Deck 23: Transfer of Title and Risk of Loss

Question 1

The Code has expanded the rights of good faith purchasers with respect to sales by minors.

Answer 1

True

Question 2

Under a shipment contract, the seller passes title to the buyer when the goods arrive.

Answer 2

False

Question 3

Claraine obtained a necklace by criminal fraud punishable as larceny.If she sells the necklace to Sherry, who is a good faith purchaser for value, Sherry obtains valid title.

Answer 3

True

Question 4

Carl ordered 1,000 sq.ft.of green carpet from RS Company.In error, RS Company shipped 1,000 sq.ft.of yellow carpet.In this case, the risk of loss remains with the seller until Carl accepts the yellow carpet or RS Company remedies the defect.

Question 5

Mario, a minor, sells his bicycle to Jimmy for $150.A week later, Kelly, who does not know Mario, buys the bike from Jimmy for $200.Mario, upon learning about Jimmy's sale of the bike, disaffirms his contract with Jimmy.Kelly does not have valid title and must return the bike to Mario.

Question 6

If the owner of goods entrusts them to a merchant, the merchant can transfer good title to the goods to a buyer in the ordinary course of business even if the original owner does not want to sell the goods.

Question 7

Title to existing, identified goods can pass whenever the parties agree it will pass.

Question 8

The buyer and seller of goods may not simultaneously hold insurable interests in the goods.

Question 9

Given a transaction involving two innocent persons, the true owner and the good faith purchaser for value, the law will not disturb the legal title but will rule in favor of the one who has it.

Question 10

A good faith purchaser acts honestly, gives value, and takes the goods without notice or knowledge of any defect in the title.

Question 11

If goods are sold and delivered to buyer with an option to return them, the risk is on the buyer until they are returned.

Question 12

The bulk sales portion of the Code applies only to transfers in the ordinary course of business.

Question 13

Jerry bought a stereo from SX Company "on approval." The risk of loss passed to Jerry when he took possession of the stereo.

Question 14

A major purpose of the bulk sales provisions of the Code is to protect the seller's creditors.

Question 15

Security interests in goods are governed by the common law rather than the UCC.

Question 16

The UCC and the common law are essentially the same in regard to their treatment of risk of loss or damage to identified goods.

Question 17

Future goods can be the subject of a present sale.

Question 18

The distinction between a void and voidable title is not important in determining the rights of good faith purchasers of goods.

Question 19

The UCC "risk of loss" rules depend on transfer of title.

Question 20

When delivery is to be made by physically moving the goods, title passes at the time and place at which the seller completes performance with reference to delivery of the goods.

Question 21

Community Hospital in Atlanta entered into a contract to buy delicate lab equipment from D & D Company in Denver.The contract states shipping terms as FOB, Denver.While in transit the equipment was damaged beyond repair by the carrier, Fly-by-Nite Air Lines.The carrier is in weak financial condition and refused to pay for the equipment.In this case:

A)D & D Company must replace the equipment at no cost to the hospital.
B)Community Hospital has risk of loss.
C)D & D Company and Community Hospital will share the loss equally.
D)risk of loss will depend on which party chose Fly-by-Nite as the carrier.

Question 22

The UCC uses a transactional approach to risk of loss questions.

Question 23

Ralph buys a bicycle for his son.The transaction is considered a sale of goods under the UCC.

Question 24

Which of the following is true regarding identification of the goods under Article 2?

A)Only the buyer can identify the goods.
B)Identification of existing goods gives the buyer a special property interest.
C)Fungible goods are identified when the seller separates the contracted units from the whole.
D)All of these are correct.

Question 25

Identification may be made by either the seller or the buyer.

Question 26

Dividing the risk and the shift of allocation of risk are options by agreement of both parties.

Question 27

If goods are fungible, identification of a share of undivided goods occurs when the parties enter into the contract.

Question 28

Mark, a college student, agreed to sell his horse to Henry for $1,000.The contract required Mark to take the horse on that same day to Idlewild Stables where Henry was going to board the horse.Henry paid Mark the money, patted the horse and said, "I'm glad you're mine, you beauty," and drove off.Mark then led the horse into the trailer and set off for the two-hour drive to Idlewild.Has there been a sale?

A)No, not until delivery to Idlewild.
B)No, not until Henry sees the horse again.
C)Yes, since Henry already paid for it.
D)Yes, since the contract was made earlier in the day.

Question 29

A basic tenet of the law, as codified in the UCC, is that a purchaser of goods obtains such title as his transferor had or had the power to transfer.

Question 30

The seller has an insurable interest in goods even though he no longer owns them if he continues to retain a security interest in them.

Question 31

Kollenberg's sold a substantial part of its equipment to Castillo Brothers.Nothing else was involved in the sale.The
sale of the equipment is a bulk transfer under the Code.

Question 32

Except in a finance lease, the risk of loss passes to the lessee in a lease of personal property.

Question 33

Howard stole a computer and then sold it to his friend Ivan for $100.Ivan has:

A)good title to the computerr, because he paid for it.
B)a voidable title to the computer.
C)a void title to the computer.
D)good title to the word computer if he is a good faith purchaser for value.

Question 34

If a contract is not clearly a destination or a shipment contract, the law assumes that it is a shipment contract.

Question 35

Steve sold his canoe to his neighbor Rhonda for $300.Steve then tells Rhonda, "I'll put the canoe in my driveway and you can pick it up any time tomorrow." Steve retains risk of loss until Rhonda picks up the canoe.

Question 36

A seller has the right to transfer title:

A)in any case in which the seller has possession of the goods.
B)in all cases in which the seller has the power to transfer title.
C)even if the seller does not have either possession of or title to the goods, if he has authority to sell the goods for the rightful owner.
D)only if the seller is the rightful owner of the goods.

Question 37

A sale exists when the buyer takes:

A)title to the goods.
B)the risk of loss on the goods.
C)an insurable interest in the goods.
D)a special property interest in the goods.

Question 38

Z, a seller in Miami, enters into a contract which states that goods are to be delivered to X, a buyer, in New York. Title is to remain with Z until delivery to X.This is:

A)a shipment contract.
B)an FOB Miami contract.
C)a destination contract.
D)a contract voidable by the buyer until delivery.

Question 39

In a lease of personal property, title does not pass.

Question 40

Which of the following is/are required for a valid tender under the Code? The seller must:

A)put and hold conforming goods at the buyer's disposition.
B)give notice to the buyer that the goods are available.
C)give notice at a reasonable time and keep the goods available for a reasonable period of time.
D)All of these are required.

Question 41

Inga runs a Swedish health spa in Connecticut.She orders 100 loofah sponges from a company in California.They are sent "F.O.B.Hartford, Connecticut," but they never arrive at Inga's.What consequence?

A)Inga has to pay anyway since it was a destination contract.
B)The California company is required to bear the loss since the sponges had not yet reached the F.O.B.point.
C)The California company and Inga will have to split the loss since they did not specify in their contract when ^{the risk of loss would pass to Inga.}
D)It cannot be determined from the information given who has the risk of loss.

Question 42

New Horizons delivers 20 dozen blankets to its agent, Marketall, for sale by Marketall.Marketall maintains a place of business where it sells bedding under its own name.A creditor of Marketall may obtain possession of New Horizons' blankets:

A)under the Code, since a consignment is regarded as a sale or return.
B)but cannot prevail against New Horizons because New Horizons keeps title in a consignment until the goods are sold to a third party.
C)and will prevail against New Horizons even if Marketall had a sign, in compliance with state law, evidencing New Horizons' ownership interest in the blankets.
D)and will prevail against New Horizons even if Marketall can establish that it is generally known by its creditors to be substantially engaged in selling the goods of others.

Question 43

Jack is a guest in Harry's home.While there, he goes into the library and picks up a music box that is part of Harry's collection.Jack overwinds the stem and it breaks.Hoping Harry won't notice, Jack takes the music box for repair to a jeweler who sells similar ones.The jeweler fixes it, but forgets to tag it and an unsuspecting clerk sells it to Robert.Jack is frantic.Can Harry get the music box from Robert?

A)No, the jeweler gives good title to a bona fide purchaser for value
B)No, the jeweler was not a merchant with regard to the music box
C)Yes, Robert was not a buyer in the ordinary course of business
D)Yes, Robert has assumed only Jack's title, which is no title at all

Question 44

Brett contracts to purchase a particular automobile from Johnson's car lot.At what point does Brett obtain a special property interest that enables him to insure the car?

A)When the car is tendered to Brett
B)When the contract is made
C)When Brett pays for the car
D)When Brett accepts the car

Question 45

Amanda ordered fifty personalized sweatshirts from King Manufacturing Company.After the shirts were specially imprinted, but before they were mailed, Amanda called King Manufacturing to disavow the contract.The next day the sweatshirts were stolen.Who must bear the loss?

A)Amanda must pay the entire purchase price, because she breached the contract.
B)King will have to bear the entire loss, because it had not yet mailed the shirts.
C)Amanda must bear the entire loss, because the shirts were identified to the contract.
D)King must first seek payment from its insurance carrier, and then collect from Amanda for any amount not covered by insurance.

Question 46

In the goods are sold and delivered to the buyer with an option to return them to the seller.

A)a bailment
B)a sale on approval
C)a sale or return
D)entrusting to a merchant

Question 47

In a sale on approval:

A)possession but not title is transferred to the buyer for a stated period of time.
B)possession and title are transferred to the buyer for a stated period of time.
C)title but not possession is transferred to the buyer for a stated period of time.
D)title but not risk of loss remains with the seller until the buyer accepts the goods.

Question 48

Tom makes pottery in his spare time.Jackie asks if he'd sell her a particular covered bowl.Later that day, he telephones her and says she can have it for $50.She agrees, so he tells her he'll wrap it up for her and it will be ready in half an hour.Six days later, Jackie had not yet come for the bowl when a dog knocks the box off the shelf and breaks the bowl.Who is liable?

A)Tom, because he is a merchant regarding the pottery and Jackie had not yet received the bowl
B)Tom, because the bowl was in his possession when the dog broke it
C)Jackie, because she had identified the bowl
D)Jackie, because Tom had it ready for her to pick up for nearly a week

Question 49

According to the Code, identification takes place:

A)upon the making of a contract if it is for future goods.
B)when the seller ships, marks, or otherwise designates the goods as those to which the contract refers if the contract is for goods that are already existing and identified.
C)when the crops are planted or start growing if the contract is for crops to be grown within twelve months.
D)when the young animals are born if the contract is for offspring of animals to be born within twelve months.

Question 50

If the goods that are the subject of a sale are in the possession of a bailee and are to be delivered without being moved, when does the risk of loss pass to the buyer?

A)When the seller tenders a negotiable document of title
B)When the buyer receives a negotiable document of title or a nonnegotiable document of title is tendered to the buyer
C)When a negotiable or nonnegotiable document of title is tendered to the buyer
D)When the seller tenders a negotiable or nonnegotiable document of title

Question 51

At common law, the risk of loss or damage to goods identified under a contract of sale falls upon:

A)the buyer.
B)the seller.
C)the party who had title or ownership of the goods at the time of the loss or damage.
D)the designated party as determined by the court.

Question 52

Brenda agrees to lease a new car from Hyland Motors.Which of the following statements is true?

A)Brenda has no insurable interest in the car.
B)Brenda receives title at the time of her contract with Hyland Motors.
C)Hyland Motors retains an insurable interest in the car unless and until Brenda exercises an option to buy the car.
D)None of the above.

Question 53

The seller and buyer of goods agree that identification will be made by the seller when it manufactures and separates those particular goods out for the buyer.Identification will actually occur:

A)at the time and in the manner agreed upon by the parties.
B)according to Code Section 2-501, upon the making of the contract of sale.
C)when the buyer points out the particular goods it wants; the seller cannot identify goods.
D)when the goods are tendered to the carrier for shipment to the buyer.

Question 54

Under the CISG:

A)loss of or damage to the goods after the risk of loss has passed to the buyer does not discharge the buyer from the obligation to pay the purchase price.
B)loss of or damage to the goods after the risk of loss has passed to the buyer discharges the buyer from the obligation to pay the purchase price.
C)if the buyer is bound to take over the goods at a place other than the seller's place of business, the risk of loss passes when the goods arrive at that location.
D)if the sales contract does not involve the carriage of the goods, the risk of loss passes to the buyer as soon as the goods are placed at his disposal, regardless of the amount of time it takes him to take possession.

Question 55

Growingreen, a gourmet fresh food store, orders 100 lbs.of peaches from Western Fruits "on approval." Growingreen has never dealt with Western before this transaction.Since it only sells the highest quality fruits, Growingreen asked for and received these special terms.The peaches arrived on Saturday, but the owners of Growingreen were too busy to open the crates.Sunday they are closed.Monday at 4 p.m., they opened the boxes and inspected the peaches.They did not meet the high standards of Growingreen, so they nailed the crates shut and ordered a truck to return them the next day.They arrived at Western on Thursday, totally spoiled, a week after they were sent.This is the first time Western knew they were not being accepted.Who is responsible for the damages to the peaches?

A)Growingreen, since it did not, within a reasonable time, notify Western of its election to return the peaches
B)Growingreen; the risk of loss was on them when the peaches arrived
C)Western, since they retained the risk of loss until approval
D)Western, because they agreed to take the goods back

Question 56

Property law protects existing ownership of goods.A principal belief underlying this policy is:

A)a person should not be required to retain constant possession of all the goods he owns, yet at the same time, ownership should be indicated by who is in possession of the goods.
B)while a person should not be required to retain constant possession of all the goods he owns, there must be a method for good faith purchasers for value to be protected so they may make safe acquisitions of goods.
C)even good faith purchasers should be held responsible for making sure the item they are buying wasn't stolen from the rightful owner.
D)there must not be conflicts among underlying beliefs.

Question 57

Although he knows the ring is really valuable, Alex tells Mona her ring contains artificial gems, but he would be willing to buy it for $50.Mona agrees.Alex quickly takes the ring to Hanna's Antique Jewelry Shop and sells it for
$1,000.A month later, Mona sees her ring on sale for $2,000 at the shop.Is Mona entitled to get the ring back?

A)Yes, she is the true owner of the ring since she was defrauded.
B)Yes, since Alex had void title to the ring.
C)No, since Alex had voidable title to the ring and Hanna was a good faith purchaser.
D)No, since Mona was an entruster.

Question 58

Mary orders a dress for $1,000.Mary doesn't inspect the dress on arrival and therefore doesn't discover a flaw in the fabric until the day before she is to wear it to her first board meeting as president of Tri-State Engineering.This is a month after the dress arrived.She calls the designer and sends the dress back, but it is lost in the mail.Mary's insurance would cover $400 of the loss.The designer's insurance would cover $900.Who is liable?

A)Mary will bear the whole loss because she accepted the goods.
B)The designer will bear the whole loss because Mary returned the nonconforming goods.
C)Mary will owe $100; the designer, $900.
D)The risk is Mary's to the extent of $400.

Question 59

A(n) is a delivery of possession of personal property to an agent for sale by the agent.

A)sale on approval
B)consignment
C)sale or return
D)None of these.

Question 60

Alex tells Mona that he thinks her ring is very valuable and that he would like to take it to be appraised.She gives him the ring, and he quickly sells it to unsuspecting Hanna's Antique Jewelry Shop for $2,000.A week later, Mona discovers her ring on sale at Hanna's and uncovers the story.Can Mona get the ring back?

A)Yes, a true owner can always recover his or her own property
B)Yes, since Alex had no title to the ring
C)No, since Alex had voidable title to the ring and Hanna was a good faith purchaser
D)No, since Hanna has paid for the ring

Question 61

With regard to UCC Article 6, which of the following is true?

A)The 1988 joint recommendation of the National Conference of Commissioners on Uniform State Laws and the American Law Institute was for states to adopt the revised version of Article 6, which the majority of states have done.
B)At least 45 states have repealed Article 6.
C)Article 60 is a revision of Article 6.
D)All of these.

Question 62

Discuss who has the risk of loss in the absence of a breach in a destination contract for the sale of goods.Also discuss the effect of an agreement of the parties.

Question 63

Under the UCC, identifying goods to which a contract refers gives the buyer a special property interest which permits the holder to:

A)insure the goods.
B)immediately transfer title to the goods.
C)take immediate possession of the goods from the seller.
D)sue the seller for improper treatment of the goods.