Pricing

TO: Claims Manager, Bad Hands Insurance Company

FROM: J-rod32

DATE: May 06, 2013

ISSUE: Is the insured party (Goldberg) liable under Article Two of the Uniform Commercial Code?

HOLDING: Yes, the insured party (Goldberg) is liable under Article Two of the Uniform Commercial Code.

REASONING: The determination of liability focused on three things, if a contract existed between Avery James and Goldberg, who had title to the ring at the time it was stolen, and if Goldberg had insurable interest in the ring at the time it was stolen. The question of title and insurable interest focused on identification of existing goods as goods to which the contract refers.

The transaction between the wholesale jeweler, Avery James and Mr. Goldberg is a Sale or Return contract. Sale or Return contracts are covered by § 2–326 of the Uniform Commercial Code. In a sale or return contract the sale is completed (between Avery James seller and Goldberg buyer) but the buyer has the option to return the ring and undo the sale. Mr. Goldberg purchased the ring from Avery James primarily for resale with an option to return the ring in lieu of payment if it failed to be resold.

When the Sale or Return contract was made the ring was in existence and it was identified as the subject matter of the contract. Identification is important in establishing interest in the ring, and in determining title to the ring.

Because Mr. Goldberg received possession at the time of sale title and risk of loss passed to Mr. Goldberg and remained with him because the ring was not returned to Avery James. § 2-327 (2) (b) of the Uniform Commercial Code specifies that “the return is at the buyers risk and expense”.

When Mr. Goldberg took possession of the ring from Avery James the requirements for interest in the ring, as described in §2-105(2) of the Uniform Commercial Code were meet; it was in existence and it was identified in the contract. Identification is significant because it gives Mr....