Deck 21: Ownership And Risk

Question 1

The UCC looks solely upon "title" to determine ownership in goods.

Answer 1

False

Question 2

Crops are considered identified when they are planted.

Answer 2

True

Question 3

Both the buyer and seller may have an insurable interest in the same goods at the same time.

Answer 3

True

Question 4

In a shipment contract,title and risk of loss pass to the buyer when the goods are properly tendered at the destination point.

Question 5

Buyer is located in Des Moines,Iowa and seller is located in Sacramento,California.The contract specifies F.O.B.Des Moines.This contract is a:

A) destination contract.
B) sale or return.
C) shipment contract.
D) sale on approval.

Question 6

You leave your watch with Bryte Jewelers for repair.Bryte could not transfer ownership interests in the watch to a customer of the jewelry shop without your permission.

Question 7

George's Greenery orders two dozen live dogwood trees from Nancy's Nursery.George's is to keep the dogwoods healthy by keeping them in a greenouse following certain instructions to keep the air at the right temperature,etc.The sale is made on a trial basis and George's may return all unsold dogwood trees at the end of 30 days.This contract is a:

A) contract to sell future goods.
B) conditional sale.
C) sale or return.
D) sale on approval.

Question 8

Regardless of the language of the contract,title to goods passes to the buyer at the time and place at which the seller physically delivers the goods.

Question 9

Angela uses fraudulent means to induce Walter to enter a sales contract.Angela obtains a voidable title to the goods.

Question 10

In January,Eddie contracts to sell 100 bushels of soybeans that fall.This contract:

A) is void. He cannot contract to sell a crop before it is even planted; the goods must be in existence.
B) is void. The soybeans must be identified to the contract at the time he contracts to sell them.
C) can be valid; but title to the soybeans cannot pass until the soybeans exist.
D) can be valid, and title to the soybeans passes when the contract is signed.

Question 11

Arco sells to Melvin 1,000 computers that are stored in Arco's warehouse.Arco gives Melvin the ownership documents and Melvin will pick up the computers at the warehouse.Title has passed to Melvin.

Question 12

Only one party can have an interest in particular goods at a particular time.

Question 13

In the case of Lindholm v.Brant,the court ruled:

A) Brant was a BIOC, entitled to keep the painting in question.
B) Brant could not be a BIOC since the seller had a reputation for dishonesty.
C) Brant could not be a BIOC because he did not act in good faith.
D) no entrustment was involved because Malmberg was not a "merchant who deals in goods of that kind."

Question 14

A buyer has an insurable interest in goods when they are identified.

Question 15

If Terrill steals a digital camera and sells it to Samuel,Samuel will get a valid title as long as he can prove he gave value for the camera and acted in good faith.

Question 16

Murphy stops at a garage sale and purchases an oak rocking chair.Murphy and the seller agree that Murphy will pick up the rocking chair the next day when Murphy will return with a truck.That night,there is an earthquake and the rocking chair is swallowed up by earth and totally destroyed.In this case,the seller had the risk of loss and must refund the purchase price to Murphy.

Question 17

Under the UCC,the party who has title to the goods always has the risk of loss.

Question 18

Roger purchased a tennis racquet from Rafael.Roger can prove he is a BFP by showing only that he gave value and acted in good faith.

Question 19

A purchaser may acquire better title than the seller had.

Question 20

Ruppart Manufacturing has a contract for the sale of 100 cases of teaching supplies to Teachers Co-op,Inc.Payment of the order is to be made in installments over the next year.Ruppart Manufacturing keeps a security interest in the cases sold to assure payment by Teachers Co-op,Inc.When the order is completed,Ruppart ships the order.Legally:

A) both Ruppart and Teachers have an insurable interest in the supplies.
B) only Ruppart has an insurable interest in the supplies.
C) only Teachers has an insurable interest in the supplies.
D) neither Ruppart nor Teachers has an insurable interest in the supplies.

Question 21

Marco Manufacturing contracted to sell Kurtz Industries 3,000 iron clasps.The contract specified: F.O.B.Kurtz Industries.Upon arrival and inspection,the goods were rejected by Kurtz Industries because they did not conform to the contract specifications.In transit back to Marco Manufacturing,the common carrier's truck overturned and completely destroyed the clasps.Which statement is correct?

A) Marco may sue Kurtz for the contract price, as risk of loss transferred to Kurtz at the F.O.B. point.
B) Kurtz will not be liable for the purchase price. The risk of loss had not yet transferred since the goods were nonconforming.
C) The loss will be split between the parties upon a 50/50 basis.
D) The loss will be assigned to the party who could best bear the loss.

Question 22

Imogene takes her diamond solitaire ring to Sparkle Jewelry Shop to have the prongs holding the diamond retipped and have the ring cleaned.The clerk at Sparkle says she will have to leave the ring and that it should be ready in about a week.When Imogene returns in a week to get her ring,she finds out that the ring has been sold.Which of the following is true?

A) Sparkle Jewelry Shop had the power to transfer all of Imogene's rights in the ring to a good faith buyer in the ordinary course of business.
B) This situation was a theft of the ring by Sparkle, and Sparkle must retrieve the ring and return it to Imogene.
C) The buyer of the ring must return it to Imogene since the buyer did not fully investigate whether Sparkle had good title to the ring.
D) Imogene has lost title to her ring and has no recourse since she is responsible for investigating the merchant's integrity before leaving her property.

Question 23

The term F.O.B.:

A) can indicate a destination or shipment contract.
B) stands for "freight on board."
C) requires the seller to insure the goods for the buyer's benefit.
D) shifts the risk of loss to the buyer when the goods are identified.

Question 24

Mayco has received goods from Wallace pursuant to a sale or return agreement.If Mayco subsequently declares bankruptcy,the goods will be:

A) returned to Wallace because title did not pass to Mayco under this type of sale.
B) belong to Mayco and will not be a part of the bankruptcy.
C) subject to the claims of Mayco's creditors under Section 2-326 of the Uniform Commercial Code.
D) will be kept by the bankruptcy judge and clerk.

Question 25

In which case does the buyer receive no title to the goods he purchases?

A) Owner has good title. Max steals the goods and sells them to buyer.
B) Owner has good title. Max purchases the goods using deception. He then sells them to buyer who gives value and acts in good faith.
C) Owner has good title. Max purchases the goods using fraud. He then sells them to buyer who is not a BFP.
D) All of the above.

Question 26

On impulse,you purchase a travel trailer and ask your acquaintance,Max,if you can leave the trailer at the edge of his restaurant's parking lot until you can have a concrete pad built to store the trailer on your property.Max agrees.When you return for the trailer the next week,it is gone and you find out that Max sold it.You can:

A) recover the trailer because Max did not have any ownership interest to pass.
B) recover, but only if Max bought insurance to cover the trailer while it was on his property.
C) not recover because you "entrusted" the trailer to Max, who then had a right to sell it.
D) not recover because Max had only a voidable title to transfer.

Question 27

A contract that requires a seller to deliver goods to the carrier is:

A) a destination contract.
B) a shipment contract.
C) a C.I.F. contract.
D) a C.O.D. contract.

Question 28

Marco sells goods to Byron for his personal use on the basis that the goods may be returned if Byron is not satisfied with them.The sale is:

A) a "sale or return."
B) a "sale on approval."
C) a consignment.
D) outside the UCC.

Question 29

A gun manufacturer in Helena,Montana agrees to sell guns and ammunition to the ATF in Washington,D.C.The terms of the contract specify that the goods are to be shipped "FOB,Chicago." When does the buyer acquire title and risk of loss?

A) When the goods reach Chicago.
B) When the goods are delivered to the carrier in Montana.
C) When the goods are tendered in Washington D.C. by the carrier.
D) When the goods reach Washington D.C.

Question 30

Graham,an adult,purchases a car from a minor,and subsequently sells it to Harlow,another adult.Harlow paid full value for the car and had no reason to know that Graham had purchased the car from a minor.Which of the following best describes this situation?

A) Graham had good title and Harlow gets good title.
B) Graham had good title and Harlow gets a voidable title.
C) Graham had voidable title and Harlow gets good title.
D) Graham had void title and Harlow gets void title.

Question 31

The identification of goods permits the buyer to:

A) obtain insurance on the goods.
B) take title to the goods in any manner that the parties agree upon.
C) enter into a contract with the seller.
D) Both a and b

Question 32

Mike sold his car to Beth,who was to pick the car up at Mike's house by 12:00 noon on September 1.Mike was at his house waiting for Beth but she was late.In fact,when Beth arrived she discovered Mike's home and the car destroyed by a fire that started at 1:00 p.m.The risk of loss falls on:

A) Mike because Beth had not taken possession of the car.
B) Beth because Mike was ready, willing, and able to tender the car at 12:00 noon.
C) Beth because under the UCC, the buyer bears the risk of loss.
D) Mike, as he had possession of the car.

Question 33

Assume that Bubba orders 15 cases of BBQ chips from Mays Potato Chips for his restaurant,Bubba's BBQ.Mays ships 15 cases of regular chips by mistake.If Bubba decides to keep the regular chips,in spite of the nonconformity with the contract,then the destruction of the chips when a water pipe breaks in the food storage room will result in:

A) Mays' having to bear the loss, because it shipped nonconforming goods to Bubba.
B) Mays' having to bear the loss, because it failed to insure the chips.
C) Bubba's having to bear the loss, because he accepted delivery of the nonconforming chips.
D) Bubba's having to bear the loss, because it was a sale on approval contract.

Question 34

Sanco contracted to sell 1,000 cases of oil to AMF.The oil is located in a public warehouse,which has issued a warehouse receipt for it.Which of the following is correct?

A) The risk of loss passes to the buyer when the contract is made.
B) The risk of loss passes to the buyer when the goods are tendered to him.
C) The risk of loss passes to the buyer when the warehouse receipt is delivered to the buyer.
D) The risk of loss passes to the buyer when the buyer gets the oil to its final destination.

Question 35

Rayco Ski Shop purchased 500 pairs of skis from Skitron.Rayco is located in Colorado.Skitron's business is in Tennessee.The purchase order included the following term: "F.O.B.Colorado." The contract makes no mention of risk of loss or title.The contract can be described as a:

A) shipment contract.
B) destination contract.
C) bulk transfer.
D) sale on approval.

Question 36

Dick steals Jane's camcorder and sells it to Sid.Jane can recover the camcorder from Sid:

A) under any circumstances.
B) only if Sid knew that the camcorder was stolen from Jane.
C) only if Sid did not know that the camcorder was stolen from Jane.
D) only if Sid paid less than the fair market value for the camcorder.

Question 37

Which of the following sales would fall within the bulk sales provisions of Article 6?

A) The sale of a substantial part of the equipment of a business.
B) The sale of a substantial part of a store's inventory.
C) The sale of an office building.
D) The sale of the chairs in a barber's shop.

Question 38

Hill Computers is a retailer,which buys its inventory from Acme Co.on credit,giving Acme a security interest in the inventory.Hubert buys a computer from Hill in the normal course of business.Hubert's title in the computer is:

A) a good title.
B) a voidable title.
C) Hubert has no title in the computer. Title does not pass to Hill and therefore to Hubert until Hill pays its debt in full to Acme.
D) Hubert has good title that is subject to Acme's security interest.

Question 39

Tuan,Inc.contracted to buy 200 monogrammed blankets from Titex,Inc.Tuan paid for the blankets in advance.Before segregating and monogramming the blankets,Tuan filed for bankruptcy.Tuan will not be able to recover the blankets because:

A) Tuan is a merchant.
B) the blankets were not identified to the contract.
C) Tuan became bankrupt after the contract was formed.
D) the goods were specially manufactured.

Question 40

In a consignment contract,the consignee:

A) holds title.
B) takes the goods intending to resell them, and the goods are subject to the claims of the creditors of the consignee.
C) is the party who leaves goods with the consignor to be resold.
D) cannot transfer title since the consignor retains the title.

Question 41

Oceanside entered into a contract with the seller Old Tennessee,for the purchase of $6,431 worth of plants.The terms were sale and delivery C.O.D.with the express provision of "No Risk to Supplier," and a large logo at the top of papers stating:
"NOTICE: ALL SHIPMENTS TRAVEL AT RISK AND COST OF PURCHASER."
The plants were shipped by an experienced truck common carrier.Upon arrival in New York,it appeared as though some plants were in a poor state because of excessive heat.Although the carrier on its own marked the bill of lading to indicate that the temperature in the truck should be 50 degrees,this was not done for at least a portion of the journey.Oceanside rejected the shipment by writing "rejected" on the back of the trucker's bill of lading.However,the plants were retained "on consignment" at Oceanside's premises.There were no other formal written rejections or official notices of breach or defects given by the buyer to seller at any point prior to trial.Discuss who has the risk of loss.

Question 42

Explain the concept and significance of identification of goods.Discuss how identification takes place.

Question 43

Rayco entered into a contract to buy Chia Pets from We Grow 'Em.The contract specified that the shipment would be "F.O.B.destination; title to pass on the date of shipment." The goods were destroyed in transit to Rayco.Rayco argues that the loss is We Grow 'Em's.Analyze the situation and determine who is liable for the loss.

Question 44

Garden World orders 120 hand cultivators from Green Thumb,Inc.When the cultivators arrive,they seem fine,so Garden World accepts them.As the stock person is putting the cultivators on display,she notices that the tines are loose on all the cultivators.Garden World returns the cultivators to Green Thumb,but they are lost when the delivery truck slips on an oily spot in the road and drives into a nearby lake.Discuss who bears the risk of loss for the shipment.

Question 45

Baker Furniture sold 50 living room sets to King's Department Store.The parties did not agree on passage of title,but the delivery term was F.O.B.place of shipment.Discuss title and risk of loss regarding the furniture.

Question 46

Discuss the concept of insurable interests.