Question 1

A seller who has a ________ has the power to pass good title to a good faith purchaser for value.

Accepted Answer

A person may have voidable title if he obtained goods by impersonating another person or by paying for them with a bad check etc.However,a seller who has voidable title has the power to pass good title to a good faith (taken to mean "honesty in fact in the conduct or transaction concerned")purchaser for value.

Question 2

Cey Corp.entered into a contract to sell parts to Deck,Ltd.The contract provided that the goods would be shipped "FOB Cey's warehouse." Cey shipped parts different from those specified in the contract.Deck rejected the parts.A few hours after Deck informed Cey that the parts were rejected,they were destroyed by fire in Deck's warehouse.Cey believed that the parts were conforming to the contract.Which of the following statements is correct?

Accepted Answer

When a buyer rightfully revokes acceptance of the goods,the risk of loss is on the seller from the beginning,to the extent that it is not covered by the buyer's insurance.

Question 3

Which of the following terms in a contract for the sale of goods requires the seller to insure the goods?

Accepted Answer

The term CIF (cost,insurance,and freight)means that the price of the goods includes the cost of shipping and insuring them.The seller bears this expense and the risk of loading the goods.

Question 4

Joe went to a music store and misrepresented himself as James to the store attendant.He buys a plasma television set on credit,charging it to James's account.He then sells that set to Mike.Mike buys the set in good faith.Which of the following is true?

Accepted Answer

Mike has no knowledge of past events and has made the purchase in good faith.Therefore,he has the right to the goods.

Question 5

Pulse Corp.maintained a warehouse where it stored its manufactured goods.Pulse received an order from Star.Shortly after Pulse identified the goods to be shipped to Star and before moving them to the loading dock,a fire destroyed the warehouse and its contents.With respect to the goods,which of the following statements is correct?

Accepted Answer

Buyers may protect their interest in goods before they obtain title to them,since they have an insurable interest in goods at the moment the goods are identified to the contract.Sellers have an insurable interest in their goods as long as they have title to the goods or a security interest in them.

Question 6

The Benson Bearing Company sells Textron,Inc.a quantity of baseball bats that were stored in an independent warehouse at the time of the sale.The contract says that Textron is to pick up the bats at the warehouse.The risk of loss passes to Textron:

Accepted Answer

If the goods are in the possession of a third-party bailee (like a warehouseman)and are to be delivered without being moved,the risk of loss passes to the buyer upon delivery to him by a negotiable document of title for the goods.

Question 7

If goods have been delivered to a buyer pursuant to a sale or return contract,the:

Accepted Answer

Once the goods are delivered to the buyer,the risk of loss passes from the seller to the buyer.

Question 8

Stone,a merchant seller in Seattle,contracted with Rose,a merchant buyer in Rochester,for the sale of goods to be shipped by truck.The terms of the contract were "F.O.B.Seattle." Stone delivered the goods to the carrier.After leaving Seattle,the truck containing the goods was never seen again.Stone has demanded payment for the goods,and Rose has refused.If Stone sues,the outcome will be:

Accepted Answer

Since Stone did not fulfill his responsibility of delivering the shipment to Rose (which is indicated by the "F.O.B Seattle"),he cannot claim payment for it.

Question 9

An exception to the general rule on buyer receiving better title than seller is that if goods are entrusted to a merchant who deals in goods of that kind,the merchant has:

Accepted Answer

This is the exception to the rule that a buyer cannot receive better title to goods than the seller had.If the goods are entrusted 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.

Question 10

Which section of the UCC states that title passes to the buyer when seller has completed physical delivery of the goods?

Accepted Answer

Under UCC section 2-401(2)the title in goods passes to the buyer when the seller has completely performed his or her duties concerning physical delivery of the goods.

Question 11

For which of the following sale contracts does title and risk of loss remain with the seller until the buyer accepts the goods?

Accepted Answer

In a sale on approval the buyer is given the opportunity to examine or try the goods so as to decide whether to accept them.Risk of loss and title to the goods do not pass to the buyer until the buyer accepts the goods.

Question 12

Maple Interiors,located in Boston,contracted to sell and ship sofas to Peach Furniture,located in Atlanta.The contract stated that the goods were to be shipped "F.O.B.Boston,via XYZ railroad." Maple delivered the sofas to XYZ railroad.They were shipped from Boston but never seen again.Both Peach and Maple assumed that the other party had the risk of loss,so neither had obtained insurance.Who must bear this loss?

Accepted Answer

The term FOB (free on board)calls for the seller to deliver the goods free of expense and at the seller's risk at the place designated.In the example the goods were delivered to Boston and to XYZ railroad thus,Maple,the seller,was no longer responsible for risk.

Question 13

Goods are being sold by Anne in Seattle and shipped by ABC Railroad to Brian in Portland,Oregon.In this situation,the term "FOB Seattle" means that the risk of loss passes from the seller to the buyer when:

Accepted Answer

The term "FOB Seattle" clearly indicates that the goods are at the buyer's risk only when they are delivered to their destination.

Question 14

Which of the following is most important in determining who bears the risk of loss in a sale of goods contract?

Accepted Answer

Risk of loss under the UCC depends on (1)the terms of the parties' agreement, (2)the time that the loss occurs,and (3)whether one of the parties was in breach of contract when the loss occurred.

Question 15

The common law placed the risk of loss on ________ at the time of the loss.

Accepted Answer

The transportation of goods from sellers to buyers can be a risky business and losses may occur without anyone's fault.The common law placed the risk on the party who had technical title at the time of the loss.The Code,however,provides very specific rules to determine the bearer of any losses.

Question 16

Abe took his bicycle to a bicycle shop for repair.By mistake,a sales clerk sold Abe's bike to Leon.This was a sale in the ordinary course of business;neither the clerk nor Leon was aware that the bike belonged to Abe.Can Abe recover his bike from Leon?

Accepted Answer

Abe cannot recover from Leon.In this case,the bicycle shop will have to bear liability because it was responsible for keeping it.An exception to the general rule that a buyer cannot get better title to goods than his seller includes a person who buys goods in the ordinary course of a dealer's business takes free any claim of a person who entrusted those goods to the dealer.

Question 17

Megan has purchased two tickets for a lucky draw at the local supermarket,which are with the store's cashier.Tracy,her friend,who knows about this,convinces the cashier that she is Megan and takes the tickets.She then goes and sells the tickets to Anya,who has no knowledge of the case.Which of the following statements is true?

Accepted Answer

Under the Code,good faith means "honesty in fact in the conduct or transaction concerned" and a buyer has given value if he has given any consideration sufficient to support a simple contract.Good faith purchasers can do nothing to avoid injury.

Question 18

The only difference between C & F and CIF shipping contracts is:

Accepted Answer

The term C & F is the same as CIF except that the seller is not obligated to insure the goods under the contract.

Question 19

Sean goes to Pinnacle Corp. ,convinces the store manager that he is their loyal online customer Ryan and purchases a DVD credited to Ryan's account.He then sells the DVD to Jason for a higher price.When Ryan finds out,he wants the DVD back from Jason.Which of the following is true of the case?

Accepted Answer

A seller who has a voidable title has the power to pass good title to a good faith purchaser for value.A seller has a voidable title to goods if he has obtained his title through fraudulent representations.

Question 20

Which of the following factors is most important in deciding who bears the risk of loss between merchants when goods are destroyed during shipment?

Accepted Answer

The contracting parties,subject to the rule of good faith,may specify who has the risk of loss in their agreement.

Quiz 19: Formation and Terms of Sales Contracts