Deck 21: Title Risk and Insurable Interest

Question 1

Identification is not significant for the buyer or lessee.

Answer 1

False

Question 2

In a shipment contract, the seller is required to deliver the goods to a particular destination.

Answer 2

False

Question 3

Identification is one of the concepts involved in determining the rights and liabilities of parties to a sales contract.

Answer 3

True

Question 4

Identification is the express designation of the goods provided for in a contract.

Question 5

In a sales contract, the passage of risk of loss from a seller to a buyer gives the buyer the right to insure the goods.

Question 6

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

Question 7

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

Question 8

The parties can agree in their contract when identification will take place.

Question 9

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

Question 10

Generally, the buyer acquires whatever title the seller has to the goods sold.

Question 11

The UCC's provisions relating to passage of title do not apply to leases of goods.

Question 12

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

Question 13

A receipt issued by a warehouser for goods stored in a warehouse is a warehouse receipt .

Question 14

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

Question 15

Goods that are not both existing and identified to the contract are called future goods .

Question 16

Risk of loss cannot pass from seller to buyer unless the goods are identified to the contract.

Question 17

If the seller's title is voidable , a good faith purchaser acquires no title, and the real owner can reclaim the goods.

Question 18

If the seller's title is void , the seller has the power to transfer good title to a good faith purchaser.

Question 19

If a person buys cattle at a livestock auction, unless the parties agree otherwise, title will pass to the buyer when the cattle are physically delivered.

Question 20

If the contract calls for the sale or lease of specific goods that are already in existence, identification takes place when the goods are shipped.

Question 21

On a contract-"F.O.B. New York"-for a sale of almonds by a broker in California, the risk of loss passes to the buyer when conforming goods are placed in the possession of the carrier.

Question 22

In a shipment contract, risk of loss remains with the seller until the goods are delivered to the buyer at the buyer's place of business.

Question 23

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

Question 24

Equip Corporation agrees to lease a woodchipper to Forest Management LLC. Before any interest in the woodchipper can pass from Equip to Forest, it must be

A)in existence and identified as the goods in the contract.
B)in Equip's physical possession.
C)in Forest's physical possession.
D)listed in a document of title filed in the appropriate state office.

Question 25

Identification gives

A)the state the right to impose taxes on a sale or lease of goods.
B)the buyer or lessee the right to insure certain goods.
C)the seller the right to collect payment for goods before their delivery.
D)none of the choices.

Question 26

When a buyer breaches a contract, risk of loss remains with or reverts to the seller.

Question 27

In a sale of oranges from Citrus Grove Farms to Donuts & Juice Inc. to be delivered after the harvest, a fire destroys the fruit before it is picked. Under the UCC, the rights and liabilities of Citrus and Donuts in this circumstance are generally determined by

A)the right of ownership.
B)who has title.
C)the concepts of identification and risk of loss.
D)all of the choices.

Question 28

After title passes to a buyer, a seller no longer has an insurable interest in the goods.

Question 29

If the seller is not a merchant, and the goods are being held by the seller for the buyer to pick up, the risk of loss passes to a buyer on identification.

Question 30

When a buyer breaches a sales contract, the risk of loss remains with the seller to the extent of any deficiency in the buyer's insurance coverage.

Question 31

Buyers and lessees have an insurable interest in identified goods.

Question 32

When a bailee is holding goods that are to be delivered under a contract without being moved, risk of loss passes when the bailee acknowledges the buyer's right to the goods.

Question 33

If a lessor is a merchant who is holding the goods for the buyer to pick up, the risk of loss passes to a lessee when the lessee takes physical possession of the goods.

Question 34

Barley that fills Cultivator Co-op's silo is fungible if the grain is

A)alike naturally, by agreement, or by trade usage.
B)fundamentally different.
C)good, edible, and marketable.
D)rotting due to a fungus caused by a leaky roof and a delay in shipping.

Question 35

If a seller supplies ten dishwashers in response to an order for ten washing machines-"F.O.B. the seller's warehouse"-and the goods are damaged in transit to the buyer's store, the loss falls on the seller.

Question 36

Generally, the party in breach of a sales contract bears the risk of loss.

Question 37

Parties to sales or lease contracts often obtain insurance coverage to protect against damage, loss, or destruction of the goods.

Question 38

Security Insurance Agency contracts with Town Motors to buy six cars. The contract lists the cars by their VINs (vehicle identification numbers). Under the UCC, identification

A)requires the filing of a copy of the contract in the appropriate state office.
B)has taken place.
C)cannot take place unless the cars are in the seller's possession.
D)cannot take place until the cars are in the buyer's possession.

Question 39

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

Question 40

If the seller is a merchant who is holding the goods for the buyer to pick up, the risk of loss passes when the buyer takes physical possession of the goods.

Question 41

Mountain Coffee Company and Nature's Cuisine Inc. enter into a contract for a sale of coffee beans. The contract includes the term "F.O.B. Ocean City," which is the location of Nature's Cuisine. This means that the contract is

A)a bill of lading.
B)a destination contract.
C)a shipment contract.
D)a warehouse receipt.

Question 42

Ota buys a Prius from Quincy's Toyota, paying with a check that is later dishonored. Ota offers to sell the car to Rafe for cash. With respect to this offer, Ota's title to the car is

A)valid.
B)voidable.
C)void.
D)good.

Question 43

Beef Ranch raises calves to sell. In January, Cold Cuts Inc. contracts with Beef to buy fifty calves. Beef breeds its cows in April, and the cows calve in February of the following year. Identification of the calves to the Cold Cuts contract takes place in

A)January, when the contract is signed.
B)April, when the calves are conceived.
C)February, when the calves are born.
D)when the buyer takes possession of the calves.

Question 44

EverSafe Corporation in New York sells a truckload of protective suits, masks, and other safety gear to Foundry Inc. in Connecticut, "F.O.B. New York." EverSafe arranges with Geo Truckline to transport the goods. The cost of the transport will be paid by

A)EverSafe.
B)Foundry.
C)Geo.
D)all businesses through an increase in the prices of safety gear.

Question 45

Red Bev LLC contracts to buy two tons of strawberries from Sweet Fruits, Inc. The contract states that Sweet Fruits is required to ship the strawberries to Red Bev by Truck Transport Inc. The contract is

A)a bill of lading.
B)a destination contract.
C)a shipment contract.
D)a warehouse receipt.

Question 46

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

A)whatever title Fiesta had.
B)whatever title Gem had.
C)whatever title Hanna had.
D)no title.

Question 47

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

A)C)I.F.
B)delivery ex-ship.
C)F)A.S.
D)F)O.B.

Question 48

Quaff Café buys twenty-five crates of apples from Reynaldo Produce, Inc. The parties agree to ship the apples "F.O.B. Quaff" via Swift Trucking Company. The apples rot in transit. The loss is suffered by

A)Quaff.
B)Swift.
C)F)O.B.
D)Reynaldo.

Question 49

Pipe Company orders six irrigation pumps from Quality Pumps Inc. The pumps are stored in Re-storage Warehouse. Under the terms of the order, Quality must give Pipe a warehouse receipt for the goods, which the buyer will then pick up. Title to the goods passes to Pipe when

A)Quality stores the pumps.
B)Pipe orders the pumps.
C)Pipe picks up the pumps.
D)Quality gives Pipe the warehouse receipt.

Question 50

Roasters Corporation and Outdoor Barbecues Inc. enter into a contract for a sale of a commercial grill. The contract requires Roasters to deliver the goods to Speedy Delivery Company for transport to Outdoor. Risk of loss passes to Outdoor when

A)Roasters delivers the goods to Speedy.
B)Roasters and Outdoor enter into their contract.
C)Speedy transports the goods to Outdoor.
D)Outdoor begins to use the grill.

Question 51

Runners Feet, a shoe store, orders one hundred pair of athletic shoes from Speedster Inc. Absent a contrary agreement between the parties, title will pass to Runners Feet when

A)the parties sign the contract.
B)the goods exist and are identified.
C)the seller physically delivers the goods.
D)the buyer pays for the goods.

Question 52

Regional Freight LLC delivers a receipt issued by Storage Warehouse for goods stored in its facility to Transnational Inc., a buyer of the goods. This is

A)a bill of lading.
B)a destination contract.
C)a shipment contract.
D)a warehouse receipt.

Question 53

Roofing Contractor LLC buys roof tiles from Shingles Inc. The parties agree that the tiles will be shipped "F.O.B. Shingles" to Roofing via Tristate Shipping Corporation. The goods are lost in transit. The loss is suffered by

A)Tristate.
B)Shingles.
C)Roofing.
D)consumers by an increase in the prices of tiles and shipping.

Question 54

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

A)a bill of lading.
B)a destination contract.
C)a shipment contract.
D)a warehouse receipt.

Question 55

Growers Mart buys one hundred cases of berries from Hilltop Farm. The parties agree that the berries will be transported "F.O.B. Hilltop Farm" via Intrastate Trucking Company. Intrastate's truck and the berries are lost in a fire following an accident. The loss of the berries is suffered by

A)Growers.
B)Hilltop.
C)Intrastate.
D)all of the parties as owners in common in equal measure.

Question 56

A seller's title to goods being sold is voidable if the goods

A)were bought on credit.
B)were obtained by fraud.
C)were delivered to a buyer but have not yet been paid for.
D)must be sold to a good faith purchaser for value.

Question 57

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

A)no one.
B)CSR.
C)Doris.
D)the maker of the iPod.

Question 58

When the risk of loss passes is generally determined by

A)the passage of title to identified goods.
B)the acquisition of an insurable interest in specific goods.
C)the expression of a buyer or lessee's interest in obtaining certain goods.
D)the terms of a contract for a sale or lease of goods.

Question 59

Commercial Rents Corporation agrees to lease a pressure washer to Delivery Trucks Inc., which agrees to pick it up at E Street Warehouse. Before Delivery Trucks retrieves the washer, it is stolen. The loss is suffered by

A)Commercial Rents.
B)Delivery Trucks.
C)E Street Warehouse.
D)the thief.

Question 60

Outdoor Outfitters Store contracts to buy fifty tents from Pitched Camp, Inc. Unless the contract states otherwise, this document is assumed to be

A)a bill of lading.
B)a destination contract.
C)a shipment contract.
D)a warehouse receipt.

Question 61

Spuds Corporation buys from Tater Farm Inc. a potato crop that Tater plans to plant and harvest during the next growing season. Spuds plans to sell the potatoes to Tasty Food Restaurant. After the potatoes are planted, but before they are harvested, an insurable interest in the crop exists in

A)Spuds and Tater, but not Tasty.
B)Spuds, Tater, and Tasty.
C)Tater only.
D)none of the choices.

Question 62

Sure Good Appliance Corporation contracts with Trucking Company to take a selection of appliances to United Railroad Inc. for United to transport the goods to a VeriSafe Company warehouse. Trucking, United, and VeriSafe each acknowledge possession of the goods by a document of title. These parties are

A)bailees.
B)buyers.
C)lessees.
D)sellers.

Question 63

Consumers Choice Store accepts a shipment of phones from Digital Devices Inc. Consumers Choice later discovers a defect in the phones, revokes acceptance, and returns the goods via GoBack, Inc. During the return, the goods are lost. The loss is suffered by

A)Consumers Choice.
B)Digital Devices.
C)GoBack.
D)consumers by increases in the prices of other goods and shipping.

Question 64

Organic Café orders five gallons of PureMaid-brand olive oil from Quico Oil Inc. Quico mistakenly ships Pure soy oil, which Organic keeps, despite the nonconformity. The oil is destroyed in a fire. The loss is suffered by

A)all of the parties as owners in common in equal measure.
B)Pure.
C)Organic.
D)Quico.

Question 65

An insurable interest is

A)an interest in goods permitting a party to insure against their damage.
B)an interest in ensuring that goods are of a certain quality.
C)interest that can accrue from investing in insurance of certain goods.
D)none of the choices.

Question 66

Appliance Corporation sells Best-brand vacuum cleaners to Cash Discount Stores and other retailers. Appliance will have an insurable interest in the vacuums as long as

A)Appliance remains in business.
B)Appliance retains title to the goods.
C)the goods are in existence.
D)there is no risk of loss.

Question 67

Garden Stores order a specific assortment of rose bulbs from Hybrid Company. Hybrid mistakenly ships a selection of annuals, which Garden rejects and returns via Indie Transport Inc. During the return, the annuals are lost. The loss is suffered by

A)Garden.
B)Hybrid.
C)Indie.
D)consumers by increases in the prices of other goods and shipping.

Question 68

Jared buys a kayak from a Lake Craft store, which agrees to keep it for him until he picks it up. Before Jared gets the kayak, an unforeseen tornado destroys the store and the goods. The loss is suffered by

A)Jared.
B)the maker of the kayak.
C)Lake Craft.
D)the government agency that failed to foresee the tornado.

Question 69

Quest Outdoor Store orders a specified size of RiverRun-brand rafts from Sports Merchandise, Inc. Sports Merchandise mistakenly ships rafts of the wrong size, which Quest rejects and returns via Trans-State Shipping. During the return, the rafts are lost. The loss is suffered by

A)Quest.
B)Trans-State.
C)RiverRun.
D)Sports Merchandise.

Question 70

In the following situations, two parties claim the same goods. Who is most likely to prevail in each circumstance? Explain.
(a)Czeslaw steals Denise's Ultra HD TV set and sells it to Ezra, an innocent purchaser, for value. Denise learns that Ezra has the set and demands its return.
(b)Gwendolyn takes her all-terrain vehicle (ATV)for repair to Hank's Sales & Repair, a merchant who fixes and sometimes sells used ATVs. One of Hank's employees sells Gwendolyn's ATV to John, an innocent purchaser-customer, who takes possession. Gwendolyn wants her ATV back from John.

Question 71

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?

Question 72

Confection Corporation orders Double Chocolate Bars from Edible Distribution Company. Edible identifies the goods. Before they are shipped via Fast Shipping LLC, an insurable interest in the goods exists in

A)Confection only.
B)Edible only.
C)both Confection and Edible.
D)Confection, Edible, and Fast.