Question 1

There are various types of bailment,in both common law and the statutory rules vary to some extent according to the type of bailment.Which of the following is NOT regarded as a special type of bailment?

Accepted Answer

The other options - storage and safekeeping, repairing, innkeeping, and pledge or pawn - are all recognized as special types of bailment in both common law and statutory rules. However, "athletic bailment" is not commonly recognized as a separate category of bailment.

Question 2

A reason to sue for breach of a contract of bailment rather than for negligence is that in a contract of bailment

Accepted Answer

In a contract of bailment, the bailee has the burden to disprove negligence, meaning they must show they were not negligent in caring for the goods.

Question 3

The transfer of possession of personal property without a transfer of ownership is referred to legally as bailment.Which of the following is NOT considered a type of bailment?

Accepted Answer

Bailment involves the transfer of possession of personal property from one party to another, with the understanding that the property will eventually be returned. The concept of "bailment for negligence (tort bailment)" does not fit within the legal framework of bailment, as bailment agreements are based on the consent and intention of the parties involved, rather than on negligence.

Question 4

Given its importance,how does the accounting profession determine whether a lease is an operating lease or a purchase capital lease?

Accepted Answer

The classification of a lease as an operating lease or a capital lease (finance lease under newer standards) often depends on specific criteria, one of which includes whether the ownership of the asset is expected to transfer to the lessee at the end of the lease term.

Question 5

In a bailment of common carriage,where the bailor proves that the goods were given to the bailee in good condition but were returned damaged,the bailee will be held liable unless it can show that the damage was caused by

Accepted Answer

In a bailment of common carriage, the bailee is held liable for any damage to the goods unless they can prove that the damage was caused by the default of the bailor, an act of God, or the dangerous condition of the goods. Therefore, choice A is the best answer.

Question 6

A and B agree that A will lease a truck owned by B.The truck is valued at $30 000 and the term,which cannot be cancelled,is three years,by which time A will have paid slightly more than $22 500.00 in lease payments.In this situation,the lease is best described as

Accepted Answer

The answer of A and B agree that A will...

Question 7

Identify which of the following statements correctly describes a hire-purchase agreement.

Accepted Answer

A hire-purchase agreement involves the hiring of goods with an option to purchase at the end of the stipulated term. It creates a bailment, meaning the possession and control of the goods are transferred to the hirer, but the ownership remains with the owner until the final payment is made. The hirer has an obligation to pay the purchase price and failure to do so could result in repossession of the goods. Therefore, option E is the correct statement.

Question 8

Marcus rented some scaffolding to aid in replacing the siding of his house.This type of lease would be referred to as

Accepted Answer

An operating lease is correct because it is a short-term lease agreement that allows the lessee to rent equipment or property for a period that is shorter than the asset's useful life, which fits the scenario of renting scaffolding for a specific, temporary project like replacing siding.

Question 9

A sends a package valued at $400.00 to B by means of the courier company X Co.In the contract between A and X Co.,there is a limitation of liability clause that limits X Co.'s liability for damage or loss caused to the goods by any reason whatsoever,including the negligence of X Co.and/or its employees,to $20.00.When the goods reach B,they are damaged.If A sues X Co.for the full $400.00

Accepted Answer

The limitation of liability clause in the contract between A and X Co. is effective to reduce A's damages to $20.00, regardless of the reason for the damage or loss caused to the goods, including the negligence of X Co. and/or its employees. Therefore, A cannot sue X Co. for the full $400.00.

Question 10

The tax advantage in leasing arrangements is most apparent

Accepted Answer

The answer of The tax advantage in leasing arrangements is...

Question 11

Use the fact situation above to answer the question. In the fact situation above,the lease is best described as

Accepted Answer

The answer of Use the fact situation above to answer...

Question 12

A and B are neighbours.B wants to trim his hedges,but his trimmer is broken.Being close neighbours,A and B often borrow things from each other,so B borrows A's trimmer from A's garage.This is an example of

Accepted Answer

This is a gratuitous bailment because there is no agreement or payment between A and B for the use of the trimmer. A is lending the trimmer to B as a favor or out of goodwill, and B is not paying for its use.

Question 13

A and B enter into an agreement for a car whereby A will make lease payments for a certain term,after which A will have the option of buying the car by a final payment of $5000.00.In this case,the lease is best described as

Accepted Answer

The answer of A and B enter into an agreement...

Question 14

Hilda rented a hospital bed from Medical Leasing Co.for her bedridden father.In the contract she was referred to as the ________ and Medical Leasing was referred to as the ________.

Accepted Answer

In a rental contract, the person who rents the equipment is referred to as the lessee, and the company that owns the equipment and rents it out is referred to as the lessor. Therefore, choice A, where Hilda is the lessee and Medical Leasing Co. is the lessor, is the correct choice. Choices B, C, D, and E, all have incorrect terminology for a rental contract.

Question 15

A takes his car into B's car repair shop.B does substantial repairs to A's car and presents A with an invoice for $1500.00.A says,"I'll come back later to pay you" and leaves.A couple of months go by and A has not returned to pay for the repairs.B has which of the following options?

Accepted Answer

B has multiple legal remedies in this situation. B can sue A for the cost of repairs (A), has a mechanic's lien on the car for the amount of the repairs (B), can sell the car to recover the cost of repairs after a certain period of time if permitted by law (C), and can retain possession of the car pending payment as part of the lien rights (D).

Question 16

A leases a harvesting machine from B to be used during the harvesting season in Ontario,which is from the beginning of August to the end of September.In this case,the lease is best described as

Accepted Answer

This is an operating lease as it is only for a specific period of time and does not transfer ownership of the harvesting machine to the lessee.

Question 17

While A is staying in a hotel,A's room is broken into and her jewellery is stolen.The hotel provided state of the art security and the latest and most secure locks on all guest room doors.If A sues the hotel,at common law,

Accepted Answer

At common law, innkeepers are held strictly liable for the loss or theft of their guests' belongings. This means that they are responsible for compensating the guest for the full value of the stolen property, regardless of any fault or negligence on their part. Therefore, A will succeed in suing the hotel for the stolen jewellery. Choices A, B, and C are incorrect because they do not reflect the strict liability rule that applies to innkeepers.

Question 18

Quincy owns a metal fabricating company.He is desperately in need of working capital in order to carry out several large orders.Therefore he sells his heavy stamping equipment to Beneficial Leasing Inc.in a five-year purchase lease plan.This arrangement amounts to

Accepted Answer

This is a classic example of a sale and leaseback, as Quincy is selling his heavy stamping equipment and then leasing it back from Beneficial Leasing Inc. This allows him to access working capital while still retaining the use of the equipment.

Question 19

In leases,who is most likely to carry the insurance and bear the cost of maintenance and repairs?

Accepted Answer

The answer of In leases,who is most likely to carry...

Question 20

Use the fact situation above to answer the question. Using the fact situation above,assume that just after B,the dealer,enters into the lease agreement with A,he assigns the lease to a financing company,which gives notice to A to make all payments to the company until the price has been paid in full,at which time the company will transfer the car to A.In this case,the lease is best described as

Accepted Answer

This lease is best described as a finance lease because the financing company has assigned the lease from the dealer and is requiring A to make payments until the car is paid in full, at which point they will transfer ownership. This is characteristic of a finance lease, where the lessee is essentially financing the purchase of the asset and ultimately becomes the owner.

Quiz 15: Bailment and Leasing