Cengage Advantage Books: Fundamentals of Business Law Today 10th Edition by Roger LeRoy Miller

Exercise 2

FACTS Under a contract with Cheran Investments, LLC, Blasini, Inc., agreed to buy the business assets of the Attic Bar Grill in Omaha, Nebraska. The contract required a down payment and monthly payments until the price was fully paid. Blasini obtained insurance on the property from Nautilus Insurance Co. Less than three years later, a fire damaged the "personal property" in the Attic. Nautilus filed an action in a Nebraska state court against several defendants, including Cheran, to determine who was entitled to the insurance proceeds for the damage. The court concluded that Blasini had "failed to consummate the purchase agreement" and declared Cheran the owner of the personal property. Blasini appealed.
ISSUE Did the sale of the Attic's assets pass title to those goods to Blasini?
DECISION Yes. A state intermediate appellate court reversed the lower court's ruling. Title to the Attic's assets passed at the time of the contract for their sale to Blasini, which became the owner. The appellate court remanded the case to the lower court, however, to determine whether Blasini had breached the contract.
REASON The sale of the Attic's personal property involved "goods," and thus the agreement for their sale was subject to the UCC-all of the items designated in the agreement were movable, and no real estate, intellectual property, or goodwill was transferred under the agreement. Blasini entered into a contract to buy the assets of the Attic and agreed to assume its operation. Under UCC 2-401, title to the goods passed to Blasini at the time of the agreement, regardless of whether the contract price was paid. No physical delivery was necessary because Blasini was to assume the operation of the Attic, which is where the goods were located. "Therefore, irrespective of whether Blasini paid the purchase price, … Blasini became the owner of the property in the purchase agreement."
FOR CRITICAL ANALYSIS-Legal Environment Consideration How does the UCC define a sale? Under that definition, did the court correctly determine the ownership of the Attic's "personal property" at the time of the fire? Explain.