Deck 11: Performance of Sales and Lease Contracts

Question 1

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

Answer 1

False

Question 2

The function of a letter of credit is to substitute the credit of a recognized international bank for that of the buyer.

Answer 2

True

Question 3

A destination contract requires the seller to deliver to either the buyer's place of business or to another destination specified in the sales contract.

Answer 3

True

Question 4

The unborn young of stock animals are considered future goods.

Question 5

Under common law,the risk of loss was based on who had title to the goods.

Question 6

The general rule for passage of title is that title passes when the buyer acquires possession of the goods.

Question 7

Unborn animals are identified when they are conceived.

Question 8

If the parties do not have a specific agreement regarding the assessment of the risk of loss,the UCC mandates who will bear the risk.

Question 9

The issuing bank for a letter of credit is called the correspondent bank.

Question 10

In a lease transaction,title to the leased goods remains with either the lessor or a third party.

Question 11

Title for goods cannot pass before the goods are identified to the contract.

Question 12

A shipment contract requires the seller to ship the goods to the buyer via a common carrier.

Question 13

With letters of credit in international transactions,a bill of lading is issued by the common carrier.

Question 14

The parties to a contract may decide when title and risk of loss pass,but if the parties do not specifically agree on such a time,the UCC provides rules for them.

Question 15

Ownership of the unborn foal of a pregnant mare cannot pass to a buyer until the colt is born.

Question 16

Chairs in a warehouse are identified to a sale contract when the seller explicitly selects and separates the chairs for shipment to the buyer.

Question 17

For goods to be selected from like items in inventory,identification cannot occur until the specific goods for the specific customer are separated or tagged for that customer.

Question 18

Under the UCC,the risk of loss depends on who had title to the goods.

Question 19

At common law,the risk of loss to goods is placed on the party that has the insurable interest.

Question 20

If no document of title is needed,and the goods are identified at the time of contracting,title passes at the time of contracting.

Question 21

In a consignment,the seller is also known as the consignor.

Question 22

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

Question 23

If a good faith purchaser for value acquires goods from another good faith purchaser,but the goods were stolen at some point in the past,the last good faith purchaser does not obtain good title.

Question 24

A thief can transfer good title to stolen goods,as long as the other person purchased them in good faith.

Question 25

A seller's duty in an F.O.B.destination contract with respect to delivering the goods ends upon placing the goods in the hands of the common carrier.

Question 26

A consignment is treated as a sale or return under the UCC.

Question 27

If goods are held by the seller to be picked up by the buyer,the risk of loss passes to the buyer upon "tender of delivery," if the seller is a merchant.

Question 28

C.I.F is a pricing term that indicates the seller is responsible for paying the cost of the goods that are the subject of the sale as well as insurance and freight for their delivery.

Question 29

In an ordinary lease,the risk of loss transfers to the lessee.

Question 30

If a seller delivers nonconforming goods to a buyer and the buyer rejects them,the risk of loss remains on the seller until either the defect is cured or the buyer accepts the nonconforming goods.

Question 31

If a contract for the sale of goods is F.O.B.Minneapolis and the seller is in Minneapolis and the buyer is in Chicago,the contract is a shipment contract.

Question 32

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

Question 33

Under the UCC,for risk of loss purposes,the "sale on consignment" is treated like a "sale on approval."

Question 34

In a sale or return,risk of loss passes to the buyer when the buyer takes possession of the goods.

Question 35

Acceptance of a sale on approval can occur if the buyer uses the goods inconsistently with the purpose of the trial.

Question 36

A breach by the buyer will shift the risk of loss to the buyer as soon as the breach occurs if the risk has not already shifted.

Question 37

F.O.B.Burlington,Vermont requires the seller to arrange to ship goods and put the goods in the carrier's possession.

Question 38

In an F.O.B.destination contract,the seller must replace the goods if they are lost in transit.

Question 39

When the seller breaches,the risk of loss often passes to the buyer sooner than it otherwise would.

Question 40

A merchant-seller bears the risk of loss between the time of contracting and the time the buyer picks up the goods.

Question 41

If a contract calls for the goods to be shipped "F.A.S.the Peerless" it means that:

A)The seller must place the goods on the Peerless and will bear the risk of loss until the goods reach their destination.
B)The seller must place the goods alongside the Peerless and will bear the risk of loss until the goods are loaded onto the ship.
C)The seller must place the goods alongside the Peerless and the risk of loss will shift when this is done.
D)The seller must notify the operator of the Peerless as to the location of the goods,and the risk of loss will shift when they are picked up.
E)The seller must notify the buyer so that the buyer can make arrangements to get the goods to the Peerless and the risk of loss will shift when the notification has been made.

Question 42

Identification of goods is significant because:

A)It allows the contract to be a destination contract.
B)It is the earliest that risk of loss can pass.
C)It determines when a document of title is needed.
D)It determines when the implied warranties become effective.

Question 43

If no carrier is involved,the goods are sold without a document of title,and the goods are identified at the time of contracting,when does title pass?

A)When the buyer pays for them.
B)At the time of contracting.
C)When the warranty period expires.
D)When the buyer picks them up.

Question 44

In a noncarrier case,under which of the following sales will risk of loss pass upon tender of delivery?

A)Sale by a nonmerchant to a nonmerchant.
B)Sale by a merchant to a nonmerchant.
C)Sale by a nonmerchant to a merchant.
D)Both A and C.
E)A,B,and C.

Question 45

Which of the following best describes the significance of risk of loss in a carrier case?

A)It determines who will bear the loss for any problems that arise under the contract.
B)It determines with certainty which party will pay if the goods are lost or damaged in transit.
C)It determines whether the buyer or seller will pay if the goods are lost or damaged in transit,and other possible sources of recovery,such as insurance,do not cover the loss.
D)It determines the terms of payment under the contract.

Question 46

In which of the following,does the buyer usually try out the goods for the buyer's own use?

A)Sale on approval.
B)Sale or return.
C)Consignment and sale or return.
D)Consignment,sale or return,and sale on approval.
E)Sale or return and sale on approval.

Question 47

A provision under the UCC that affects merchants differently from nonmerchants is:

A)The effect of additional terms in an acceptance.
B)The firm offer rule.
C)Transfer of risk of loss in noncarrier cases.
D)The written confirmation rule.
E)All of the above.

Question 48

When a buyer may return goods to a seller if the buyer does not resell them within a stated period of time,this is known under the UCC as:

A)A sale or return.
B)A sale contingent upon no return.
C)A consignment sale.
D)A sale on approval.
E)A preliminary sale.

Question 49

In which of the following is the usual reason for the return of the goods that they were not able to be resold?

A)Sale on approval.
B)Sale or return.
C)Consignment and sale or return.
D)Consignment,sale or return,and sale on approval.
E)Sale or return and sale on approval.

Question 50

In a noncarrier case for the sale of goods,which of the following is most important in determining when risk of loss passes?

A)Whether the seller is a merchant.
B)Whether any warranties have been disclaimed.
C)Whether the buyer is a merchant.
D)When title passes.

Question 51

Which of the following statements regarding identification of goods under the UCC is false?

A)Purchased goods that are part of a larger mass are identified when designated as the goods sold to the buyer.
B)Fungible goods may be identified without being separated.
C)Risk of loss may shift to the buyer before identification occurs.
D)Future goods (other than crops and unborn animals)must come into existence before they can be identified.

Question 52

The International Chamber of Commerce has issued the following for rules on letters of credit:

A)The International Credit Collection Procedures.
B)The Uniform Customs and Practices for Documentary Credits.
C)The International Convention for the Sale and Delivery of Goods.
D)The United Nations Process for Letter of Credit Documentation.

Question 53

Which of the following is true about passage of title?

A)It occurs at the time and place goods are shipped in a shipment contract,and upon reaching the buyer's place of business or other specified location in a destination contract.
B)It always occurs when the goods leave the hands of the seller.
C)It does not occur until the buyer indicates acceptance of the goods.
D)It always passes at the same time that risk of loss passes.
E)It occurs at the time payment is made by the buyer.

Question 54

If an owner brings a computer to a store to be repaired and the store accidentally sells it to a customer who is a buyer in the ordinary course of business,the buyer from the store has ownership priority over the original owner.

Question 55

One who has voidable title can transfer good title to a good faith purchaser for value.

Question 56

When does risk of loss pass in a sale of goods that does not involve a common carrier:

A)Upon tender of delivery for both merchant sellers and nonmerchant sellers.
B)Upon tender of delivery for merchant sellers and when goods are received by the buyer in the case of nonmerchant sellers.
C)Upon tender of delivery for nonmerchant sellers and when goods are received by the buyer in the case of merchant sellers.
D)When goods are received by the buyer for both merchant sellers and nonmerchant sellers.

Question 57

How does a "no-arrival,no-sale" contract differ from an F.O.B.destination contract?

A)If the goods fail to reach their destination,the seller must replace them in an F.O.B.destination contract,but not in a no-arrival,no-sale contract.
B)Risk of loss while the goods are in transit is on the seller in an F.O.B.destination contract,but on the buyer in a no-arrival,no-sale contract.
C)Implied warranties exist in the F.O.B.destination contract,but not in the no-arrival,no-sale contract.
D)Identification will occur in an F.O.B.destination contract,but not in a no-arrival,no-sale contract.

Question 58

In a carrier case,what is most important in determining when risk of loss passes from the seller to the buyer?

A)The contract's shipping terms.
B)The buyer's insurance policy terms.
C)The seller's insurance policy terms.
D)When title passes.
E)The price of the goods.

Question 59

For which of the following does the risk of loss shift to the buyer upon the buyer taking possession?

A)Sale on approval.
B)Sale or return.
C)Consignment and sale or return.
D)Consignment,sale or return,and sale on approval.
E)Sale or return and sale on approval.

Question 60

What would a seller of goods use to assure payment from the sale of goods overseas?

A)Bill of lading.
B)Warehouse receipt.
C)Letter of credit.
D)Negotiable draft.

Question 61

Mrs.Smith is moving out of her personal residence to a smaller apartment.Because of this,she wishes to sell her piano.George inspects her piano and decides to buy it.Mrs.Smith receives her money and tells George he can take the piano right now.George says he needs to borrow his friend's truck before he can remove the piano.That night,the piano is destroyed by fire.George sues to recover his money.Which best describes this situation?

A)Mrs.Smith wins;the risk of loss passed to George as soon as the contract was made.
B)Mrs.Smith wins;the risk of loss passed to George when Mrs.Smith said he could take the piano.
C)George wins;the risk of loss does not pass until George takes delivery of the piano.
D)George wins;the risk of loss does not pass until George receives a negotiable warehouse receipt.
E)George wins;the risk of loss stays on Mrs.Smith because the goods were not conforming.

Question 62

Seller contracts to sell goods to the buyer.This was a destination contract.However,the buyer refused to accept these goods and returned them to the seller,even though they were the proper goods under the contract.Before the seller received them,the goods were destroyed by fire.Which of the following best describes this situation?

A)The risk of loss passes to the buyer when the contract was made.
B)The risk of loss passes to the buyer when the goods were delivered to the common carrier.
C)The risk of loss is on the seller because the goods were nonconforming goods.
D)The risk of loss is on the buyer because the goods were conforming goods.

Question 63

Once a seller breaches by delivering nonconforming goods:

A)The risk of loss will remain on the seller,but only if it has not already shifted to the buyer.
B)The risk of loss will shift back to the seller even if it had already shifted to the buyer.
C)The risk of loss will not be affected by the breach.
D)The title will follow the risk of loss.

Question 64

A seller contracted to sell lumber to the buyer.The contract was a destination contract and the goods were to be shipped by common carrier.The lumber was destroyed by fire before it was delivered to the buyer.Which of the following statements best describes this situation?

A)The risk of loss passed to the buyer when the contract was made.
B)The risk of loss passed to the buyer when the goods were delivered to the common carrier.
C)The risk of loss has not yet passed to the buyer and remains on the seller until the goods are delivered.
D)The risk of loss remains on the seller until a document of title is delivered to the buyer.

Question 65

A seller contracted to sell lumber to the buyer.The contract was a shipment contract and the goods were to be shipped by common carrier.The lumber was destroyed by fire before the common carrier delivered the lumber to the buyer.Which of the following statements best describes this situation?

A)The risk of loss passed to the buyer when the contract was made.
B)The risk of loss passed to the buyer when the goods were delivered to the common carrier.
C)The risk of loss has not yet passed to the buyer and remains on the seller until the goods are delivered.
D)The risk of loss remains on the seller until a document of title is delivered to the buyer.

Question 66

Mary runs a ski shop at a popular ski resort.She is approached by Sandy who has several hundred ski hats she would like Mary to buy for her shop.These hats are very funky and artistic.From Mary's experience,she believes that they will either be a big hit and will sell out quickly,or people will look at them and say,"how interesting" and move on.Mary says she does not want to be stuck with a bunch of the hats.Mary says that she will buy them,but wants Sandy to agree to take any back at the end of the season if they didn't sell and Mary decides to not keep them until the following season.This arrangement is:

A)A sale or return.
B)A sale on approval.
C)A consignment.
D)Not a contract because Mary has made an illusory promise.

Question 67

A seller contracted to sell goods to the buyer.The goods were to be held by the seller until the buyer could pick them up.The seller informed the buyer that the goods were ready to be picked up.Several days later,before the buyer could pick up the goods,the goods were destroyed by fire.The seller is not a merchant.Which of the following statements best describes this situation?

A)The risk of loss passed to the buyer when the contract was made.
B)The risk of loss passed to the buyer when the goods were tendered to the buyer.
C)The risk of loss has not yet passed to the buyer.
D)The risk of loss passed to the buyer a reasonable time after she was notified that the goods could be picked up.

Question 68

Seller agrees to sell and deliver goods to the buyer.The terms were F.O.B.destination.The goods were delivered to the common carrier,but were destroyed in transit.Both parties have insurance policies that will cover the loss,if they have an insurable interest.Which of the following statements best describes this situation?

A)The seller has an insurable interest in the goods until they are delivered to the buyer.
B)The buyer had an insurable interest in the goods ever since they were identified to this contract.
C)Since the seller has the risk of loss,only the seller will be able to collect insurance proceeds.
D)A,B,and C.
E)A and C only.

Question 69

To whom can a thief pass good title to stolen goods?

A)Any purchaser who gives consideration.
B)Any purchaser or donee who is unaware that the goods are stolen.
C)Any good faith purchaser for value.
D)Any buyer in the ordinary course of business.
E)No one.

Question 70

When a thief sells stolen goods to someone who does not know that they were stolen and has no reason to know that they were stolen,the buyer receives what kind of title?

A)Voidable.
B)Void.
C)Good.
D)Joint.

Question 71

A seller and buyer have just agreed that the buyer will purchase 1,000 of the widgets from the thousands that the seller has in its warehouse.The buyer will pick them up at the seller's warehouse.The day before the buyer is to pick them up,the seller's employee sets the 1,000 widgets aside.What is the significance of setting the buyer's widgets aside?

A)It shifts the risk of loss to the buyer.
B)It constitutes identification.
C)It terminates the buyer's ability to revoke.
D)It fully discharges the seller's duties under the contract.

Question 72

When a buyer breaches a contract by refusing to take delivery of conforming goods,the buyer:

A)Bears the risk of loss only for a commercially reasonable time.
B)Bears the risk of loss until the breach is cured.
C)Shifts the risk of loss back to the seller.
D)Bears the risk of loss only in the case of an unjustified breach.

Question 73

In general,what is the effect on risk of loss when a party breaches a contract?

A)The breaching party will bear the risk of loss for some period of time.
B)The breaching party will permanently bear the risk of loss.
C)The breach can speed up shift of the risk of loss to the buyer,or return the risk to the seller.
D)A and C.

Question 74

When a buyer of goods has obtained the goods properly from the seller,but later fails to pay for them,what kind of title does the buyer have?

A)Voidable.
B)Void.
C)Good.
D)Joint.

Question 75

Cybermakers has contracted with a computer chip manufacturer to buy a quantity of computer chips for delivery the following month.These computer chips are in the seller's warehouse,and the contract's shipping terms are F.O.B shipping point.At this point,prior to the chips being shipped,who has an insurable interest in the computer chips?

A)The buyer only.
B)The seller only.
C)Both the buyer and seller.
D)Neither the buyer nor seller.

Question 76

Under the UCC,an entrusting of goods to a merchant who deals in that kind of goods gives the merchant:

A)The power to transfer all rights of the entrustor to a buyer in the ordinary course of business.
B)No power to transfer all rights of the entrustor to a buyer in the ordinary course of business.
C)The power to transfer all rights of the entrustor to anyone who makes a demand for the goods.
D)The power to transfer all rights of the entrustor to anyone except to a buyer in the ordinary course of business.

Question 77

When a seller breaches a contract for the sale of goods by delivering nonconforming goods,the risk of loss:

A)Is unaffected by the seller's breach.
B)Remains on the seller until the nonconformity is cured or the buyer accepts the nonconforming goods.
C)Remains on the seller indefinitely.
D)Is transferred to the buyer upon delivery of the nonconforming goods,but is transferred back to the seller if the buyer returns the goods.

Question 78

A seller contracted to sell goods to the buyer.The goods were to be held by the seller until the buyer could pick them up.The seller informed the buyer that the goods were ready to be picked up.Several days later,before the buyer could pick up the goods,the goods were destroyed by fire.The seller is a merchant.Which of the following statements best describes this situation?

A)The risk of loss passed to the buyer when the contract was made.
B)The risk of loss passed to the buyer when the goods were tendered to the buyer.
C)The risk of loss has not yet passed to the buyer.
D)The risk of loss remains on the seller until a document of title is delivered to the buyer.

Question 79

A buyer and seller contract for the sale of certain goods,currently in the seller's possession.The contract requires that the goods be delivered by the seller to the buyer's place of business.Title of these goods passes to the buyer when:

A)The seller places the goods in the possession of a common carrier and makes a proper contract for delivery.
B)The seller physically delivers these goods to the buyer's place of business.
C)The buyer picks up the goods.
D)The buyer receives a document of title.

Question 80

For which types of leases is the risk of loss on the lessor during the term of the lease?

A)Ordinary leases.
B)Finance leases.
C)Both ordinary and finance leases.
D)Neither ordinary nor finance leases.