Deck 21: Title, Risk, and Insurable Interest

Question 1

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

Answer 1

False

Question 2

Unless a contract provides otherwise, it is assumed to be a destination contract.

Answer 2

False

Question 3

A bill of lading serves as a con?tract for the transportation of goods.

Answer 3

True

Question 4

Fungible goods are goods that cannot be delivered by physical transport.

Question 5

If a sale involves crops that are to be harvested within twelve months, iden?tification takes place when the crops are planted or begin to grow.

Question 6

Under a lease of specific and ascertained goods that are already in existence, identification takes place at the time the contract is made.

Question 7

Under a shipment contract, the risk of loss passes to the buyer only when the seller tenders conforming goods to the buyer at the specified destination.

Question 8

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

Question 9

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

Question 10

Under a destination contract, the risk of loss passes to the buyer when the goods are duly delivered to the carrier.

Question 11

Title is one concept that the UCC has substituted for the common law concept of risk of loss.

Question 12

When an owner holds fungible goods as a tenant in common, the owner cannot pass title to the goods without the other owners' acquiescence.

Question 13

In all circumstances, title passes to the buyer at the time and place at which the seller physically delivers the goods.

Question 14

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

Question 15

Under a shipment contract, the risk of loss passes to the buyer when the seller places conforming goods in the possession of the carrier.

Question 16

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

Question 17

The UCC has replaced the common law concept of title in part with the concept of identification.

Question 18

Entrusting goods to a merchant who deals in goods of the kind gives the merchant power to transfer all rights to a buyer in the ordinary course of business.

Question 19

Fungible goods are goods that can be delivered only by transport.

Question 20

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

Question 21

A contract in which a buyer is allowed to take goods on a trial basis is a consignment.

Question 22

When goods are in a consignee's possession, his or her creditors will prevail over the consignor in an action to repossess the goods.

Question 23

A sale or return is a conditional sale.

Question 24

When a buyer agrees to buy goods held by a bailee, unless otherwise ex?plicitly agreed, the risk of loss passes to the buyer when the price is paid.

Question 25

Under the UCC, a bailment is a sale on approval.

Question 26

In general, a buyer's breach of a contract causes the risk of loss to shift to the buyer.

Question 27

If a seller is not a merchant, and not required to move the goods, the risk of loss passes to a buyer only when the buyer takes physical possession of the goods.

Question 28

In a sale on approval, title and risk of loss pass only when the buyer ac?cepts the goods.

Question 29

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

Question 30

A warehousing company that normally issues documents of title for goods it receives is a bailee.

Question 31

A bailee is a buyer or lessee.

Question 32

If a seller is not a merchant, and the goods are not to be moved, the risk of loss cannot pass to a buyer.

Question 33

A buyer and a seller cannot normally have an insurable interest in iden?tical goods at the same time.

Question 34

If a seller is a merchant, and not required to move the goods, the risk of loss passes to a buyer when the buyer takes physical possession of the goods.

Question 35

A buyer has an insurable interest in identified goods.

Question 36

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

Question 37

If a seller is a merchant, and the goods are not to be moved, the risk of loss cannot pass to a buyer.

Question 38

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.

Question 39

A contract in which a buyer takes goods primarily for resale, with a right to return any goods that fail to sell, is a sale on approval.

Question 40

Before a seller can have an insurable interest in goods, the goods must be identified to a contract.

Question 41

Ideal Gadgets, Inc., and Jolly Outlets Corporation enter into a contract for a sale of kitchenware. The contract requires Ideal to deliver the goods to Ladle Carrier Company for transport to Jolly's warehouse in Metro City. Risk of loss passes to Jolly when

A) Ideal delivers the goods to Ladle.
B) Ideal identifies the goods to the contract.
C) Ladle transports the goods to Jolly's warehouse.
D) the goods arrive in Metro City.

Question 42

Alaskan salmon that fill the hold of Bill and Carla's fishing boat are fungible if the salmon are

A) alike naturally or by agreement or trade usage.
B) fundamentally different.
C) fun, good, and edible.
D) liable to deteriorate over time.

Question 43

Kip, a representative for Little Shipping Company, delivers a bill of lading to Meg, the owner of Normal Warehouse. A bill of lading is

A) an invoice for payment for loading and carting.
B) an order to ship goods by carrier to a certain destination.
C) a receipt for goods signed by a carrier.
D) a receipt issued by a warehouser for goods in a warehouse.

Question 44

Martin buys 1,000 bales of hay from Nuevo Farms. The parties agree that the hay will be transported F.A.S. via Overland Transport Company. Nuevo Farms' truck carrying the hay explodes before reach?ing Overland Transport. The loss is suffered by

A) Martin and Nuevo Farms, but not Overland Transport.
B) Martin, Nuevo Farms, and Overland Transport.
C) Martin only.
D) Nuevo Farms only.

Question 45

Home Products Store buys furniture from Ideal Furniture, Inc. The parties agree that the furniture will be shipped "F.O.B. Ideal's ware?house" to Home Products via Jiffy Shipping Corporation. The furniture is lost in transit. The loss is suffered by

A) Home Products and Ideal Furniture, but not Jiffy Shipping.
B) Home Products, Ideal Furniture, and Jiffy Shipping.
C) Home Products only.
D) Ideal Furniture only.

Question 46

Uri sells 100 cases of vitamins to Wanda, but before she 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) physical possession.
B) product liability.
C) risk of loss.
D) title.

Question 47

Rita orders 1,000 cases of 1/4-inch nuts from Steel Parts Company's 10,000-case lot. Steel Parts separates 1,000 cases from the lot. Title and risk of loss

A) remain with Steel Parts until Rita acknowledges tender of delivery.
B) remain with Steel Parts until Rita accepts 1,000 cases.
C) shift to Rita after she accepts the nuts and inspects them for defects.
D) shift to Rita when Steel Parts separates the cases.

Question 48

Office Equipment Leasing, Inc. (OEL), agrees to lease five computer work?stations to Product Promotion Corporation (PPC). Before any inter?est in the workstations can pass from OEL to PPC, they must be

A) in existence and identified as the goods in the contract.
B) in existence only.
C) identified as the specific goods designated in the contract only.
D) none of the choices.

Question 49

XL Electronics orders thirty hard drives from Yang Computers, Inc. The hard drives are stored in City Warehouse. Under the terms of the or?der, Yang must give XL a warehouse receipt for the goods, which XL will then pick up. Title to the goods passes to XL when

A) City Warehouse stores the goods.
B) XL orders the goods.
C) XL picks up the goods.
D) Yang gives XL a warehouse receipt for the goods.

Question 50

Raw Material, Inc., and Sewn Fabric Corporation enter into a contract for a sale of muslin. The terms do not clearly indicate whether it is a destination or shipment contract. A court would most likely presume that it is

A) a bailment contract.
B) a destination contract.
C) a shipment contract.
D) a transportation contract.

Question 51

EZ Equipment Corporation leases six forklifts to Faulty Refining Company, but as the forklifts are delivered, they are lost in an explosion. Under the UCC, the parties' rights and obligations with respect to the loss depend on the concept of

A) physical possession.
B) product liability.
C) risk of loss.
D) title.

Question 52

Real Tea Company and Savory Stores, Inc., enter into a contract for a sale of tea. The contract includes the term "F.O.B. Upriver City," which is Savory's location. This means that the contract is

A) a bailment contract.
B) a destination contract.
C) a shipment contract.
D) a transportation contract.

Question 53

Quiet Soles, Inc., and Retail Footwear Stores enter into a contract for the 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 54

A specific grade of corn that fills Dean and Ethel's silo is fungible. This means that the corn is

A) alike naturally or by agreement or trade usage.
B) fundamentally different.
C) fundamentally edible.
D) perishable.

Question 55

Lou's Bicycle Store contracts to buy fifty bicycles from Mountain Bikes, Inc. Unless the contract states otherwise, this is

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

Question 56

Rani leaves a pair of new shoes at Soles Shoe Store to be dyed. Soles sells the shoes to Tia, who does not know that the shoes belong to Rani. Rani can recover from

A) neither Tia nor Soles Shoe Store.
B) Soles Shoe Store only.
C) Soles Shoe Store or Tia.
D) Tia only.

Question 57

With a bill of lading, Cartage Common Carrier Company acknowledges possession of certain goods and contracts to deliver them. Cartage is

A) a bailee.
B) a buyer in the ordinary course of business.
C) a good faith purchaser for value.
D) an F,O,B.

Question 58

Brothers Cafe buys 100 bags of oranges from Sisters Citrus Company. The parties agree to ship the oranges "F.O.B. Brothers Cafe" via Tonnage Trucking Company. The oranges rot in transit. The loss is suf?fered by

A) Brothers Cafe and Sisters Citrus, but not Tonnage Trucking.
B) Brothers Cafe only.
C) Brothers Cafe, Sisters Citrus, and Tonnage Trucking.
D) Sisters Citrus only.

Question 59

Dan steals Eve's necklace and sells it to Fiona. Eve can recover the neck?lace from Fiona

A) only if Fiona did not know that the necklace was stolen.
B) only if Fiona gave legally sufficient consideration for the necklace.
C) only if Fiona knew that the necklace was stolen.
D) under any circumstances.

Question 60

Fine Material Corporation in New Jersey sells fifty tons of fabric to Great Clothing, Inc., in Ohio, F.O.B. New Jersey. The cost of transport?ing the fab?ric to Ohio will be paid by

A) Fine Material.
B) Great Clothing.
C) New Jersey.
D) Ohio.

Question 61

City Storage Company holds goods for Downtown Sales Corporation, which contracts to sell them to eStores, Inc. The goods are to be delivered without being moved and are represented by a negotiable bill of lading. The risk of loss passes to eStores

A) if City refuses to honor the bill of lading.
B) if Downtown gives the bill of lading to City.
C) if the goods are lost due to an "act of God."
D) when eStores receives the bill of lading.

Question 62

Orange Computer Corporation sells Pad-brand MP3 players to Quik Discount Stores and other retailers. Orange will have an insurable in?ter?est in the players as long as

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

Question 63

Little Jewelry Store orders display racks from Marketing Supplies, Inc. (MSI). MSI mistakenly ships racks of the wrong size and color, which Little rejects and returns via New Shipping Company. During the re?turn, the racks are lost. The loss is suffered by

A) Little only.
B) Little and MSI, but not New Shipping.
C) Little, MSI, and New Shipping.
D) MSI only.

Question 64

Diner's Cafe orders five gallons of transfat-free olive oil from EZ Distributors, Inc. EZ mistakenly ships soy oil, which Diner's keeps, despite the nonconform?ity. The oil is destroyed in a fire. The loss is suffered by

A) Diner's and EZ, but not Diner's customers.
B) Diner's, EZ, and Diner's customers.
C) Diner's only.
D) EZ only.

Question 65

Office Corporation (OC) orders five inkjet printers from Print Products, Inc. (PPI), to be delivered by PPI. Before PPI's truck ar?rives with the goods, OC tells PPI it will not pay. The printers are de?stroyed in transit. The loss is suffered by

A) OC and PPI equally.
B) OC only.
C) OC to the extent of a deficiency in PPI's insurance coverage only.
D) PPI only.

Question 66

Commercial Storage (CS), a bailee, holds goods for Delta Distributors, Inc., which has contracted to sell them to Eagle Company. The goods are to be delivered without being moved. The risk of loss will pass to Eagle when Eagle receives

A) a copy of Delta's contract with CS.
B) a copy of Delta's contract with Eagle.
C) a negotiable document of title.
D) a notice that Eagle's payment for the goods has cleared.

Question 67

NuStores accepts a shipment of DVD players from Open-Ur-Eyes Video, Inc. NuStores later discovers a defect in the players, revokes acceptance, and returns the players via Playback, Inc. During the return, the play?ers are lost. The loss is suffered by

A) NuStores only.
B) NuStores and Open-Ur-Eyes, but not Playback.
C) NuStores, Open-Ur-Eyes, and Playback.
D) Open-Ur-Eyes only.

Question 68

Diamond Camera Shop receives lenses from Excel Optical, Inc., under a sale or return agreement. While the lenses are in Diamond's possession, title is held by

A) Diamond and Excel jointly.
B) Diamond only.
C) Diamond's creditors only.
D) Excel only.

Question 69

Delta Products Corporation contracts with Excel Trucking Company to take goods to Flight Airlines, Inc., with Flight to transport the goods to a Geo Storage Company warehouse. Excel, Flight, and Geo each acknowl?edge possession of the goods by a document of title. Excel, Flight, and Geo are

A) bailees.
B) consignees.
C) lessees.
D) sellers.

Question 70

Town Style Stores orders leather jackets from Unique Clothing Company. Unique mistakenly ships denim jackets, which Town re?jects and returns via Value Transport, Inc. During the return, the jack?ets are lost. The loss is suffered by

A) Town and Unique, but not Value.
B) Town only.
C) Town, Unique, and Value.
D) Unique only.

Question 71

Essen Corporation buys from Fallow Farms, Inc., a rice crop that Fallow plans to plant and harvest during the next growing season. Essen plans to sell the rice to Gourmet Grocery Stores. After the rice is planted, but before it is harvested, an insurable interest in the rice ex?ists in

A) Essen and Fallow, but not Gourmet Grocery.
B) Essen, Fallow, and Gourmet Grocery.
C) Essen only.
D) Fallow only.

Question 72

Crest Jewelers buys diamonds from Excel Gems to resell with the right to return the unsold stones in lieu of payment. This is

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

Question 73

Perfect Furnishings, Inc., agrees to lease a desk to Research Resources, Inc. (RRI), which requests that the desk be left outside Streetside Warehouse for RRI to pick up. Before RRI retrieves the desk, it is stolen. The loss is suf?fered by

A) Perfect Furnishings and RRI, but not Streetside Warehouse.
B) Perfect Furnishings only.
C) Perfect Furnishings, RRI, and Streetside Warehouse.
D) RRI only.

Question 74

Leo buys a bicycle from his brother, Mike, who is a used car dealer. Mike agrees to keep the bike at his house until Leo picks it up. A tree falls on Mike's garage and destroys the bike. The loss is suffered by

A) Leo and Mike.
B) Leo only.
C) Mike only.
D) neither Leo nor Mike.

Question 75

Eagle Company sells new and used motorcycles. Some of the motorcycles are held on consignment, including six consigned by Fine Cycles, Inc. While the Fine cycles are in Eagle's possession, title to them is held by

A) Eagle and Fine jointly.
B) Eagle only.
C) Eagle's creditors only.
D) Fine only.

Question 76

My-Tee Purchasing Corporation orders from National Sales, Inc., goods that are stored in a Outstate Properties, Inc., warehouse. My-Tee pays for the goods, delivery is via the transfer of a negotiable warehouse receipt, and My-Tee moves the goods out of the warehouse. The risk of loss passes to My-Tee when it

A) orders the goods.
B) pays for the goods.
C) receives the negotiable warehouse receipt.
D) moves the goods out of the warehouse.

Question 77

Great Workouts, Inc., offers to sell a home gym to Ida and sends it to her on a trial basis. This is

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

Question 78

Relax Recreation Toys, Inc., allows Sandy to take a Relax boat for a "test run." Sandy tries the boat for a few hours, returns, and buys it. This is

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

Question 79

Twyla buys a bicycle from U-Pik-It Bike Store, which agrees to keep the bike for Twyla until she picks it up. Before Twyla gets the bike, a fire destroys the store and the bike. The loss is suffered by

A) neither Twyla nor U-Pik-It
B) Twyla and U-Pik-It.
C) Twyla only.
D) U-Pik-It only.

Question 80

Quik Sales Corporation orders goods from Re Stock Company. Re plans to market the goods to consumers generally. Re identifies the goods. Before they are shipped to Quik, an insurable interest in the goods exists in

A) Quik and Re, but not consumers generally.
B) Quik only.
C) Quik, Re, and consumers generally.
D) Re only.