Shipment and Destination Contracts. National Hydro-Vac Industrial Services, L.L.C., based in Houston, Texas, bought some of the assets of Freemyer Co The assets included three industrial, trailer-mounted vacuum units made by Guzzler Manufacturing, Inc,

Question

with whom National had an account. National offered to trade in the three used units to Guzzler in exchange for one new one, and shipped the used units to Guzzler in Birmingham, Alabama, in the spring of 2000. Guzzler inspected the units and refurbished two, which it then sold to Vac-Tech, a company in Australia, for $110,000 each. Meanwhile, the trade-in deal with National fell through, and in May or June, Guzzler offered to pay National for the units sold to Vac-Tech. Bills of sale dated August 1 stated the price as $75,000 each, but Guzzler credited National's account with only $130,000 for both. National filed a claim in a federal bankruptcy court against Guzzler and others, seeking damages. Was there a sale of the units from National to Guzzler? If so, when did title to the units pass? Discuss.

Answer 1

Shipment and destination contracts
When delivery is to occur without moving goods, "if the goods are at the time of contracting already identified and no documents are to be delivered, title passes at the time and place of contracting," under UCC 2-401(3)(b). In this case, the court held that a sale took place "in May or June 2000, [when] the parties agreed on a sale from [National] to Guzzler of both units for $75,000.00 each." The court reasoned, "Since the goods were already in Guzzler's possession at the time of contracting . . . , title passed to Guzzler and payment was due to" National at that time. The court added, "The fact that a formal bill of sale was not signed until August 1, 2000, is immaterial. The two units, having already been delivered to Guzzler by [National], were sold to Guzzler when the parties reached an agreement, and not when the bills of sale were executed. Guzzler's failure to pay [National] at the time of contracting should be viewed as a breach of a contract." The court held that National was entitled to $20,000—the difference between the amounts on the bills of sale and the amount of Guzzler's credit to National's account—plus interest from the date when the payment was originally due until the date of the judgment.