Question 1

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

Accepted Answer

In a shipment contract, risk of loss passes to the buyer when the seller delivers the goods to the carrier.

Question 2

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

Accepted Answer

Fungible goods are interchangeable and have the same value. Alaskan salmon that are caught from the same area and have similar characteristics (e.g. species, size, quality) would be considered alike and interchangeable, making them fungible.

Question 3

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

Accepted Answer

A bill of lading is a document issued by a carrier to acknowledge receipt of cargo for shipment. It serves as a receipt for the goods, detailing the type, quantity, and destination of the goods being carried.

Question 4

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

Accepted Answer

Under F.A.S. (Free Alongside Ship) terms, the seller's responsibility ends when the goods are delivered alongside the transport vessel. Since the hay was not yet delivered to Overland Transport, Nuevo Farms bears the risk of loss.

Question 5

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

Accepted Answer

F.O.B. stands for "free on board" and typically means that the seller (Ideal Furniture) is responsible for delivering the goods to the shipping carrier (Jiffy Shipping) and once the carrier takes possession of the goods, the buyer (Home Products) assumes responsibility for any loss or damage during transit. Therefore, the loss is suffered by Home Products only as they assumed the risk once the furniture was in Jiffy Shipping's possession. Ideal Furniture is not responsible for the loss as they shipped the furniture in good condition and as agreed upon. Jiffy Shipping may be liable for the loss as they were responsible for the safe delivery of the goods, but this would depend on the terms of their agreement with Home Products.

Question 6

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

Accepted Answer

According to the UCC, the concept of risk of loss determines which party bears the economic loss when goods are lost, damaged, or destroyed. Since Wanda did not yet take physical possession of the goods, the risk of loss falls on Uri, the seller. Therefore, Uri bears the economic loss of the lost goods.

Question 7

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

Accepted Answer

Title and risk of loss typically pass from the seller to the buyer when goods are separated from a larger lot and identified as the specific goods to be sold. In this case, Steel Parts separates 1,000 cases from the lot, so title and risk of loss would shift to Rita at that point.

Question 8

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

Accepted Answer

The requirement for passing interest in goods from the lessor to lessee under a lease agreement is that the goods must be both in existence and identified as the specific goods that are the subject of the contract. Option A is the only choice that satisfies both conditions. Therefore, before any interest can pass from OEL to PPC, the workstations must not only exist but must also be identified as the specific goods that are being leased under the contract.

Question 9

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

Accepted Answer

Title to the goods passes to XL when Yang gives XL a warehouse receipt for the goods. This is because a warehouse receipt is a document of title, which means it represents ownership of the goods. Once XL has the warehouse receipt, they have legal title to the goods even though they have not physically picked them up yet.

Question 10

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

Accepted Answer

When the terms of a contract for sale do not indicate whether it is a destination or shipment contract, the Uniform Commercial Code (UCC) provides a presumption that it is a shipment contract. Therefore, in this scenario, the court would most likely presume that it is a shipment contract.

Question 11

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

Accepted Answer

The concept of risk of loss governs who will bear the loss in a situation where goods are damaged or destroyed before delivery. In this case, since the forklifts were lost in an explosion, the issue of risk of loss will determine whether EZ Equipment or Faulty Refining Company is responsible for the loss.

Question 12

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

Accepted Answer

The term "F.O.B. Upriver City" indicates that the seller, Real Tea Company, is responsible for delivering the goods to the buyer's location, Savory Stores, Inc., in Upriver City. This makes it a destination contract, where the seller bears the risk and cost of transporting the goods to the specified destination.

Question 13

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

Accepted Answer

F.O.B. (Free on Board) is a pricing term that indicates that the seller is responsible for the goods until they are loaded on the transportation vehicle. The buyer then assumes responsibility for the goods and transportation costs from that point forward. This term is commonly used when the buyer is arranging for transportation and wants to avoid any confusion or disputes about who is responsible for the goods during transit.

Question 14

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

Accepted Answer

Fungible means that the corn is alike naturally or by agreement or trade usage. This means that all units of the corn are interchangeable and have the same value, quality, and characteristics.

Question 15

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

Accepted Answer

This is a shipment contract, as the contract is for the purchase of goods that will be shipped from the seller (Mountain Bikes, Inc.) to the buyer (Lou's Bicycle Store).

Question 16

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

Accepted Answer

Rani can recover from Soles Shoe Store only because they wrongfully sold her shoes. Tia, as a good faith purchaser, is not liable since she was unaware of Rani's ownership.

Question 17

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

Accepted Answer

Cartage Common Carrier Company is a bailee since they acknowledge possession of goods but are not the owner of the goods.

Question 18

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

Accepted Answer

"F.O.B. Brothers Cafe" means that the risk of loss passes to Brothers Cafe only when the goods reach their destination. Since the oranges rotted in transit, the loss is suffered by Sisters Citrus, as the risk had not yet transferred to Brothers Cafe.

Question 19

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

Accepted Answer

Eve can recover the necklace from Fiona under any circumstances because a thief cannot pass good title to stolen property, regardless of Fiona's knowledge or consideration given.

Question 20

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

Accepted Answer

F.O.B. (Free on Board) New Jersey means that the seller (Fine Material Corporation) is responsible for getting the fabric to the shipping point in New Jersey, but the buyer (Great Clothing, Inc.) assumes responsibility for the cost of transportation from New Jersey to Ohio. Therefore, choice B is correct.

Quiz 21: Title, Risk, and Insurable Interest