Question 1

Which of the following is true of a shipment contract?

Accepted Answer

In a shipment contract, the title and risk of loss pass to the buyer once the seller delivers the goods to the carrier, not necessarily when payment is made or when the goods reach the buyer. This means the buyer assumes risk for any damage or loss during transit.

Question 2

A sale on approval is a completed sale with the right of the buyer to return the goods and thereby set aside the sale.

Accepted Answer

In a sale on approval, the sale is not considered completed until the buyer approves the goods. If the buyer does not approve, they can return the goods without having to complete the purchase.

Question 3

The right of ownership of property or evidence of ownership is called title. ​

Accepted Answer

Title refers to the legal right to own, use, or sell a piece of property, and it is often evidenced by a document.

Question 4

When goods are sold at an auction in separate lots, each lot is considered a separate transaction.

Accepted Answer

In an auction, when goods are sold in separate lots, each lot is treated as an individual transaction because each lot is auctioned off separately, often with its own bidding process and final sale price.

Question 5

What is the essential element in determining who bears the risk of loss of goods?

Accepted Answer

The risk of loss typically falls on the party who has control over the goods. This principle allows for a clear determination of responsibility in the event that goods are damaged or lost, based on who had possession or control at the time of the loss.

Question 6

Which of the following is true of a sale by entrustee?

Accepted Answer

The answer of Which of the following is true of...

Question 7

Who bears the risk of loss of damage to unidentified goods?

Accepted Answer

The seller bears the risk of loss or damage to goods until they are identified to the contract, meaning until it is determined which goods are to be used to fulfill the contract.

Question 8

​ Which of the following best describes the term "title"?

Accepted Answer

Title refers to the legal right of ownership of property or evidence of that ownership, distinguishing it from temporary transfers or specific future rights.

Question 9

A buyer has a property interest in goods when the seller indicates that certain goods are the ones to be delivered to the buyer under the contract.

Accepted Answer

The buyer obtains a property interest in the goods when the seller identifies the specific goods to be delivered under the contract, as this act signifies the seller's commitment to transfer ownership of those goods to the buyer.

Question 10

Generally, people can sell only such interest or title in goods as they possess.

Accepted Answer

This principle, often encapsulated in the phrase "nemo dat quod non habet" (no one gives what they do not have), means that a seller cannot transfer a better title to goods than they themselves possess, unless the law provides for an exception.

Question 11

Documents that show ownership are called documents of .

Accepted Answer

Documents of title are legal documents that prove ownership of a particular asset or property.

Question 12

Give examples of some documents of title. What is their function? ​

Accepted Answer

The answer of Give examples of some documents of title....

Question 13

When might a seller retain its right to possession of goods after delivery to a carrier?

Accepted Answer

A seller can retain the right to possession of goods after delivery to a carrier by making the shipment cash on delivery (COD), as the buyer must pay before taking possession.

Question 14

In a sale or return contract, the cost and risk of return is borne by the seller.

Accepted Answer

In a sale or return contract, the buyer typically bears the cost and risk of returning the goods if they choose not to keep them.

Question 15

In the event of goods damaged through no fault of either the buyer or the seller, the party with control over the goods bears the risk of loss.

Accepted Answer

Under the Uniform Commercial Code (UCC), the risk of loss for goods that are damaged or destroyed through no fault of the buyer or seller typically falls on the party who has control over the goods at the time of such damage or destruction.

Question 16

If the owner entrusts goods to a merchant who deals in goods of that kind, the merchant does not have the power to transfer the entruster's title to anyone who buys in the ordinary course of business.

Accepted Answer

Under the principle of entrustment found in the Uniform Commercial Code (UCC), when an owner entrusts goods to a merchant who deals in goods of that kind, the merchant has the power to transfer all rights of the entruster to a buyer in the ordinary course of business, effectively giving the buyer good title to the goods.

Question 17

A sale on approval and a sale or return are two names for the same transaction.

Accepted Answer

A sale on approval is when the buyer has the goods on a trial basis and the sale is only finalized if they approve or decide to keep the goods. A sale or return, however, is when the buyer has the right to return the goods even after the sale if they choose not to keep them, typically within a specified period. These are two distinct types of transactions with different terms and conditions.

Question 18

Which of the following is an example of a consignment?

Accepted Answer

In a consignment, goods are sent by their owner (the consignor) to another party (the consignee) for the purpose of selling those goods. The consignee sells the goods on behalf of the consignor and earns a commission on the sale. Option C, where A sends a shipment of farm produce to B for sale, fits this description.

Question 19

In an FOB contract, the seller bears the risk of loss until the goods are delivered to the FOB point designated.

Accepted Answer

In an FOB (Free on Board) contract, the seller's responsibility and risk of loss end when the goods are delivered to the designated FOB point, typically a shipping point or port.

Question 20

An insurable interest may arise when a party has sufficient economic interest in the transaction to entitle them to insure the property involved.

Accepted Answer

An insurable interest exists when an individual or entity stands to suffer a financial loss or certain other kinds of losses if the insured property is damaged or lost. This legal requirement ensures that insurance contracts are valid and enforceable, preventing gambling on the misfortune of others.

Quiz 18: Transfer of Title and Risk in Sales Contracts