Exam 18: Title and Risk of Loss

Quality Computer Company agrees to sell one hundred servers to Social Media Networks, Inc. The servers, which Social Media Networks expressly requires to have certain amounts of memory, are to be shipped "F.O.B. Social Media Networks distribution center in Memphis, TN." When the servers arrive, Social Media Networks rejects them and informs Quality Computer, claiming that the servers do not conform to Social Media Networks' memory requirement. A few hours later, the servers are destroyed in a fire at Social Media Networks' distribution center. Will Quality Computer succeed in a suit against Social Media Networks for the cost of the goods?

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Question 1

Correct Answer:

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No, because the goods were nonconforming, and so the cost of their loss will be borne by Quality Computer, the seller. When goods are shipped and destroyed while in the possession of the buyer, if a contract does not state who bears the risk of loss, the determining factor is whether there has been a breach of the contract. There is a breach if the goods are so nonconforming as to give the buyer a right of rejection. In that situation, the risk of loss belongs to the seller until the defects are cured or until the buyer accepts the goods in spite of their defects. It makes no difference, in these circumstances, whether the agreement is a shipment contract or a destination contract. Here, the goods were destroyed without their defects being cured and without the buyer's accepting them anyway.

Household Appliance Corporation sells Ideal-brand vacuum cleaners to Jolly Discount stores and other retailers. Household will have an insurable interest in the vacuums as long as

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Question 2

Correct Answer:

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An owner in common of fungible goods can pass title and risk of loss to the buyer only by actually separating the goods.

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(True/False)

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Question 3

Correct Answer:

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False

In a sale or return, a buyer has an option to return the goods and undo the sale.

(True/False)

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Question 4

A buyer cannot acquire any more right to goods than the seller has to the goods sold.

(True/False)

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Question 5

Title can pass to the buyer from the seller before the goods are identified to the contract.

(True/False)

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Question 6

Candy Corporation orders Double Chocolate Bars from Edibles Distribution Company. Edibles identifies the goods. Before they are shipped to Candy, an insurable interest in the goods exists in

(Multiple Choice)

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Question 7

A contract between Fresh Fruit Corporation and Green Grocer, Inc., requires Fresh Fruit to deliver goods to Green Grocer's place of business. This is

(Multiple Choice)

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Question 8

Equipment Rental Corporation (ERC) agrees to lease two backhoes to Dig & Fill Construction, Inc. Before any interest in the backhoes can pass from ERC to Dig & Fill, they must be

(Multiple Choice)

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Question 9

United Wear Inc. and Winter Gear stores enter into a contract for a sale of coats. Their contract can indicate that the price includes transportation costs to a specific destination by including the term

(Multiple Choice)

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Question 10

Generally, all contracts are assumed to be destination contracts if nothing to the contrary is stated in the contract.

(True/False)

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Question 11

Gas & Wood Stove Shop receives Hearth-brand stoves from Indie Dealer, Inc., under a sale or return agreement. While the stoves are in Gas & Wood's possession, title is held by

(Multiple Choice)

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Question 12

Brad leaves a laptop at Computer Sales & Repair (CSR) to have the battery replaced. CSR sells the laptop to Doris, who does not know that it belongs to Brad. Brad can recover

(Multiple Choice)

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Question 13

In most situations involving sales or leases, rights and liabilities are generally not determined by who has title to the goods.

(True/False)

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Question 14

Buyers and lessees have an insurable interest in identified goods even if the risk of loss has not yet passed .

(True/False)

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Question 15

When no documents of title are required, title does not pass.

(True/False)

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Question 16

A trucking company that normally issues documents of title for goods it receives is called a bailee.

(True/False)

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Question 17

Great Bikes, Inc., allows Herb to take an Itasca-brand motorcycle for a "test run." Herb tries the bike for a few hours, returns, and buys it. This is

(Multiple Choice)

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Question 18

Eve buys from Fiesta Autos a used pick-up truck. The truck was manufactured by Gem Vehicles, Inc., and previously owned by Hal. Regarding title to the truck, Eve acquires

(Multiple Choice)

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Question 19

In a shipment contract, risk of loss passes to the buyer or lessee when the goods are delivered to the carrier.

(True/False)

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Question 20

Showing 1 - 20 of 72

Exam 18: Title and Risk of Loss

Household Appliance Corporation sells Ideal-brand vacuum cleaners to Jolly Discount stores and other retailers. Household will have an insurable interest in the vacuums as long as

An owner in common of fungible goods can pass title and risk of loss to the buyer only by actually separating the goods.

In a sale or return, a buyer has an option to return the goods and undo the sale.

A buyer cannot acquire any more right to goods than the seller has to the goods sold.

Title can pass to the buyer from the seller before the goods are identified to the contract.

Candy Corporation orders Double Chocolate Bars from Edibles Distribution Company. Edibles identifies the goods. Before they are shipped to Candy, an insurable interest in the goods exists in

A contract between Fresh Fruit Corporation and Green Grocer, Inc., requires Fresh Fruit to deliver goods to Green Grocer's place of business. This is

Equipment Rental Corporation (ERC) agrees to lease two backhoes to Dig & Fill Construction, Inc. Before any interest in the backhoes can pass from ERC to Dig & Fill, they must be

United Wear Inc. and Winter Gear stores enter into a contract for a sale of coats. Their contract can indicate that the price includes transportation costs to a specific destination by including the term

Generally, all contracts are assumed to be destination contracts if nothing to the contrary is stated in the contract.

Gas & Wood Stove Shop receives Hearth-brand stoves from Indie Dealer, Inc., under a sale or return agreement. While the stoves are in Gas & Wood's possession, title is held by

Brad leaves a laptop at Computer Sales & Repair (CSR) to have the battery replaced. CSR sells the laptop to Doris, who does not know that it belongs to Brad. Brad can recover

In most situations involving sales or leases, rights and liabilities are generally not determined by who has title to the goods.

Buyers and lessees have an insurable interest in identified goods even if the risk of loss has not yet passed .

When no documents of title are required, title does not pass.

A trucking company that normally issues documents of title for goods it receives is called a bailee.

Great Bikes, Inc., allows Herb to take an Itasca-brand motorcycle for a "test run." Herb tries the bike for a few hours, returns, and buys it. This is

Eve buys from Fiesta Autos a used pick-up truck. The truck was manufactured by Gem Vehicles, Inc., and previously owned by Hal. Regarding title to the truck, Eve acquires

In a shipment contract, risk of loss passes to the buyer or lessee when the goods are delivered to the carrier.

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