Deck 22: Ownership, Risk and Warranties

Question 1

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.

Answer 1

False

Question 2

Generally, a contract may include language that limits or alters the damages recoverable for a breach of warranty, as long as the restrictions are not unconscionable.

Answer 2

True

Question 3

Mark, a power tool salesman, promises Jill, a customer, that the Turbo Power Hedge Trimmer 1000 will easily cut through bamboo up to 3 inches thick. Mark's statement constitutes an express warranty if Jill purchases the hedge trimmer.

Answer 3

True

Question 4

If a seller includes an express warranty in the written sales contract, any disclaimer is invalid.

Question 5

The shipping terms, FOB place of destination, indicate that the seller must deliver the goods at the place named and bear the expense and risk of shipping.

Question 6

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 7

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

Question 8

A tag attached to a tree in a nursery identifying the tree as a Southern Magnolia creates an express warranty.

Question 9

The buyer of a product is located in Des Moines, Iowa, and the seller is located in Sacramento, California. The contract specifies F.O.B. Des Moines. What type of contract is this?

A) destination contract
B) mixed contract
C) shipment contract
D) carrier contract

Question 10

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

Question 11

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 on a 50/50 basis.
D) The loss will be assigned to the party who can best bear the loss.

Question 12

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

Question 13

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

Question 14

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

Question 15

In a shipment contract, the risk passes to the buyer when the goods are properly tendered at the destination point.

Question 16

In January, Eddie contracts to sell 100 bushels of soybeans in the 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 17

A buyer obtains an insurable interest when the goods are identified to the contract.

Question 18

The statute of limitations for breach of warranty under the UCC is

A) one year.
B) two years.
C) three years.
D) four years.

Question 19

Crops are considered identified when they are planted.

Question 20

When neither party has breached the contract, the risk of loss generally passes from seller to buyer when the seller has transported the goods as far as he is obligated to.

Question 21

Mason bought a rotisserie in preparation for a party he was planning. When he put a chicken on the rotisserie, it would not rotate, but stayed in one position where it burned the chicken on one side and left it raw on the other. When he returned the rotisserie to the store, the salesperson disclaimed any responsibility because he had never told Mason the rotisserie would rotate the food as it cooked. Does Mason have any recourse?

A) No, the salesperson did not make any express warranties.
B) Yes, the salesperson made an express warranty just by selling the goods.
C) Yes, although the salesperson did not make any express warranties, the UCC imposes an express warranty on the sale.
D) Yes, although the salesperson did not make any express warranties, the UCC imposes an implied warranty of merchantability under which the rotisserie is guaranteed to be fit for the ordinary purposes for which it is used.

Question 22

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 23

In a breach of warranty case, the buyer must

A) notify the seller of defects within a reasonable time.
B) bring any lawsuit no later than three years after the defect was discovered.
C) extend the statute of limitations in writing rather than orally if he chooses to allow a longer time for bringing suit.
D) notify the seller of defects within six months of his discovery or he cannot bring a lawsuit.

Question 24

Leonardo fraudulently obtained a piece of jewelry from Jessica. He then sold the piece to Midori, who did not know about the fraud. Which of the following describes the situation?

A) Leonardo had voidable title and Midori gets a void title.
B) Leonardo had void title and Midori gets good title.
C) Leonardo had voidable title and Midori gets good title.
D) Leonardo had good title and Midori gets good title.

Question 25

Bill is injured when his new motorcycle speeds out of control because of a defective part. In most jurisdictions, Bill

A) can sue the motorcycle manufacturer even though he does not have privity.
B) cannot sue the motorcycle manufacturer because his injuries are personal injuries as opposed to economic loss.
C) cannot sue the motorcycle manufacturer because the law requires arbitration.
D) cannot sue the motorcycle manufacturer because there is no privity of contract.

Question 26

Mike sold his car to Beth, who was to pick the car up at Mike's house and pay for it then. In fact, when Beth arrived, she discovered Mike's home and the car destroyed by a fire the night before. 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.
C) Beth because under the UCC, the buyer bears the risk of loss.
D) Mike, because as a merchant he is responsible for the car.

Question 27

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 28

Implied warranties are created by

A) the seller's words or actions.
B) the buyer's intentions.
C) the UCC itself.
D) both the seller and the buyer.

Question 29

Imogene takes her diamond solitaire ring to Sparkle Jewelry Shop to have the prongs holding the diamond retipped and the ring cleaned. The clerk at Sparkle tells her 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 was responsible for investigating the merchant's integrity before leaving her property.

Question 30

A statement that a particular warranty does not apply is called a(n)

A) disclaimer.
B) infringement.
C) limitation of remedy clause.
D) voidable title.

Question 31

Alice's Aspirin Inc. produces and packages aspirin for sale to retail stores. Bob buys a bottle of Alice's aspirin at Dahl's Food Stores. Two days later Bob takes two aspirin and within minutes, becomes very ill and is rushed to the hospital, where it is found that a defect in the aspirin caused the reaction. Which of the following is correct?

A) Bob can sue both Alice's Aspirin Inc. and Dahl's because he suffered personal injury due to the defective product.
B) Bob cannot sue anyone because he assumed the risk of taking the aspirin.
C) Bob cannot sue anyone because he is not in privity with Dahl's or Alice's.
D) Bob can sue but will not be able to recover consequential damages for his medical expenses.

Question 32

Tu-thumbs buys a used paint sprayer from the local paint store. The sprayer had a large sign on it that said "AS IS." The dealer made no promises or statements concerning the performance of the paint sprayer. When Tu-thumbs attempts to spray paint his house, the trigger on the sprayer sticks in the "on" position and before Tu-thumbs can pull the electrical cord to cut the power, paint is sprayed all over his prize Borzoi dog that is scheduled to be shown in a dog show the next day. Tu-thumbs sues the dealership. Who wins?

A) Dealer wins; there were no express warranties, and all implied warranties have been successfully disclaimed.
B) Tu-thumbs wins; he can recover on the basis of express warranties.
C) Tu-thumbs wins; he can recover on the basis of the implied warranty of merchantability because the word "merchantability" was not used in the disclaimer.
D) Dealer wins; even though there were implied warranties, the damage to the dog could not have been foreseen.

Question 33

Tuan, Inc. contracted to buy 200 monogrammed blankets from Titex, Inc. Before Titex segregated and monogrammed the blankets, Tuan filed for bankruptcy. Tuan does not own title to 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 34

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

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

Question 35

Which of the following would be a breach of the implied warranty of merchantability?

A) a knife that cuts its user when slicing a bagel
B) a radio that does not pick up FM signals
C) a match that burns a spot in the carpet when accidentally dropped
D) a dress watch that does not keep accurate time after getting wet

Question 36

If shipping terms are C&F, then

A) the price includes, in a lump sum, the cost of the goods and freight, but not insurance.
B) the price includes, in a lump sum, the cost of the goods and the insurance and freight to the named destination.
C) neither the buyer nor the seller bears risk; the shipping company bears all risk.
D) the seller bears all risk until goods are in the carrier's possession; then the buyer bears the risk.

Question 37

Crytrin Manufacturing, Inc. contracted with Molfry, Inc. to manufacture three large pieces of equipment. The contract contained a clause stating that Crytrin agreed to repair or replace any defective equipment, but that was the only remedy Molfry would have. This clause

A) is an effective disclaimer.
B) will not keep Molfry from obtaining consequential damages since, under the UCC, consequential damages cannot be excluded.
C) is a limitation of remedy clause, which limits or excludes normal remedies permitted under the UCC.
D) limits any express warranties made by Crytrin.

Question 38

A sales representative at Oxtren, Inc. orally tells the purchasing agent at Wety, Inc. that its industrial saw is exceptional. Which statement is correct concerning the claim that the saw is exceptional?

A) The claim is an express warranty.
B) The claim is an implied warranty of merchantability.
C) The claim is not a warranty because it is not in writing.
D) The claim is not a warranty because it is sales puffery.

Question 39

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 40

What is a bailment?

A) One party assures another party that goods will meet certain standards.
B) One party delivers goods to a merchant or permits the merchant to retain them.
C) One party conveys goods to another for a specified time, usually in return for a periodic payment.
D) One party is legally holding goods for the benefit of another party.

Question 41

Inez contracted with Filippo Furnaces Co. for the installation of a new furnace. Inez selected the furnace she wanted, accepting no suggestions from Filippo Furnaces' heating engineer. The furnace operated fine, but it did not heat the entire house. The size of the blower on the furnace was too small to accommodate the third floor of the house. Inez sued Filippo Furnaces Co. for the breach of the implied warranties of merchantability and fitness. What result?

Question 42

A common problem in cases of express warranty is being able to separate statements that create express warranties from statements that do not. Discuss what type of statements create an express warranty and four indications that a statement is likely to create an express warranty.

Question 43

Discuss the concept of insurable interest. Indicate the difference between a buyer's and a seller's insurable interest.

Question 44

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

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.