Question 1

Fredrick shipped his goods to his buyer Asland via the common carrier UPS. This is known as a(n) ________.

Accepted Answer

A)  simple delivery contract 
B)  common-carrier delivery contract 
C)  goods-in-bailment contract 
D)  average delivery contract 
E)  delivery-carrier contract 
A)  simple delivery contract 
B)  common-carrier delivery contract 
C)  goods-in-bailment contract 
D)  average delivery contract 
E)  delivery-carrier contract

Question 2

Which of the following is true when the designation FAS is used?

Accepted Answer

A)  The buyer, at the buyer's expense, delivers the goods alongside the ship before the risk passes to the seller. 
B)  The buyer, at the seller's expense, delivers the goods alongside the ship before the risk passes to the seller. 
C)  The seller, at the seller's expense, delivers the goods alongside the ship before the risk passes to the buyer. 
D)  The seller, at the buyer's expense, delivers the goods alongside the ship before the risk passes to the buyer. 
E)  The common carrier, at the carrier's expense, delivers the goods alongside the ship before the risk passes to the buyer. 
A)  The buyer, at the buyer's expense, delivers the goods alongside the ship before the risk passes to the seller. 
B)  The buyer, at the seller's expense, delivers the goods alongside the ship before the risk passes to the seller. 
C)  The seller, at the seller's expense, delivers the goods alongside the ship before the risk passes to the buyer. 
D)  The seller, at the buyer's expense, delivers the goods alongside the ship before the risk passes to the buyer. 
E)  The common carrier, at the carrier's expense, delivers the goods alongside the ship before the risk passes to the buyer.

Question 3

[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.
-Who has the risk of loss for the sculpture purchased by Adler?

Accepted Answer

A)  Juno, because the contract was silent as to who bore the risk of loss. 
B)  Juno, because the document contained the words "deliver to the order of Adler". 
C)  Adler, because the contract was silent as to who bore the risk of loss. 
D)  Adler, because Juno endorsed a negotiable instrument to him. 
E)  The ship, because it had possession of the sculpture at the time of the loss. 
A)  Juno, because the contract was silent as to who bore the risk of loss. 
B)  Juno, because the document contained the words "deliver to the order of Adler". 
C)  Adler, because the contract was silent as to who bore the risk of loss. 
D)  Adler, because Juno endorsed a negotiable instrument to him. 
E)  The ship, because it had possession of the sculpture at the time of the loss.

Question 4

In a(n) ________, title passes to the buyer at the time and place of shipment.

Accepted Answer

A)  transfer contract 
B)  consumer purchase contract 
C)  delivery contract 
D)  origin contract 
E)  purchase for resale contract 
A)  transfer contract 
B)  consumer purchase contract 
C)  delivery contract 
D)  origin contract 
E)  purchase for resale contract

Question 5

Which statement about the risk of loss at the time the goods were damaged is correct?

Accepted Answer

A)  The risk of loss was with Smith-Napa. 
B)  The risk of loss was with Ivan. 
C)  The risk of loss was split 50-50 between Ivan and Smith-Napa. 
D)  The risk of loss was with Ivan only if the driver is determined to be an agent of Smith-Napa. 
E)  The risk of loss was with Smith-Napa only if the driver is determined to be an agent of Smith-Napa. 
A)  The risk of loss was with Smith-Napa. 
B)  The risk of loss was with Ivan. 
C)  The risk of loss was split 50-50 between Ivan and Smith-Napa. 
D)  The risk of loss was with Ivan only if the driver is determined to be an agent of Smith-Napa. 
E)  The risk of loss was with Smith-Napa only if the driver is determined to be an agent of Smith-Napa.

Question 6

Most buyer breaches occur when a buyer changes his or her mind about the price of the goods.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is true regarding transportation costs when the designation FOB is used?

Accepted Answer

A)  The selling price includes transportation costs. 
B)  The selling price does not include transportation costs. 
C)  The buyer and seller bear transportation costs with the costs apportioned at a rate of 50% to the buyer and 50% to the seller. 
D)  The buyer and seller with the cost being proportioned 75% to the buyer and 25% to the seller. 
E)  The buyer and seller with the cost being proportioned 25% to the buyer and 75% to the seller. 
A)  The selling price includes transportation costs. 
B)  The selling price does not include transportation costs. 
C)  The buyer and seller bear transportation costs with the costs apportioned at a rate of 50% to the buyer and 50% to the seller. 
D)  The buyer and seller with the cost being proportioned 75% to the buyer and 25% to the seller. 
E)  The buyer and seller with the cost being proportioned 25% to the buyer and 75% to the seller.

Question 8

[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.
-What type of contract does Cleo have with Kool Klothes?

Accepted Answer

A)  Simple delivery contract 
B)  Common carrier delivery contract 
C)  Goods in bailment contract 
D)  Sale-on-approval contract 
E)  Sale-or-return contract 
A)  Simple delivery contract 
B)  Common carrier delivery contract 
C)  Goods in bailment contract 
D)  Sale-on-approval contract 
E)  Sale-or-return contract

Question 9

A contract is a sale-or-return contract if the seller allows the buyer to take possession of the goods before deciding whether to complete the contract by making the purchase.

Accepted Answer

A) True 
 B)False

Question 10

[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.
-Toula is buying a delivery vehicle for her business and it will be available for her to pick up on Tuesday. On Monday, the day before her delivery truck is ready, Toula meets with her banker to complete the application for a small business loan. Can Toula use the delivery truck as collateral for the loan?

Accepted Answer

A)  Yes, because the right to encumber goods has nothing to do with title. 
B)  No, because she does not yet have title to the delivery truck. 
C)  No, because having title does not mean that one can encumber the goods. 
D)  Yes, because she has a right to encumber the goods. 
E)  No, because risk of loss has not yet passed to her. 
A)  Yes, because the right to encumber goods has nothing to do with title. 
B)  No, because she does not yet have title to the delivery truck. 
C)  No, because having title does not mean that one can encumber the goods. 
D)  Yes, because she has a right to encumber the goods. 
E)  No, because risk of loss has not yet passed to her.

Question 11

Assume a buyer and seller execute a contract in which the seller is going to deliver a couch later in the day to the buyer. With a simple delivery contract in which the seller is a merchant, which party sustains a loss if, through no fault of either party, the couch is destroyed through fire prior to delivery?

Accepted Answer

A)  The seller 
B)  The buyer 
C)  Loss is proportioned 50% to the buyer and 50% to the seller 
D)  Loss is proportioned 75% to the buyer and 25% to the seller 
E)  Loss is proportioned 25% to the buyer and 75% to the seller 
A)  The seller 
B)  The buyer 
C)  Loss is proportioned 50% to the buyer and 50% to the seller 
D)  Loss is proportioned 75% to the buyer and 25% to the seller 
E)  Loss is proportioned 25% to the buyer and 75% to the seller

Question 12

[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.
-What is the term used for the goods while they are in storage on board the ship?

Accepted Answer

A)  Goods in storage 
B)  Goods in bailment 
C)  Goods on board 
D)  Free on board 
E)  Free on bailment 
A)  Goods in storage 
B)  Goods in bailment 
C)  Goods on board 
D)  Free on board 
E)  Free on bailment

Question 13

Renée goes to Great Deal and buys a plasma TV. She pays for it, and the store agrees to deliver it. Unfortunately, on the way to her house, the vehicle overheats and burns, destroying the truck and the TV inside. Renée asks for a refund or another TV. The store owner refuses on the basis that risk of loss had passed to Renée. What would be the result of a lawsuit between Renée and Great Deal under the UCC?

Accepted Answer

Under the UCC, since the store

Question 14

If an owner entrusts the possession of goods to a merchant who deals in goods of that kind, the merchant has no authority to transfer any rights in the goods to a buyer in the ordinary course of business.

Accepted Answer

A) True 
 B)False

Question 15

A(n) ________ contract requires that the seller make proper shipping arrangements and deliver goods to the buyer via a common carrier, but not guarantee the safety of goods to their destination.

Accepted Answer

A)  destination 
B)  origin 
C)  transfer 
D)  common-carrier 
E)  risk 
A)  destination 
B)  origin 
C)  transfer 
D)  common-carrier 
E)  risk

Question 16

[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.
-Are Mavis' concerns about a lack of agreement between Singapore and Indonesia accurate?

Accepted Answer

A)  Yes, there are no anti-piracy agreements between the two countries. 
B)  Yes, even though there are agreements between the two countries, they have taken no steps to halt piracy. 
C)  No, both countries have signed an agreement that aims to halt piracy. 
D)  No, although the countries have not signed an agreement that aims to halt piracy, there are no risks involved in shipping on international waters. 
E)  Yes, there are no agreements between the two countries that affect shipping. 
A)  Yes, there are no anti-piracy agreements between the two countries. 
B)  Yes, even though there are agreements between the two countries, they have taken no steps to halt piracy. 
C)  No, both countries have signed an agreement that aims to halt piracy. 
D)  No, although the countries have not signed an agreement that aims to halt piracy, there are no risks involved in shipping on international waters. 
E)  Yes, there are no agreements between the two countries that affect shipping.

Question 17

In a destination contract, the ________ bears the risk of loss while the goods are in transit.

Accepted Answer

A)  seller 
B)  buyer 
C)  third-party carrier 
D)  seller and the third party carrier split the risk of loss equally 
E)  buyer and seller split the risk of loss equally 
A)  seller 
B)  buyer 
C)  third-party carrier 
D)  seller and the third party carrier split the risk of loss equally 
E)  buyer and seller split the risk of loss equally

Question 18

Which statement is correct regarding CIF agreements?

Accepted Answer

A)  Risk of loss occurs when goods are identified to the contract. 
B)  Risk of loss occurs when the goods are delivered to the buyer. 
C)  Risk of loss remains with the seller for 5 days after the sale. 
D)  Risk of loss remains with the seller for 5 days before the sale. 
E)  The seller puts the goods into the possession of a carrier before the risk passes to the buyer. 
A)  Risk of loss occurs when goods are identified to the contract. 
B)  Risk of loss occurs when the goods are delivered to the buyer. 
C)  Risk of loss remains with the seller for 5 days after the sale. 
D)  Risk of loss remains with the seller for 5 days before the sale. 
E)  The seller puts the goods into the possession of a carrier before the risk passes to the buyer.

Question 19

Assume a buyer and seller execute a contract in which the seller is going to deliver a couch later in the day to the buyer. With a simple delivery contract in which the seller is not a merchant, which party sustains a loss if, through no fault of either party, the couch is destroyed through fire prior to delivery?

Accepted Answer

A)  The seller 
B)  The buyer 
C)  Loss is proportioned 50% to the buyer and 50% to the seller 
D)  Loss is proportioned 75% to the buyer and 25% to the seller 
E)  Loss is proportioned 25% to the buyer and 75% to the seller 
A)  The seller 
B)  The buyer 
C)  Loss is proportioned 50% to the buyer and 50% to the seller 
D)  Loss is proportioned 75% to the buyer and 25% to the seller 
E)  Loss is proportioned 25% to the buyer and 75% to the seller

Question 20

Frieda purchased a large desk at a garage sale. She asked the seller if she could leave the desk at the side of the road so she could go home and get her pickup truck. When she returned, she found that the desk had been struck by a car and demolished. Can Frieda get her money back?

Accepted Answer

A)  Yes, because the risk of loss does not transfer until she takes possession. 
B)  Yes, because the seller allowed Frieda to leave the goods until she takes possession. 
C)  Yes, because the goods were not tendered until she takes possession. 
D)  No, because the desk was available for Frieda to take when she purchased it and thus she bore the risk of loss. 
E)  No, because, even though the desk was available for Frieda to take when she purchased it, the risk of loss does not transfer until delivery. 
A)  Yes, because the risk of loss does not transfer until she takes possession. 
B)  Yes, because the seller allowed Frieda to leave the goods until she takes possession. 
C)  Yes, because the goods were not tendered until she takes possession. 
D)  No, because the desk was available for Frieda to take when she purchased it and thus she bore the risk of loss. 
E)  No, because, even though the desk was available for Frieda to take when she purchased it, the risk of loss does not transfer until delivery.

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

Fredrick shipped his goods to his buyer Asland via the common carrier UPS. This is known as a(n) ________.

Which of the following is true when the designation FAS is used?

In a(n) ________, title passes to the buyer at the time and place of shipment.

Which statement about the risk of loss at the time the goods were damaged is correct?

Most buyer breaches occur when a buyer changes his or her mind about the price of the goods.

Which of the following is true regarding transportation costs when the designation FOB is used?

A contract is a sale-or-return contract if the seller allows the buyer to take possession of the goods before deciding whether to complete the contract by making the purchase.

If an owner entrusts the possession of goods to a merchant who deals in goods of that kind, the merchant has no authority to transfer any rights in the goods to a buyer in the ordinary course of business.

A(n) ________ contract requires that the seller make proper shipping arrangements and deliver goods to the buyer via a common carrier, but not guarantee the safety of goods to their destination.

In a destination contract, the ________ bears the risk of loss while the goods are in transit.

Which statement is correct regarding CIF agreements?

Frieda purchased a large desk at a garage sale. She asked the seller if she could leave the desk at the side of the road so she could go home and get her pickup truck. When she returned, she found that the desk had been struck by a car and demolished. Can Frieda get her money back?

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

Filters