Published on January 15, 2008
Good Faith Purchase of Stolen or Lost Goods: Good Faith Purchase of Stolen or Lost Goods Owner – Thief – (Middle Person)－Buyer (Problem) How should we allocate the “theft risk” among parties involved? Schrier v. Home Indemnity Company: Schrier v. Home Indemnity Company Pennsauken－×－(Unknown)→Wholesaler (N.Y.) Silver Hill(Md.) Schrier Home Indemnity Co. Voidable v. Void Title U.C.C. §2-403(1): Voidable v. Void Title U.C.C. §2-403(1) Purchaser from a “con artist” (with voidable title) may be protected, while purchaser from thief (with no title at all) not. Entrustment 2-403 (2): Entrustment 2-403 (2) entrustment of goods to merchant who deals in goods of that kind. buyer in ordinary course of business (see, U. C. C. 1-201) is protected ⇒ Again, one who purchased from thief is not protected. J.C.C. §192-194 etc.: J.C.C. §192-194 etc. §192 The good faith purchaser from anyone who has a possession of goods gets title. §193 Exception : Original owner of stolen or lost good can recover for 2 years from good faith purchaser. §194 Original owner should compensate under a certain condition. (exception to §193) Original owner do not have to compensate to used goods dealer for one year even if he satisfied C.C.§194. The rule 2: J.C.C. etc. cont’d: The rule 2: J.C.C. etc. cont’d Recovery by the owner is limited for 2 years. Owner needs to compensate to the good faith purchaser in some cases. Other countries: Other countries Non assignment rule (like the U.S.) ---e.g., Germany The rule similar to Japan---e.g., France, Switzerland More protection for good faith purchaser---e.g., the U.K. (before 1994) UNIDROIT Convention: UNIDROIT Convention Time limitation of recovery: three years from the claimant knew the location of the goods and the identity of the possessor or 50 years from the time of theft (Art. 3 (3)) Good faith purchaser can require compensation (Article 4 (1)) Corrective Justice (or Fairness) Argument: Corrective Justice (or Fairness) Argument Perhaps not promising because we are now allocating the risk between innocent parties. Economic Perspective (primitive version): Economic Perspective (primitive version) Prevention Which party is in the better position to avoid theft ? Risk bearing Which party is in the better position to insure the risk An Additional Question: An Additional Question If it is difficult to determine who is in the better position to prevent theft categorically, why don’t we adopt case-by-case approach to determine who is the least cost avoider in each particular case ? see, contributing negligence (or last clear chance test) in tort law Additional Questions (cont’d): Additional Questions (cont’d) Is it sensible to give real owner a protection if and only if he/she has made a reasonable precaution (e.g., investment against theft) ? Neither the U.S. and Japan adopts such an approach and perhaps very few in the world does. Why ?