Legal Definitions - identification of goods

Identification of goods refers to the crucial point in a sales transaction when specific items intended for a buyer become distinct and set aside from other similar items. This process establishes the buyer's special interest in those particular goods, even before they physically take possession. Once goods are identified, the buyer typically gains an insurable interest in them, meaning they can purchase insurance against loss or damage to those specific items. It also impacts when the risk of loss shifts from the seller to the buyer and, in some circumstances, may give the buyer a right to claim those specific goods if the seller breaches the contract. The method and timing of identification are usually determined by the agreement between the buyer and seller.

• Custom-Built Computer:

  Imagine a customer orders a high-performance gaming computer with specific components and custom modifications from a computer builder. The moment the builder sets aside the particular motherboard, graphics card, processor, and unique casing components, specifically for that customer's order, the goods are considered identified.

  How it illustrates the term: Before this point, the components were just generic stock. Once they are designated for the customer's specific build, they become "identified goods." The customer now has an insurable interest in those exact parts, even if the computer hasn't been fully assembled or shipped yet. If, for example, the builder's workshop experiences a fire, the customer could potentially claim insurance for those specific components.

• Purchase of a Specific Artwork:

  A collector agrees to purchase a particular painting from an art gallery. The gallery and the collector sign a sales agreement that explicitly references the painting by its title, artist, and unique inventory number. The painting remains at the gallery for a week for professional packing and shipping arrangements.

  How it illustrates the term: The moment the specific painting is designated in the contract as the item being sold, it is identified. Even though the collector has not yet taken physical possession, they now have an insurable interest in *that exact painting*. If the painting were damaged while still at the gallery before shipment, the collector's insurance policy could potentially cover the loss because the goods were identified.

• Bulk Order from a Warehouse:

  A restaurant places an order for 20 cases of a specific brand of olive oil from a food distributor's warehouse, which stores hundreds of cases of various oils. The distributor's staff then pulls 20 cases of the exact olive oil requested, labels them with the restaurant's order number, and moves them to a staging area for pickup.

  How it illustrates the term: Initially, the olive oil was part of a larger, undifferentiated stock. Once the specific 20 cases are selected, marked, and set aside for the restaurant's order, they become "identified goods." The restaurant now has a specific interest in those particular cases, and the risk of loss for those exact items might shift, even before they are loaded onto the restaurant's delivery truck.