Deck 21: Title, Risk, and Insurable Interest

Question 1

A seller with voidable title can transfer good title to a good faith purchaser for value.

Answer 1

True

Question 2

Any explicit understanding between the buyer and the seller determines when title passes.

Answer 2

True

Question 3

In a sale or return, title and risk of loss remain with the seller until the buyer accepts the goods.

Answer 3

False

Question 4

Even if goods are not identified to the contract, the title and risk of loss can still pass from the seller to the buyer.

Question 5

If a seller is not a merchant, and the goods are not to be moved, the risk of loss passes to a buyer on tender of delivery.​

Question 6

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

Question 7

When a lessee sells leased equipment to a third party, the lessor cannot, under any circumstances, recover the equipment from the buyer.

Question 8

In contracts involving a sale of unborn animals to be born within twelve months, identification takes place when the animals are born.

Question 9

In a sale on approval, a buyer takes goods primarily for resale, with a right to return any goods that fail to sell.

Question 10

If a buyer accepts a shipment of goods and later discovers a defect, acceptance cannot be revoked.

Question 11

A receipt issued by a warehouser for goods stored in a warehouse is a bill of lading.

Question 12

Identification takes place when specific goods are designated as the subject mater of a sales or lease contract.

Question 13

All UCC provisions relating to the passage of title for sales of goods also apply to leases of goods.​

Question 14

When a document of title is required, title passes to a buyer when and where the document is delivered.

Question 15

A seller has an insurable interest in goods as long as the goods are in existence.

Question 16

When a merchant keeps the goods for the buyer to pick up, the risk of loss passes when the buyer actually takes possession of the goods.

Question 17

The entrustment rule basically allows innocent buyers to obtain legitimate title to goods purchased from merchants even if the merchants do not have good title.

Question 18

In most situations involving sales, rights and liabilities are determined by who has the title to the goods.

Question 19

If a lessor is a merchant, the risk of loss passes to a lessee when the lessee takes physical possession of the goods.

Question 20

Generally, all contracts are assumed to be shipment contracts if nothing to the contrary is stated in the contract.

Question 21

Equipment Rentals Corporation (ERC) agrees to lease two backhoes to Dig & Fill Construction, Inc. Before any interest in the backhoes can pass from ERC to Dig & Fill, they must be

A) ​in ERC's physical possession.
B) ​in Dig & Fill's physical possession.
C) ​listed in a document of title and filed in the appropriate state office.
D) ​in existence and identified as the goods in the contract.

Question 22

Big Beef, Inc. raises calves to sell. Big Beef breeds its cows in April, and the cows calve in February of the following year. In January Andrea contracts with Big Beef to buy fifty calves. Identification takes place in

A) ​January, when the contract is signed.
B) ​April, when the calves are conceived.
C) ​February, when the calves are born.
D) ​a reasonable period of time.

Question 23

In a sale or return, a buyer has an option to return the goods and undo the sale.

Question 24

In a destination contract, the seller is required or authorized to ship goods by carrier.

Question 25

Fungible goods are goods that are alike naturally or by agreement or trade usage.

Question 26

When the risk of loss for goods passes from a seller to a buyer is generally determined by the contract between the parties.

Question 27

The risk of loss in a shipment contract passes to the buyer when the goods are delivered to the buyer at the specified destination.

Question 28

Title and risk of loss cannot pass to the buyer from the seller before the goods are identified to the contract.

Question 29

Ron, a representative for Statewide Freight Inc., delivers a receipt issued by Tina, the owner of United Warehouse, for goods in storage to World Products, Inc., a buyer of the goods. This is

A) ​a shipment contract.
B) ​a bill of lading.
C) ​a destination contract.
D) ​a warehouse receipt.

Question 30

Jason contracts with Golf Carts Unlimited, Inc. to buy five golf carts. The contract lists the five carts as GC001, GC002, GC003, GC004, GC005. Identification

A) ​will take place only when Jason pays for the golf carts.
B) ​requires that Jason verify his identity to take possession of the carts.
C) ​cannot take place until the contract is reviewed by a court.
D) ​has taken place.

Question 31

When a bailee is holding goods that are to be delivered under a contract without being moved, the risk of loss cannot pass to a buyer.

Question 32

If a sale involves crops that are to be harvested within twelve months, identification takes place when the crops are harvested.

Question 33

Barley that fills County Grain Co-op's silo is fungible if the barley is

A) ​alike naturally, by agreement, or by trade usage.
B) ​fundamentally different.
C) ​fun, good, and edible.
D) ​rotting due to a leaky roof and a delay in shipping.

Question 34

If the goods are so nonconforming that the buyer has the right to reject them, the risk of loss does not pass to the buyer.

Question 35

Under the UCC, the risk of loss necessarily passes with title.

Question 36

When a buyer breaches a contract, the risk of loss immediately shifts to the buyer.

Question 37

Tenants in common are owners with an undivided share of the whole.

Question 38

If an owner holds fungible goods as an owner in common, he or she can pass title without actually separating the goods.

Question 39

Identification, risk of loss, and insurable interest are all concepts that are involved in determining the rights and liabilities of parties to a contract.

Question 40

With nonconforming goods, the risk of loss does not pass to the buyer until the defects are cured or the buyer accepts the goods in spite of the defects.

Question 41

Home Appliance Corporation contracts with Instate Trucking Company to take a selection of appliance repair parts to Journey Airlines, Inc., with Journey to transport the goods to a KeepSafe Company warehouse. Instate Trucking, Journey Airlines, and KeepSafe each acknowledge possession of the goods by a document of title. Instate Trucking, Journey Airlines, and KeepSafe are

A) ​bailees.
B) ​buyers.
C) ​lessees.
D) ​none of the choices.

Question 42

Safety Supply Corporation in New York sells a truckload of protective suits, masks, and other safety gear to Toxic Recovery, Inc., in Connecticut, "F.O.B. New York." Safety Supply arranges with US Truckline to transport the goods. The cost of the transport will be paid by

A) ​Safety Supply.
B) ​Toxic Recovery.
C) ​US Truckline.
D) ​Toxic Recovery's clients by an increase in the price of loss control services.

Question 43

Big Red Drinks, Inc. contracts to buy two tons of cranberries from Super Fruits, Inc. The contract states that Super Fruits is required to ship the cranberries to Big Red Drinks by Speedy Wind Air Freight. The contract is

A) ​a bill of lading.
B) ​a destination contract.
C) ​a shipment contract.
D) ​a warehouse receipt.

Question 44

Roasters Corporation and Outdoor Barbecues, Inc., enter into a contract for a sale of a commercial grill. The contract requires Roasters to deliver the goods to Speedy Delivery Company for transport to Outdoor. Risk of loss passes to Outdoor when

A) ​Roasters delivers the goods to Speedy.
B) ​Roasters and Outdoor enter into their contract.
C) ​Speedy transports the goods to Outdoor.
D) ​Outdoor begins to use the grill.

Question 45

A contract between Fresh Fruit Corporation and Green Grocer, Inc., requires Fresh Fruit to deliver goods to Green Grocer's place of business. This is

A) ​a bill of lading.
B) ​a destination contract.
C) ​a shipment contract.
D) ​a warehouse receipt.

Question 46

Pipes & Culverts Company orders six irrigation pumps from Quality Plumbing, Inc. The pumps are stored in Restorers Warehouse. Under the terms of the order, Quality must give Pipes & Culverts a warehouse receipt for the goods, which the buyer will then pick up. Title to the goods passes to Pipes & Culverts when

A) ​Quality stores the drives.
B) ​Pipes & Culverts orders the drives.
C) ​Pipes & Culverts picks up the drives.
D) ​Quality gives Pipes & Culverts a warehouse receipt for the drives.

Question 47

Outdoor Outfitters Store contracts to buy fifty tents from Pitched Camp, Inc. Unless the contract states otherwise, it is assumed to be

A) ​none of the choices.
B) ​a destination contract.
C) ​a shipment contract.
D) ​a delivery ex-ship.

Question 48

Commercial Rents Corporation agrees to lease a pressure washer to Delivery Trucks, Inc., which agrees to pick it up at E Street Warehouse. Before Delivery Trucks retrieves the washer, it is stolen. The loss is suffered by

A) ​Commercial Rents.
B) ​Delivery Trucks.
C) ​E Street Warehouse.
D) ​the thief.

Question 49

Quaff n' Quench Café buys twenty-five crates of oranges from Reynaldo Produce, Inc. The parties agree to ship the oranges "F.O.B. Quaff n' Quench " via Swiftline Trucking Company. The oranges rot in transit. The loss is suffered by

A) ​Quaff n' Quench.
B) ​Sham.
C) ​F.O.B.
D) ​Reynaldo.

Question 50

​Brad leaves an iPod at Computer Sales & Repair (CSR) to have the battery replaced. CSR sells the iPod to Doris, who does not know that it belongs to Brad. Brad can recover from

A) ​no one.
B) ​CSR.
C) ​Doris.
D) ​Apple, Inc., the maker of the iPod.

Question 51

Liz buys a car from Midtown Motors, paying with a check that is later dishonored. Liz later offers the car to Nick for cash. As the seller in the transaction with Nick, Liz's title to the car is

A) ​valid.
B) ​voidable.
C) ​void.
D) ​good.

Question 52

Mountainside Coffee Company and Nature's Cuisine, Inc., enter into a contract for a sale of coffee beans. The contract includes the term "F.O.B. Ocean City," which is the location of Nature's Cuisine. This means that the contract is​

A) ​a bill of lading.
B) ​a destination contract.
C) ​a shipment contract.
D) ​a warehouse receipt.

Question 53

Megan, an agent for Nabob's, a department store, orders one hundred dresses from Original Designs Inc. Absent a specific agreement between the parties to the contrary, title will pass to Nabob's when

A) ​Megan signs the contract.
B) ​Original Designs signs the contract.
C) ​Original Designs physically delivers the dresses.
D) ​Nabob's pays for the dresses.

Question 54

Ursula buys a Verismooth boat from a Watercraft store, which agrees to keep the boat for Ursula until she picks it up. Before Ursula gets the boat, an unforeseen tornado destroys the store and the boat. The loss of the boat is suffered by

A) ​Ursula.
B) ​Verismooth.
C) ​Watercraft.
D) the government agency that failed to foresee the tornado.

Question 55

Varoom Motors, Inc., allows Weber to take a Xtrem-brand motorcycle for a "test run." Weber tries the cycle for a few hours, returns, and buys it. This is

A) ​a bailment.
B) ​a lease.
C) ​a sale on approval.
D) ​a sale or return.

Question 56

NutriRich, Inc., sells fifty cases of Omega 3 capsules to Good Health stores, but before Good Health takes physical possession, the cases are lost. Under the UCC, the parties' rights and obligations with respect to the loss depend on the concept of

A) ​identification.
B) ​insurable interest.
C) ​risk of loss.
D) ​title.

Question 57

Grocers Mart buys one hundred cases of berries from Hilltop Farms. The parties agree that the berries will be transported "F.O.B. Hilltop Farms" via Refrigerated Trucking Company. Refrigerated's truck and the berries are lost in a fire following an accident. The loss of the berries is suffered by

A) ​Grocers.
B) ​Hilltop.
C) ​Refrigerated.
D) ​all of the parties as tenants in common in equal measure.

Question 58

Roofing Company buys asphalt roofing tiles from Shingles, Inc. The parties agree that the tile will be shipped "F.O.B. Shingles's warehouse" to Roofing's location via Shipping Corporation. The tiles are lost in transit. The loss is suffered by

A) ​Shipping.
B) ​Shingles.
C) ​Roofing.
D) ​Roofing's customers by an increase in the prices of goods and services.

Question 59

Fits Like A Glove Shoes, Inc., and Retail Footwear Stores enter into a contract for a sale of shoes. The contract indicates that the price includes transportation costs to a specific destination by including the term

A) ​C.I.F.
B) ​delivery ex-ship.
C) ​F.A.S.
D) ​F.O.B.

Question 60

​Pam buys from Midtown Motors a used sport utility vehicle (SUV). The SUV was manufactured by GEM Vehicles, Inc., and previously owned by Ron. Regarding title to the SUV, Pam acquires

A) ​whatever title Midtown had.
B) ​whatever title Gem had.
C) ​whatever title Ron had.
D) ​no title.

Question 61

​Household Appliance Corporation sells Ideal-brand vacuum cleaners to Jolly Discount Stores and other retailers. Household Appliance will have an insurable interest in the players as long as

A) ​Household Appliance remains in business.
B) ​Household Appliance retains title to the goods.
C) ​the goods are in existence.
D) ​there is no risk of loss.

Question 62

Effortless Workouts, Inc., offers to sell a treadmill to Farouk and sends it to him on a trial basis. This is

A) ​a bailment.
B) ​a delivery ex-ship.
C) ​a sale on approval.
D) ​a sale or return.

Question 63

​Paramount Bookstores buys fifty cases of an assortment of books from Quixotic Publishing Company with the right to return the unsold books in lieu of payment. This is

A) ​a bailment.
B) ​a lease.
C) ​a sale on approval.
D) ​a sale or return.

Question 64

Garden & Field stores order a specific assortment of rose bulbs from Hybrid Flora Company. Hybrid mistakenly ships a selection of annuals, which Garden & Field rejects and returns via Intra-state Transport, Inc. During the return, the annuals are lost. The loss is suffered by

A) ​Garden & Field.
B) ​Hybrid Flora.
C) ​Intra-state Transport.
D) ​Garden & Field's customers by an increase in the prices of other goods.

Question 65

Quest Outdoor Store orders RiverRun-brand kayaks from Sports Merchandise, Inc. Sports Merchandise mistakenly ships kayaks of the wrong size, which Quest rejects and returns via Trans-State Shipping Company. During the return, the kayaks are lost. The loss is suffered by

A) ​Quest .
B) ​Trans-State.
C) ​RiverRun.
D) ​Sports Merchandise.

Question 66

In the following situations, two parties claim the same goods. Who is most likely to prevail in each circumstance? Explain.
(a) Czeslaw steals Denise's Ultra HD TV set and sells it to Ezra, an innocent purchaser, for value. Denise learns that Ezra has the set and demands its return.
(b) Gwendolyn takes her all-terrain vehicle (ATV) for repair to Hank's Sales & Repair, a merchant who fixes and sometimes sells used ATVs. By accident, one of Hank's employees sells Gwendolyn's ATV to John, an innocent purchaser-customer, who takes possession. Gwendolyn wants her ATV back from John.

Question 67

Candy Corporation orders Double Chocolate Bars from Edibles Distribution Company. Edibles identifies the goods. Before they are shipped to Candy Corporation, an insurable interest in the goods exists in

A) ​Candy only.
B) ​Edibles only.
C) ​both Candy and Edibles.
D) ​neither Candy nor Edibles.

Question 68

ReQwest LLC agrees to sell one hundred servers to Social Media Networks, Inc. The servers, which Social Media Networks expressly requires to have certain amounts of memory, are to be shipped "F.O.B. Social Media Networks distribution center in Tampa, FL." When the servers arrive, Social Media Networks rejects them and informs ReQwest, claiming that the servers do not conform to Social Media Networks' memory requirement. A few hours later, the servers are destroyed in a fire at Social Media Networks' distribution center. Will ReQwest succeed in a suit against Social Media Networks for the cost of the goods?

Question 69

Spuds Corporation buys from Tater Farms, Inc., a potato crop that Tater plans to plant and harvest during the next growing season. Spuds plans to sell the potatoes to Tasty Foods Restaurants. After the potatoes are planted, but before they are harvested, an insurable interest in the crop exists in

A) ​Spuds and Tater, but not Tasty Foods.
B) ​Spuds, Tater, and Tasty Foods.
C) ​Tater only.
D) ​none of the choices.

Question 70

Consumers Choice store accepts a shipment of EZ2U-brand tablets from Digital Devices, Inc. Consumers Choice later discovers a defect in the tablets, revokes acceptance, and returns the tablets via GoBack, Inc. During the return, the tablets are lost. The loss is suffered by

A) ​Consumers Choice.
B) ​Digital Devices.
C) ​GoBack.
D) ​Consumers Choice's customers by an increase in prices of other goods.

Question 71

Organicos Café orders five gallons of PureMaid-brand trans fat-free olive oil from Quico Cooking Supplies, Inc. Quico mistakenly ships soy oil, which Organicos keeps, despite the nonconformity. The oil is destroyed in a fire. The loss is suffered by

A) ​all of the parties as tenants in common in equal measure.
B) ​PureMaid.
C) ​Organicos Café.
D) ​Quico Cooking Supplies.

Question 72

Gas & Wood Stove Shop receives Hearthwarm-brand stoves from Independent Dealer, Inc., under a sale or return agreement. While the stoves are in Gas & Wood's possession, title is held by

A) ​Independent Dealer.
B) ​Gas & Wood.
C) ​Gas & Wood's creditors.
D) ​Hearthwarm.