[Kool Klothes] Cleo Recently Opened an Exclusive Designer Clothing Store

Multiple Choice

[Kool Klothes] Cleo recently opened an exclusive designer clothing store. She contracts with Kool Klothes to sell their high-end designer line. The contract states Kool will ship clothes each week, and Cleo has a month to pay for the clothes or she can return any merchandise she does not sell. The arrangement works well for several months, but then Kool Klothes notices several suits Cleo returns via a courier service are damaged. Also, during a weekly delivery of the Kool Klothes truck, the driver gets into a car accident, and several formal ball gowns are damaged.
-With regard to the damage to the formal ball gowns, who bears the risk of loss?

A) Kool Klothes, because it is the seller in a sale-or-return contract.
B) Kool Klothes, because it is a merchant and in a simple delivery contract, risk of loss transfers on delivery of the goods to the buyer.
C) Cleo, because she is the buyer in a sale-or-return contract.
D) Cleo, because the dresses are goods in bailment.
E) Cleo, because under a sale-or-return contract, she can return the dresses.