Question 1

The term tender of delivery refers to the moment the goods are available for the buyer to take.

Accepted Answer

A) True 
 B)False  True

Question 2

________ occurs when purchased goods are in some kind of storage under the control of a third party, such as a warehouseman.

Accepted Answer

A)  A goods-in-bailment contract 
B)  A third party delivery contract 
C)  An average bailment contract 
D)  A conditional goods in delivery contract 
E)  A goods-in-transfer contract 
A)  A goods-in-bailment contract 
B)  A third party delivery contract 
C)  An average bailment contract 
D)  A conditional goods in delivery contract 
E)  A goods-in-transfer contract A

Question 3

Which of the following is true regarding types of common-carrier delivery contracts?

Accepted Answer

A)  Common-carrier delivery contracts include origin and shipment contracts, but not destination or transfer contracts. 
B)  Common-carrier delivery contracts include destination contracts, but not origin, transfer, or shipment contracts. 
C)  Common-carrier delivery contracts include transfer contracts, but not origin, shipment, or destination contracts. 
D)  Common-carrier delivery contracts include origin and transfer contracts, but not destination contracts. 
E)  Common-carrier delivery contracts include origin and destination contracts, but not transfer contracts. 
A)  Common-carrier delivery contracts include origin and shipment contracts, but not destination or transfer contracts. 
B)  Common-carrier delivery contracts include destination contracts, but not origin, transfer, or shipment contracts. 
C)  Common-carrier delivery contracts include transfer contracts, but not origin, shipment, or destination contracts. 
D)  Common-carrier delivery contracts include origin and transfer contracts, but not destination contracts. 
E)  Common-carrier delivery contracts include origin and destination contracts, but not transfer contracts. E

Question 4

Discuss when title and risk of loss pass to the buyer in a goods-in-bailment contract when (a) the seller has a negotiable document of title (b) the seller has a nonnegotiable document of title and (c) the seller has a contract or other instrument showing ownership that is not a negotiable or nonnegotiable document of title.

Accepted Answer

(a) If the seller has a negotiable docum

Question 5

In cases where a shipment contract is vague or ambiguous on the issue, an origin contract will be presumed.

Accepted Answer

A) True 
 B)False

Question 6

[Wrecked Toaster] Ivan goes to upscale housewares store Smith-Napa to buy himself a nice new toaster, because his old one broke. The store does not have the model he wants in stock, but they can have it shipped from the warehouse directly to Ivan. It is agreed that the toaster will be placed with a common carrier for delivery. The contract between Ivan and Smith-Napa is ambiguous regarding whether the seller had the duty to deliver the goods only to the common carrier's hands or whether the seller had the duty to deliver the goods to Ivan's home. Unfortunately, on the way to Ivan's home, through no fault of the delivery driver, the delivery truck was involved in a collision, and the toaster was damaged beyond repair.
-Ivan and Smith-Napa entered into which of the following contracts?

Accepted Answer

A)  A common-carrier delivery contract 
B)  A trucking contract 
C)  A goods-in-bailment contract 
D)  A conditional sales contract 
E)  A conditional delivery contract 
A)  A common-carrier delivery contract 
B)  A trucking contract 
C)  A goods-in-bailment contract 
D)  A conditional sales contract 
E)  A conditional delivery contract

Question 7

In the text's case of National Compressor Corp. v. Carrow and McGee, the court considered whether a buyer, who purchased a compressor that was subsequently destroyed in a fire on a third party's premises before the buyer took possession, had an insurable interest since title had not yet passed and thus could bring suit against the third party. What was the court's ruling?

Accepted Answer

A)  The buyer could not sue the third party because it did not have an insurable and special interest. 
B)  The buyer had an insurable and special interest but could not sue the third party because the goods had not been identified to the contract. 
C)  The buyer had an insurable and special interest and could sue the third party because the goods had been identified to the contract. 
D)  The buyer had an insurable and special interest and could sue the third party regardless of whether or not goods had been identified to the contract. 
E)  The buyer could not sue the third party because title had not passed and thus, it did not have an insurable interest. 
A)  The buyer could not sue the third party because it did not have an insurable and special interest. 
B)  The buyer had an insurable and special interest but could not sue the third party because the goods had not been identified to the contract. 
C)  The buyer had an insurable and special interest and could sue the third party because the goods had been identified to the contract. 
D)  The buyer had an insurable and special interest and could sue the third party regardless of whether or not goods had been identified to the contract. 
E)  The buyer could not sue the third party because title had not passed and thus, it did not have an insurable interest.

Question 8

[Scuba Supplies] The Dive Shop ordered ten Mega2000 Diving Tanks, ten SuperSlick wetsuits, and ten pairs of Awesome swim fins from ScubaCo under a destination contract. The tanks were scheduled to be delivered first, and the remaining items would arrive the following day. Upon the first delivery, The Dive Shop noticed that ScubaCo sent ten Mega500 Diving Tanks, an inferior model. The Dive Shop's owner called ScubaCo and was told that ScubaCo had sold out of the Mega2000 model, but the Mega500 was the same price, was "pretty much the same", and The Dive Shop had to pay for the order or it would be in breach of contract. The following day, ScubaCo checked the remainder of the order which consisted of the wetsuits and fins and verified it to be correct. It delivered the remainder of the order, however, The Dive Shop refused delivery. On the way to its next delivery, the carrier truck ran off the side of the road and the goods were lost.
-Is ScubaCo correct that The Dive Shop must accept the ten Mega500 tanks?

Accepted Answer

A)  Yes, because they are conforming goods. 
B)  Yes, because, even though they are not conforming goods, they are substantially the same. 
C)  No, The Dive Shop can cure the deficiency in the goods on its own. 
D)  No, The Dive Shop's only recourse is to demand the conforming goods be provided. 
E)  No, The Dive Shop can either accept the nonconforming goods or reject the goods subject to the seller's curing the deficiency in the goods (and reject them if no cure is possible). 
A)  Yes, because they are conforming goods. 
B)  Yes, because, even though they are not conforming goods, they are substantially the same. 
C)  No, The Dive Shop can cure the deficiency in the goods on its own. 
D)  No, The Dive Shop's only recourse is to demand the conforming goods be provided. 
E)  No, The Dive Shop can either accept the nonconforming goods or reject the goods subject to the seller's curing the deficiency in the goods (and reject them if no cure is possible).

Question 9

The UCC lays out essentially four broad factual scenarios for the sale of goods, which of the following is not one of them?

Accepted Answer

A)  Simple delivery contract 
B)  Common-carrier delivery contract 
C)  Conditional sales contract 
D)  Comprehensive sales contract 
E)  Goods-in-bailment contracts 
A)  Simple delivery contract 
B)  Common-carrier delivery contract 
C)  Conditional sales contract 
D)  Comprehensive sales contract 
E)  Goods-in-bailment contracts

Question 10

What does "FOB" mean, when used as a shipping term?

Accepted Answer

A)  Fee on Board 
B)  Fee on Basis 
C)  Freedom of Board 
D)  Free on Board 
E)  Free of Basis 
A)  Fee on Board 
B)  Fee on Basis 
C)  Freedom of Board 
D)  Free on Board 
E)  Free of Basis

Question 11

[Singapore Sculptures] Mavis purchased a sculpture for her home in Hawaii from Juno, who owns an art gallery in Singapore. Mavis tells Juno she is concerned about shipping because there is no agreement between Singapore and Indonesia regarding piracy and she wants to ensure that Juno will be responsible for any damage to the sculpture until Mavis can pick it up on the dock when the ship arrives in Hawaii. Juno tells Mavis there are no longer any piracy concerns in the area and that he will be responsible for the sculpture until it is removed from the ship in Hawaii. Another customer, Adler, also purchases a sculpture. Juno delivers both sculptures to the dock. Mavis' sculpture is accompanied by their contract and Adler's sculpture is accompanied by a document containing the words "Deliver to the Order of Juno", and is endorsed by Juno. The ship travels through a storm, capsizes, and the sculptures are destroyed.
-Assuming Adler must bear the risk of loss of his sculpture, if he sues the ship to recover damages, would the lawsuit likely be dismissed?

Accepted Answer

A)  No, because Adler had an insurable and special interest and, thus, has standing to sue. 
B)  No, because the ship was not at fault. 
C)  Yes, because Adler bears the risk of loss according to his contract with Juno. 
D)  Yes, because Adler did not have an insurance interest in the sculpture. 
E)  Yes, because the ship was not a party to the contract. 
A)  No, because Adler had an insurable and special interest and, thus, has standing to sue. 
B)  No, because the ship was not at fault. 
C)  Yes, because Adler bears the risk of loss according to his contract with Juno. 
D)  Yes, because Adler did not have an insurance interest in the sculpture. 
E)  Yes, because the ship was not a party to the contract.

Question 12

Harold's department store sells Carl a stove. When does the risk of loss transfer to Carl in a simple delivery contract?

Accepted Answer

A)  When Carl pays for the stove. 
B)  When Carl uses his credit card. 
C)  When Carl takes possession of the stove. 
D)  One day after goods are identified to the contract 
E)  When Harold's gives Carl a receipt of payment. 
A)  When Carl pays for the stove. 
B)  When Carl uses his credit card. 
C)  When Carl takes possession of the stove. 
D)  One day after goods are identified to the contract 
E)  When Harold's gives Carl a receipt of payment.

Question 13

Discuss the most common ways sales contracts are breached. What remedies are available to a buyer when a seller fails to provide the goods described in the contract? What are the UCC provisions regarding the consequences of a revocation of the contract?

Accepted Answer

The failure to deliver goods is the most

Question 14

[Scuba Supplies] The Dive Shop ordered ten Mega2000 Diving Tanks, ten SuperSlick wetsuits, and ten pairs of Awesome swim fins from ScubaCo under a destination contract. The tanks were scheduled to be delivered first, and the remaining items would arrive the following day. Upon the first delivery, The Dive Shop noticed that ScubaCo sent ten Mega500 Diving Tanks, an inferior model. The Dive Shop's owner called ScubaCo and was told that ScubaCo had sold out of the Mega2000 model, but the Mega500 was the same price, was "pretty much the same", and The Dive Shop had to pay for the order or it would be in breach of contract. The following day, ScubaCo checked the remainder of the order which consisted of the wetsuits and fins and verified it to be correct. It delivered the remainder of the order, however, The Dive Shop refused delivery. On the way to its next delivery, the carrier truck ran off the side of the road and the goods were lost.
-If the contract between the parties had been an origin contract, who would bear the risk of loss for the second delivery?

Accepted Answer

A)  ScubaCo, because the risk of loss remains with the seller. 
B)  The Dive Shop, because the risk of loss transferred to the buyer on delivery, but only the remainder of the loss not covered by ScubaCo's insurance. 
C)  ScubaCo, because they had no right to refuse delivery of conforming goods. 
D)  Both parties share the risk of loss equally. 
E)  The Dive Shop but only to the extent of its insurance, the remainder transfers to ScubaCo. 
A)  ScubaCo, because the risk of loss remains with the seller. 
B)  The Dive Shop, because the risk of loss transferred to the buyer on delivery, but only the remainder of the loss not covered by ScubaCo's insurance. 
C)  ScubaCo, because they had no right to refuse delivery of conforming goods. 
D)  Both parties share the risk of loss equally. 
E)  The Dive Shop but only to the extent of its insurance, the remainder transfers to ScubaCo.

Question 15

Which of the following is true regarding the status of a common carrier in relation to the seller?

Accepted Answer

A)  The common carrier is an agent of the seller. 
B)  The common carrier is an employee of the seller. 
C)  The common carrier is both an employee and an agent of the seller. 
D)  The common carrier is a true carrier of the seller. 
E)  The common carrier is an independent contractor. 
A)  The common carrier is an agent of the seller. 
B)  The common carrier is an employee of the seller. 
C)  The common carrier is both an employee and an agent of the seller. 
D)  The common carrier is a true carrier of the seller. 
E)  The common carrier is an independent contractor.

Question 16

What was the court's ruling in City of Richmond v. Petroleum Marketers, Inc., the case in the text in which the court considered where the sale of petroleum occurred-where the contracts for the purchase of the oil were executed or where the goods were, in fact, delivered?

Accepted Answer

A)  Title to the petroleum passed when the product was pumped into whatever facility the buyer provided. 
B)  Title to the petroleum passed when the product was pumped out of the seller's holding tank and into the seller's rented tanks. 
C)  Goods were identified to the contract when the product was pumped out of the seller's holding tank and into the seller's rented tanks. 
D)  Title did not pass when the product arrived at the buyer's facility. 
E)  Title did not pass when the product was pumped out of the seller's holding tank. 
A)  Title to the petroleum passed when the product was pumped into whatever facility the buyer provided. 
B)  Title to the petroleum passed when the product was pumped out of the seller's holding tank and into the seller's rented tanks. 
C)  Goods were identified to the contract when the product was pumped out of the seller's holding tank and into the seller's rented tanks. 
D)  Title did not pass when the product arrived at the buyer's facility. 
E)  Title did not pass when the product was pumped out of the seller's holding tank.

Question 17

[Kool Klothes] Cleo recently opened an exclusive designer clothing store. She contracts with Kool Klothes to sell their high-end designer line. The contract states Kool will ship clothes each week, and Cleo has a month to pay for the clothes or she can return any merchandise she does not sell. The arrangement works well for several months, but then Kool Klothes notices several suits Cleo returns via a courier service are damaged. Also, during a weekly delivery of the Kool Klothes truck, the driver gets into a car accident, and several formal ball gowns are damaged.
-With regard to the damage to the formal ball gowns, who bears the risk of loss?

Accepted Answer

A)  Kool Klothes, because it is the seller in a sale-or-return contract. 
B)  Kool Klothes, because it is a merchant and in a simple delivery contract, risk of loss transfers on delivery of the goods to the buyer. 
C)  Cleo, because she is the buyer in a sale-or-return contract. 
D)  Cleo, because the dresses are goods in bailment. 
E)  Cleo, because under a sale-or-return contract, she can return the dresses. 
A)  Kool Klothes, because it is the seller in a sale-or-return contract. 
B)  Kool Klothes, because it is a merchant and in a simple delivery contract, risk of loss transfers on delivery of the goods to the buyer. 
C)  Cleo, because she is the buyer in a sale-or-return contract. 
D)  Cleo, because the dresses are goods in bailment. 
E)  Cleo, because under a sale-or-return contract, she can return the dresses.

Question 18

With goods in bailment, when is an insurable interest created?

Accepted Answer

A)  Only when either party has title to the goods 
B)  When either party has title or a risk of loss, but not under any other circumstances 
C)  When either party has title, risk of loss, or other economic interest attached to the goods 
D)  Two days after either party has title to the goods 
E)  Never. There is no such thing as an insurable interest in a goods-in-bailment contract 
A)  Only when either party has title to the goods 
B)  When either party has title or a risk of loss, but not under any other circumstances 
C)  When either party has title, risk of loss, or other economic interest attached to the goods 
D)  Two days after either party has title to the goods 
E)  Never. There is no such thing as an insurable interest in a goods-in-bailment contract

Question 19

Which of the following is true if an owner entrusts the possession of goods to a merchant who deals in goods of that kind?

Accepted Answer

A)  The merchant can transfer all rights in the goods to a buyer in the ordinary course of business. 
B)  The merchant can only transfer voidable title until any funds in the possession of the merchant are transferred to the owner. 
C)  The merchant can only transfer void title until any funds in the possession of the merchant are transferred to the owner. 
D)  The merchant can only transfer temporary title until any funds in the possession of the merchant are transferred to the owner. 
E)  The merchant must have any purchaser sign a document acknowledging that the purchaser will return the goods upon the request of the owner. 
A)  The merchant can transfer all rights in the goods to a buyer in the ordinary course of business. 
B)  The merchant can only transfer voidable title until any funds in the possession of the merchant are transferred to the owner. 
C)  The merchant can only transfer void title until any funds in the possession of the merchant are transferred to the owner. 
D)  The merchant can only transfer temporary title until any funds in the possession of the merchant are transferred to the owner. 
E)  The merchant must have any purchaser sign a document acknowledging that the purchaser will return the goods upon the request of the owner.

Question 20

[Kool Klothes] Cleo recently opened an exclusive designer clothing store. She contracts with Kool Klothes to sell their high-end designer line. The contract states Kool will ship clothes each week, and Cleo has a month to pay for the clothes or she can return any merchandise she does not sell. The arrangement works well for several months, but then Kool Klothes notices several suits Cleo returns via a courier service are damaged. Also, during a weekly delivery of the Kool Klothes truck, the driver gets into a car accident, and several formal ball gowns are damaged.
-With regard to the damaged suits, who bears the risk of loss?

Accepted Answer

A)  Kool Klothes, because Cleo is sending the goods back to the seller and had not purchased them. 
B)  Kool Klothes, because under a sale-or-return contract, title to the suits never passed to Cleo. 
C)  Cleo, because she is the buyer in a sale-or-return contract and only if there is no agreement to the contrary. 
D)  Cleo, because the dresses are goods in bailment. 
E)  Cleo, because under a sale-or-return contract, she can return the dresses. 
A)  Kool Klothes, because Cleo is sending the goods back to the seller and had not purchased them. 
B)  Kool Klothes, because under a sale-or-return contract, title to the suits never passed to Cleo. 
C)  Cleo, because she is the buyer in a sale-or-return contract and only if there is no agreement to the contrary. 
D)  Cleo, because the dresses are goods in bailment. 
E)  Cleo, because under a sale-or-return contract, she can return the dresses.

Exam 22: Title, Risk of Loss, and Insurable Interest

The term tender of delivery refers to the moment the goods are available for the buyer to take.

________ occurs when purchased goods are in some kind of storage under the control of a third party, such as a warehouseman.

Which of the following is true regarding types of common-carrier delivery contracts?

In cases where a shipment contract is vague or ambiguous on the issue, an origin contract will be presumed.

The UCC lays out essentially four broad factual scenarios for the sale of goods, which of the following is not one of them?

What does "FOB" mean, when used as a shipping term?

Harold's department store sells Carl a stove. When does the risk of loss transfer to Carl in a simple delivery contract?

Discuss the most common ways sales contracts are breached. What remedies are available to a buyer when a seller fails to provide the goods described in the contract? What are the UCC provisions regarding the consequences of a revocation of the contract?

Which of the following is true regarding the status of a common carrier in relation to the seller?

What was the court's ruling in City of Richmond v. Petroleum Marketers, Inc., the case in the text in which the court considered where the sale of petroleum occurred-where the contracts for the purchase of the oil were executed or where the goods were, in fact, delivered?

With goods in bailment, when is an insurable interest created?

Which of the following is true if an owner entrusts the possession of goods to a merchant who deals in goods of that kind?

An Introduction to Dynamic Business Law

Business Ethics

The Us Legal System

Alternative Dispute Resolution

Constitutional Principles

International and Comparative Law

Crime and the Business Community

Tort Law

Negligence and Strict Liability

Product Liability

Liability of Accountants and Other Professionals

Intellectual Property

Introduction to Contracts

Agreement

Consideration

Capacity and Legality

Legal Assent

Contracts in Writing

Third-Party Rights to Contracts

Discharge and Remedies

Introduction to Sales and Lease Contracts

Performance and Obligations Under Sales and Leases

Remedies for Breach of Sales and Lease Contracts

Warranties

Negotiable Instruments: Negotiability and Transferability

Negotiation, Holder in Due Course, and Defenses

Liability, Defenses, and Discharge

Checks and Electronic Fund Transfers

Secured Transactions

Other Creditors Remedies and Suretyship

Bankruptcy and Reorganization

Agency Formation and Duties

Liability to Third Parties and Termination

Forms of Business Organization

Partnerships: Nature, Formation, and Operation

Partnerships: Termination and Limited Partnerships

Corporations: Formation and Financing

Corporations: Directors, Officers, and Shareholders

Corporations: Mergers, Consolidations, Terminations

Corporations: Securities and Investor Protection

Employment and Labor Law

Employment Discrimination

Administrative Law

Consumer Law

Environmental Law

Antitrust Law

The Nature of Property, Personal Property, and Bailments

Real Property

Landlord-Tenant Law

Insurance Law

Wills and Trusts

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