choice

A.) A good title because stolen goods are not considered stolen goods if the person did not know they were stolen.

B.) A good title because he bought the jewelry in good faith.

C.) A void title because stolen goods always remain stolen goods.

D.) A voidable title because this is a situation involving entrustment.

E.) A voidable title because the intentions of Hugo were dishonorable.

4.) Now suppose that the goods were not stolen. The seller purchased the jewelry on clearance at wholesale price, and that is why he can offer such a good deal. Suppose, however, that Hugo bought the diamond jewelry with a check. Come to find out, it was a bad check and the check bounced. In this scenario, what kind of title does Hugo possess?

Multiple Choice

A.) Void.

B.) Entrustment.

C.) Voidable, because the buyer wrote a bad check.

D.) Good.

E.) Voidable, because Hugo is just a minor.