Business Law 12th Edition by Roger LeRoy Miller ,Frank Cross

Exercise 4

Risk of Loss H.S.A. II, Inc., made parts for motor vehicles. Under an agreement with Ford Motor Co., Ford provided steel to H.S.A. to make Ford parts. Ford's purchase orders for the parts contained the term "FOB Carrier Supplier's [Plant]." GMAC Business Credit, L.L.C., loaned money to H.S.A. under terms that guaranteed payment would be made-if the funds were not otherwise available-from H.S.A.'s inventory, raw materials, and finished goods. H.S.A. filed for bankruptcy on February 2, 2000, and ceased operations on June 20, when it had in its plant more than $1 million in finished goods for Ford. Ford sent six trucks to H.S.A. to pick up the goods. GMAC halted the removal. The parties asked the bankruptcy court to determine whose interest had priority. GMAC contended, among other things, that Ford did not have an interest in the goods because there had not yet been a sale. Ford responded that under its purchase orders, title and risk of loss transferred on completion of the parts. In whose favor should the court rule, and why? [ In re H.S.A. II, Inc., 271 Bankr. 534 (E.D.Mich. 2002)]