Chapter 16

:

Title and Risk of Loss

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WHAT THIS CHAPTER IS ABOUT
The UCC has special rules involving title, which may determine the rights and remedies of the parties to a  sales contract. In most situations, however, issues concerning the rights and remedies of parties to sales or lease  contracts are controlled by three other concepts:  (1) identification, (2) risk of loss, and (3) insurable interest.

CHAPTER OUTLINE
I. IDENTIFICATION
For an interest in goods to pass from seller to buyer or lessor to lessee, the goods must (1) exist and (2) be  identified as the goods subject to the contract. A. WHAT IDENTIFICATION IS Identification is the designation of goods as the subject matter of a sales or lease contract. B. WHY IDENTIFICATION IS SIGNIFICANT Identification gives the buyer (1) the right to obtain insurance and (2) the right to recover from third  parties who damage the goods. C. WHEN IDENTIFICATION OCCURS 1. According to the Parties’ Agreement Parties can agree when identification will occur (but to pass title and risk of loss, the goods must  exist) [UCC 2–501, 2A–217]. If the Parties Do Not Specify a Time in Their Contract a. Existing Goods If the contract calls for a sale of specific goods already existing, identification occurs when the  contract is made.

2.

b. Future Goods If a sale involves unborn animals or crops to be harvested within twelve months of the contract  (or, for crops, during the next harvest season, whichever is further in the future), identification  occurs when the goods are conceived, planted, or begin to grow. c. Goods That Are Part of a Larger Mass Identification occurs when— 1) Goods Are Marked, Shipped, or Otherwise Designated 2) Exception—Fungible Goods A buyer can acquire rights to goods that are alike by physical nature, agreement, or trade  usage and that are held by owners in common by replacing the seller as owner [UCC 2– 105(4)].

109

II.

PASSAGE OF TITLE
A. WHEN TITLE PASSES 1. 2. According to the Parties’ Agreement Parties can agree on when and under what conditions title will pass. At the Time and Place at Which the Seller Performs If  the  parties  do   not  specify   a  time,  title  passes  on  delivery   [UCC   2–401(2)].   The  delivery   terms  determine when this occurs. a. Shipment Contracts If the seller is required or authorized to ship goods by carrier, title passes at time and place of  shipment [UCC 2–401(2)(a)]. All contracts are shipment contracts unless they say otherwise.

b. Destination Contracts If the seller is required to deliver goods to a certain destination, title passes when the goods are  tendered there [UCC 2–401(2)(b)]. c. Delivery without Movement of the Goods If a buyer is to pick up goods, passing title turns on whether a seller must give a document of  title (bill of lading, warehouse receipt). 1) When a Document of Title Is Required Title passes when and where the document is delivered. The goods do not need to move (for  example, they can stay in a warehouse). 2) When No Document of Title Is Required If the goods have been identified, title passes when and where the contract was made. If the  goods have not been identified, title does not pass until identification [UCC 2–401(3)]. B. SALES OR LEASES BY NONOWNERS Generally, a buyer acquires whatever title the seller has to the goods sold [UCC 2–402, 2–403]. A lessee  acquires whatever title a lessor could transfer, subject to the lease [UCC 2A–303, 2A–304, 2A–305]. 1. Void Title If the seller or lessor stole the goods, the buyer or lessee acquires nothing; the real owner can reclaim  the goods. Voidable Title A seller or lessor has voidable title if goods were obtained by fraud, paid for with a check that is later  dishonored, bought on credit when the seller was insolvent, or bought from a minor. a. The Real Owner Can Reclaim the Goods

2.

b. Exception—Good Faith Purchaser or Lessee for Value The real owner cannot recover the goods [UCC 2–403(1)]. 3. The Entrustment Rule Entrustment includes both delivering goods to a merchant and leaving goods with the merchant for  later delivery or pickup [UCC 2–403(3)]. a. Entrusting Goods to a Merchant Who Deals in Goods of the Kind

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The merchant can transfer all rights to a buyer or sublessee in the ordinary course of business  [UCC 2–403(2), 2A–305(2)]. b. What a Buyer or Sublessee in the Ordinary Course Gets Only those rights held by the person who entrusted the goods.

III.

RISK OF LOSS

The question of who suffers a financial loss if goods are damaged, destroyed, or lost (who bears the risk of   loss) is determined by the parties’ contract. If the contract does not state who bears the risk, the UCC has rules  to determine it. A. DELIVERY WITH MOVEMENT OF THE GOODS—CARRIER CASES When goods are to be delivered by truck or other paid transport— 1. Contract Terms a. F.O.B.  (free on board)—delivery is at seller’s expense to a specific location. Risk passes at the  location [UCC 2–319(1)].

b. F.A.S.  (free   alongside)—seller   delivers   goods   next   to   the   ship   that   will   carry   them,   and  risk  passes to buyer [UCC 2–319(2)]. c. C.I.F. or C.&F. (cost, insurance, and freight)—seller puts goods in possession of a carrier before  risk passes [UCC 2–320(2)].

d. Delivery Ex­ship (from the carrying vessel)—risk passes to buyer when goods leave the ship or  are unloaded [UCC 2–322]. 2. Shipment Contracts Risk passes to the buyer or lessee when the goods are delivered to a carrier [UCC 2–509(1)(a), 2A– 219(2)(a)].

3.  Destination Contracts Risk passes to the buyer or lessee when the goods are tendered to the buyer at the destination [UCC  2–509(1)(b), 2A–219(2)(b)]. B. DELIVERY WITHOUT MOVEMENT OF THE GOODS When goods are to be picked up by the buyer or lessee— 1. 2. 3. If the Seller or Lessor Is a Merchant Risk passes only on the buyer’s or lessee’s taking possession of the goods. If the Seller or Lessor Is Not a Merchant Risk passes on tender of delivery [UCC 2–509(3), 2A–219(c)]. If a Bailee Holds the Goods Risk passes when (1) the buyer receives a negotiable document of title for the goods, (2) the bailee  acknowledges the buyer’s (or in the case of a lease, the lessee’s) right to the goods, or (3) the buyer  receives a nonnegotiable document of title, presents the document to the bailee, and demands the  goods. If the bailee refuses to honor the document, the risk remains with the seller [UCC 2–503(4)(b),  2–509(2), 2A–219(2)(b)].

C. CONDITIONAL SALES 1. Sale or Return (or Sale and Return)

A seller sells goods to a buyer who can set aside the sale by returning any portion of the goods and  paying for the goods not returned [UCC 2–326, 2–327]. a. Title and Risk Pass to the Buyer with Possession Title  and  risk  stay  with  the  buyer  until  he   or  she  returns  the  goods  to  the   seller  within  the  specified time. A sale is final if the buyer fails to return the goods in time. Goods in the buyer’s  possession are subject to the claims of the buyer’s creditors.

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b. Consignment A consignment is a sale or return. Goods in the consignee’s (buyer’s) possession are subject to his  or her creditors’ claims [UCC 2–326(3)]. 2. Sale on Approval A seller offers to sell goods, and the buyer takes them on a trial basis. Title and risk remain with the  seller until the buyer accepts the goods. a. What Constitutes Acceptance Any act inconsistent with the trial purpose or the seller’s ownership; or by the buyer’s choice not  to return the goods on time.

b. Return Return is at the seller’s expense and risk [UCC 2–327(1)]. Goods are not subject to the claims of  the buyer’s creditors until acceptance. D. RISK OF LOSS WHEN A SALES OR LEASE CONTRACT IS BREACHED Generally, the party in breach bears the risk of loss. 1. When the Seller or Lessor Breaches Risk passes to the buyer or lessee when the defects are cured or the buyer or lessee accepts the goods  in   spite   of   the   defects.   If,   after   acceptance,   a   buyer   discovers   a   latent   defect,   acceptance   can   be  revoked and the risk goes back to the seller [UCC 2–510(2), 2A–220(1)]. When the Buyer or Lessee Breaches Risk shifts to the buyer or lessee (if the goods have been identified), where it stays for a commercially  reasonable time after the seller or lessor learns of the breach. The buyer or lessee is liable to the extent  of any deficiency in seller or lessor’s insurance [UCC 2–510(3), 2A–220(2)].

2.

IV.

INSURABLE INTEREST
A party buying insurance must have a “sufficient interest” in the insured item (see Chapter 38). More than  one party can have an interest at the same time. A. INSURABLE INTEREST OF THE BUYER OR LESSEE A buyer or lessee has an insurable interest in goods the moment they are identified, even before risk of  loss passes [UCC 2–501(1), 2A–218(1)]. B. INSURABLE INTEREST OF THE SELLER OR LESSOR A seller or lessor has an insurable interest in goods as long as he or she holds title or a security interest in  the goods [UCC 2–501(2), 2A–218(3)].

TRUE­FALSE QUESTIONS
(Answers at the Back of the Book)
                        1. 2. 3. Before   an  interest   in   specific   goods   can   pass   from  a   seller   to   a   buyer,   the   goods   must   exist   and   be  identified to the contract. Under all circumstances, title passes at the time and place that the buyer accepts the goods. Unless a contract provides otherwise, it is normally assumed to be a shipment contract.

       
  

4. 5. 6. 7. 8. 9.

In a sale on approval, the buyer can set aside the deal by returning the goods. A buyer and a seller cannot both have an insurable interest in the same goods at the same time. If a seller breaches a contract, the risk passes to the buyer once the defects are cured. In a sale on approval, the risk of loss passes to a buyer when the buyer takes possession of the goods. An innocent buyer can acquire title to goods as a good faith purchaser from a thief. Under a destination contract, the risk of loss passes at time and place of shipment. If a seller is a merchant, the risk of loss to goods held by the seller passes to a buyer on delivery.

                                       

        10.

FILL­IN QUESTIONS
(Answers at the Back of the Book)
______________  (F.A.S./F.O.B.) means that delivery is at a seller’s expense to a specific location—the place of  shipment or a place of destination. When the term is ____________ (F.A.S./F.O.B.) place of shipment, risk passes when  the  seller  puts   the  goods   into  a  carrier’s  possession.  When   the  term   is  _______________  (F.A.S./F.O.B.)  place   of  destination, risk passes when the seller tenders delivery.   _______________ (F.A.S./ F.O.B.) requires a seller at his or  her own expense and risk to deliver goods alongside the ship that will transport them at which point risk passes.

MULTIPLE­CHOICE QUESTIONS
(Answers at the Back of the Book)
        1. a. b. c. d.         2. a. b. c. d.         3.  a. b. c. d. Ron agrees to sell 1,000 pens to State University Book Store. Before an interest in the pens can pass from  Ron to the bookstore, the pens must be identified as the specific goods designated in the contract only. in existence and identified as the goods in the contract. in existence only.  neither in existence nor identified as the goods in the contract. Alpha, Inc., sells ten computers to Beta Corporation. They agree to ship the computers “F.O.B. Alpha” via  Gamma Company. The computers are destroyed in transit. The loss is suffered by Alpha. Beta. Gamma. not Alpha, Beta, or Gamma. Sid buys an MP3 player from Tom, his neighbor, who agrees to keep the player until Sid picks it up.  Before Sid can get it, the player is stolen. The loss is suffered by neither Sid nor Tom. Sid and Tom. Sid only. Tom only.

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4.

Retail Floor Stores buys tile from Superior Tile Corporation. Town Storage holds the tile in a warehouse.  The tile is delivered to Retail by the transfer of a negotiable warehouse receipt. A fire later damages the  tile. The loss is suffered by not Retail, Superior, or Town. Retail. Superior. Town. Nora leaves her car with OK Auto Sales & Service for repairs. OK sells the car to Pete, who does not  know that OK has no right to sell the car. Nora can recover from not OK or Pete. OK and Pete. OK only.  Pete only. Ed buys a sport utility vehicle (SUV) from Friendly Truck Sales, which agrees to keep the SUV until Ed  picks it up. Before Ed can get it, it is stolen. The loss is suffered by Ed and Friendly. Ed only. Friendly only. neither Ed nor Friendly. Omega Engineering, Inc., buys ten drafting tables from Quality Supply Corporation. They agree to ship  the tables “F.O.B. Omega” via State Trucking Company. The tables are destroyed in transit. The loss is  suffered by not Omega, Quality, or State. Omega. Quality. State. New Products, Inc. (NPI), agrees to sell 100 cell phones to Open Source Sales. NPI identifies the goods by  marking the crate with red stripes. Before the crate is shipped, an insurable interest exists in not NPI or Open Source. NPI and Open Source. NPI only. Open Source only. Standard Goods, Inc., ships fifty defective hard drives to Top Business Corporation. Top rejects the drives  and ships them back to Standard, via United Transport, Inc. The drives are lost in transit. The loss is  suffered by not Standard, Top, or United. Standard. Top. United.

a. b. c. d.         5. a. b. c. d.         6. a. b. c. d.         7.

a. b. c. d.         8. a. b. c. d.         9.

a. b. c. d.

        10.

Red   Apples   Corporation   agrees   to   sell   forty   cases   of   apples   to   Sweet   Fruit,   Inc.,   under   a   shipment  contract. Red gives the apples to Refrigerated Trucking, Inc. (RTI), which delivers them to Sweet. Title  passed when Red agreed to sell the goods. Red gave the goods to RTI. RTI delivered the goods to Sweet. Sweet exercised dominion over the goods.

a. b. c. d.

SHORT ESSAY QUESTIONS
1. What is “risk of loss” under the UCC? 2. When does risk pass (a) under a shipment contract; (b) under a destination contract; (c) when the buyer is to pick  up the goods and (1) the seller is a merchant and (2) the seller is not a merchant; (d) when a bailee holds the goods?

ISSUE SPOTTERS
(Answers at the Back of the Book)
1. Under   a   contract   between   Great   Products,   Inc.,   in   New   York   and   National   Sales   Corporation   in   Dallas,   if  delivery is “F.O.B. New York,” the risk passes when the Great Products puts the goods in a carrier’s hands. If delivery  is “F.O.B. Dallas,” the risk passes when the goods reach Dallas. What if the contract says only that Great Products is  “to ship goods at the seller’s expense”? 2. Fine Farms in Washington sells Green Produce in Alaska a certain size of apples to be shipped “F.O.B. Seattle.”  The apples that Fine delivers to the shipping company for transport are too small. The apples are lost in transit. Who  suffers the loss? 3. Chocolate,   Inc.,   sells   five   hundred   cases   of   cocoa   mix   to   Dessert   Company,   which   pays   with   a   bad   check.  Chocolate does not discover that the check is bad until after Dessert sells the cocoa to Eden Food Stores, which  suspects nothing. Can Chocolate recover the cocoa from Eden?

1. The UCC replaces the common law concept of title with three other concepts. Which of the following is not one of the UCC concepts concerning title? a. Risk of Loss. b. Insurable Interest. c. Product Liability. d. Identification. 2. In order for an interest in goods to pass from the seller to the buyer, which conditions must exist? a. The goods must be in existence, and they must be identified as the specific goods designated in the contract. b. The goods must be adequately discussed by the parties.

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c. The goods must be an integral part of a larger quantity of goods. d. The goods must be intangible. 3. Fungible goods are: a. goods that are identified to the contract. b. goods that are designated in a requirements contract. c. goods that are alike by physical nature, by agreement, or by trade usage. d. goods that are designated in an output contract. 4. Which of the following is an example of fungible goods? a. A painting by Vincent van Gogh and one by Rembrandt. b. A novel by F. Scott Fitzgerald and a poem by Wallace Stevens. c. "Pink Princess" tulip bulbs from the premier tulip producer in Holland. 5. Under a shipment contract, title passes from the seller to the buyer: a. when the goods are delivered to the buyer's office. b. when the seller delivers conforming goods to a carrier, such as a trucking company. c. when the goods are identified. d. when the goods are created. 6. Under a destination contract, title passes to the buyer when: a. the goods are delivered to a carrier, which will then transport the goods to the buyer's city. b. the seller delivers the goods to a particular destination, such as the buyer's city or place of business. c. the seller knows the destination of the shipment. d. at the moment the seller ships fungible goods. 7. A bill of lading is: a. a payment for certain kinds of cooking materials. b. the same thing as a shipment contract. c. a receipt for goods signed by a carrier. This receipt is a contract for the transportation of the goods. d. a payment by the buyer of goods to the seller. 8. If Jill buys a stolen watch from Sam, and if she knows that Sam stole the watch from an unsuspecting woman on the street, what kind of title does Jill take to the watch? a. She takes a voidable title, based on the woman's ability to locate her. b. She takes good title because she was a good faith purchaser. c. She takes valid title but may be subject to the tort of conversion. d. She has no title because Sam's title was void based on theft.

9. Suppose that Sam owns a jewelry store. Sam defrauds his old Aunt Claire out of her watch, and sells the watch to Jill. If Jill does not know that the watch was acquired by fraud, what title does she take? a. She takes a voidable title, based on Sam's voidable title. b. She takes good title because she was a good faith purchaser. c. She takes valid title but may be subject to a tort claim for embezzlement. d. She has no title because Sam's title was void. 10. Suppose that Aunt Claire discovers that her watch is gone and that Sam is the culprit. If Claire wants to get the watch back from Jill, what legal obligation does Jill have to Claire? a. Jill must return the watch based on Sam's fraud. b. Jill must return the watch because her title was void. c. Jill has no legal obligation to Claire. d. Claire entrusted the watch to Jill, and so Jill must return it. 11. In the case of Memphis Hardwood Flooring v. Daniel, the issue concerned whether: a. whether Memphis was a good faith purchaser. b. whether Memphis was subject to the entrustment doctrine. c. whether Memphis had entrusted goods to a good faith purchaser for value. d. whether a contract was a shipment or destination contract. 12. Change the facts in question #10 and suppose that Claire willingly gave her watch to Sam and asked Sam to repair the watch. Jill comes along and sees the watch. She says to Sam, "I would like to buy that watch." If Sam answers, "Sure, that will be $250.00," what legal doctrine governs this transaction? a. The invasion rule. b. The bad faith rule. c. The anticipatory repudiation rule. d. The entrustment rule. 13. The case of DeWeldon, Ltd. v. McKean involved the legal doctrine of: a. conversion. b. entrustment. c. entrapment. d. product liability. 14. Under a shipment contract, when does the risk of loss shift from the seller to the buyer? a. When the goods are delivered to the carrier. b. When the goods are identified. c. When the goods are created. d. When the goods reach the buyer.

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UNIT THREE: SALES AND LEASE CONTRACTS

15. The case of Windows, Inc. v. Jordan Panel System Corp. involved which issue? a. A claim of restitution. b. The allocation of risk of loss in a shipment contract. c. A bailment. d. A lease by a nonowner. 16. A bailee is: a. someone to whom you donate an item of personal property. b. someone who temporarily cares for the personal property of another, without passage of title. c. someone from the seller's office who carries goods to the first carrier. d. someone who is also known as the buyer or lessee. 17. The term F.O.B. means what? a. Freight onto the buyer. b. Fixed on boat. c. Free on board. d. Finalize only with buyer. 18. A "sale or return" is a kind of: a. conditional sale. b. shipment contract. c. shipping term. d. destination contract. 19. A consignment is considered, by the UCC, to be a kind of: a. bulk sale. b. sale or return. c. unconditional sale. d. uninsurable interest. 20. In a sale on approval, risk of loss remains with: a. the seller, until the buyer accepts the seller's offer. b. the buyer, from the moment the buyer takes possession of the goods. c. both the seller and the buyer, until the buyer accepts the seller's offer. d. neither the seller nor the buyer, until the buyer returns the goods. 21. Under the UCC, if a seller breaches a sales contract, in some cases the seller may be able to "cure." What does this mean? a. It means the seller can be paid for nonperformance. b. It means the buyer must mitigate her damages to the fullest extent possible.

c. It means the buyer must accept significantly nonconforming goods. d. It means the seller can attempt to correct the breach within a specified period of time. 22. If a buyer breaches a contract for the sale of goods covered by the UCC, which of the following is not a limitation to the general rule that the buyer bears the risk of loss once the breach occurs? a. The buyer is liable only to the extent of any deficiency in the seller's insurance coverage. b. The buyer is liable for the full amount of harm, regardless of insurance coverage. c. The buyer bears the risk for a commercially reasonable time after the breach only. d. The seller or buyer must have identified the goods to the contract. 23. According to the UCC, the buyer has an insurable interest in contract goods: a. from the moment the goods are identified to the contract. b. only after the buyer takes possession of the goods. c. from the moment the contract is formed, regardless of whether the goods have been identified. d. only after the seller has tendered delivery of the goods. 24. For how long does a seller retain an insurable interest in goods involved in a sales contract under the UCC? a. Forever. b. For as long as the seller retains title to the goods. c. For three to six months. d. During the creation of the goods only. 25. A bulk transfer under Article 6 of the UCC always involves which of the following? a. A transfer of heavy equipment. b. A sale of furniture. c. A transfer of a major part of one's materials, supplies, merchandise, or inventory not made in the ordinary course of one's business. d. A transfer of an interest in land or in permanent attachments to land.

Fungible goods are: a. goods that are identified to the contract. b. goods that are designated in a requirements contract. c. goods that are alike by physical nature, by agreement, or by trade usage. d. goods that designated in an output contract. status: not answered ()

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UNIT THREE: SALES AND LEASE CONTRACTS

correct: c your answer: 2 Under a destination contract, title passes to the buyer: when the goods are delivered to a carrier, which will then transport the goods to the buyer's a. city. when the seller delivers the goods to a particular destination, such as the buyer's city or place b. of business. c. when the seller knows the destination of the shipment. d. at the moment the seller ships fungible goods. status: not answered () correct: b your answer: 3 A bill of lading is: a. a payment for certain kinds of cooking materials. b. the same thing as a shipment contract. a receipt for goods that is signed by a carrier and serves as a contract for the transportation of c. the goods. d. a payment by the buyer of goods to the seller. status: not answered () correct: c your answer: 4 Suppose that Aunt Claire discovers that her watch is gone and that Sam is the culprit, who has sold the watch to Jill. If Claire wants to get the watch back from Jill, what legal obligation does Jill have to Claire? a. Jill must return the watch based on Sam's fraud. b. Jill must return the watch because her title was void. c. Jill has no legal obligation to Claire. d. Claire entrusted the watch to Jill, and so Jill must return it. status: not answered () correct: c your answer:

5 Under a shipment contract, when does the risk of loss shift from the seller to the buyer? a. When the goods are delivered to the carrier. b. When the goods are identified. c. When the goods are created. d. When the goods reach the buyer. status: not answered () correct: a your answer: 6 The term F.O.B. means what? a. Freight onto the buyer b. Fixed on boat c. Free on board d. Finalize only with buyer status: not answered () correct: c your answer: 7 A consignment is considered, by the UCC, to be a kind of: a. bulk sale. b. sale or return. c. unconditional sale. d. uninsurable interest. status: not answered () correct: b your answer:

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8 Under the UCC, a seller who breaches a sales contract may sometimes be able to "cure." What does this mean? a. It means the seller can be paid for nonperformance. b. It means the buyer must mitigate her damages to the fullest extent possible. c. It means the buyer must accept significantly nonconforming goods. d. It means the seller can attempt to correct the breach within a specified period of time, status: not answered () correct: d your answer: 9 According to the UCC, the buyer has an insurable interest in contract goods: a. from the moment the goods are identified to the contract. b. only after the buyer takes possession of the goods. c. from the moment the contract is formed, regardless of whether the goods have been identified. d. only after the seller has tendered delivery of the goods. status: not answered () correct: a your answer: 10 A bulk transfer under Article 6 of the UCC always involves which of the following? a. A transfer of heavy equipment. b. A sale of furniture. A transfer of a major part of one's materials, supplies, merchandise, or inventory not made in c. the ordinary course of one's business. d. A transfer of an interest in land or in permanent attachments to land. status: not answered () correct: c your answer:

Chapter 15: Title and Risk of Loss
Congratulations on the successful completion of your quiz! Here are the results: Email: holliboyd@gmail.com Score: 18

Your Answer 1. d no

Correct? c

Correct Answer

Description Product Liability. The goods must be in existence, and they must be identified as the specific goods designated in the contract. goods that are alike by physical nature, by agreement, or by trade usage. "Pink Princess" tulip bulbs from the premier tulip producer in Holland. when the seller delivers conforming goods to a carrier, such as a trucking company. the seller delivers the goods to a particular destination, such as the buyer's city or place of business.

2.

a

yes

3.

c

yes

4.

c

yes

5.

b

yes

6.

b

yes

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UNIT THREE: SALES AND LEASE CONTRACTS

7.

c

yes

a receipt for goods signed by a carrier. This receipt is a contract for the transportation of the goods. She has no title because Sam's title was void based on theft. She takes good title because she was a good faith purchaser. Jill has no legal obligation to Claire. a whether Memphis was a good faith purchaser. The entrustment rule. b entrustment. When the goods are delivered to the carrier. The allocation of risk of loss in a shipment contract.

8.

d

yes

9.

d

no

b

10.

c

yes

11.

d

no

12. 13. 14.

d a a

yes no yes

15.

b

yes

16.

b

yes

someone who temporarily cares for the personal property of another, without passage of title. Free on board. conditional sale. sale or return. the seller, until the buyer accepts the seller's offer. It means the seller can attempt to correct the breach within a specified period of time. The buyer is liable for the full amount of harm, regardless of insurance coverage. from the moment the goods are identified to the contract.

17. 18. 19.

c a b

yes yes yes

20.

b

no

a

21.

d

yes

22.

d

no

b

23.

b

no

a

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UNIT THREE: SALES AND LEASE CONTRACTS

24.

b

yes

For as long as the seller retains title to the goods. A transfer of a major part of one's materials, supplies, merchandise, or inventory not made in the ordinary course of one's business. 1 out of 1 points

25.

c

yes

Question 1

A contract in which a buyer is allowed to take goods on a trial basis is a sale or return. Selected Answer: False Correct Answer: False Question 2 Selected Answer: True Correct Answer: False Question 3 1 out of 1 points When an owner holds fungible goods as a tenant in common, the owner can pass title to the goods to a buyer only by physically separating the goods. Selected Answer: False Correct Answer: False Question 4 0 out of 1 points A buyer and a seller cannot normally have an insurable interest in identical goods at the same time. Selected Answer: True 0 out of 1 points When a buyer breaches a contract, the risk of loss immediately shifts to the seller.

Correct Answer: Question 5

False 0 out of 1 points

Before a seller can have an insurable interest in goods, the goods themselves must be identified to a contract. Selected Answer: True Correct Answer: False Question 6 1 out of 1 points When a document of title is required, title passes to a buyer when and where the document is delivered. Selected Answer: True Correct Answer: True Question 7 0 out of 1 points Under the UCC, title determines all of the rights and remedies of the parties to a sales contract. Selected Answer: True Correct Answer: False Question 8 Selected Answer: True Correct Answer: True Question 9 C.I.F. stands for "cost, insurance, freight." Selected Answer: True Correct Answer: True Question 10 1 out of 1 points If a seller is a merchant, and the goods are not to be moved, the risk of loss passes to a buyer when the buyer takes physical possession of the goods. Selected Answer: True 1 out of 1 points 1 out of 1 points A buyer from a thief does not acquire title to the goods even if the buyer acts in good faith.

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UNIT THREE: SALES AND LEASE CONTRACTS

Correct Answer: Question 11

True 1 out of 1 points

Entrusting goods to a merchant who deals in goods of the kind gives the merchant the power to transfer all rights to a buyer in the ordinary course of business. Selected Answer: True Correct Answer: True Question 12 0 out of 1 points When a buyer agrees to buy goods held by a bailee, unless otherwise explicitly agreed, the risk of loss passes to the buyer when the price is paid. Selected Answer: True Correct Answer: False Question 13 1 out of 1 points When no document of title is required and delivery is made without moving the goods, title to identified goods passes when a contract for their sale is made. Selected Answer: True Correct Answer: True Question 14 1 out of 1 points A bill of lading is a receipt that a carrier signs and that serves as a contract for the transportation of goods. Selected Answer: True Correct Answer: True Question 15 1 out of 1 points Under a shipment contract, the risk of loss passes to the buyer when the seller places conforming goods in the possession of the carrier. Selected Answer: True Correct Answer: True Question 16 The UCC treats a consignment as a sale on approval. Selected Answer: False 1 out of 1 points

Correct Answer: Question 17

False 1 out of 1 points

If a seller is not a merchant, and the goods are not to be moved, the risk of loss remains with the seller until the buyer sells or otherwise disposes of the goods. Selected Answer: False Correct Answer: False Question 18 1 out of 1 points Under all circumstances, title passes to the buyer at the time and place at which the seller physically delivers the goods. Selected Answer: False Correct Answer: False Question 19 1 out of 1 points If a seller is not a merchant, the seller holds the goods, and the buyer is to pick them up, the risk of loss passes to the buyer on tender of delivery. Selected Answer: True Correct Answer: True Question 20 Selected Answer: True Correct Answer: True 1 out of 1 points Unless a contract provides otherwise, it is assumed to be a shipment contract.

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