Question 1

Open Road Showroom sells new and used motorcycles. Some of the motorcycles are held on consignment, including six consigned by Pedro Cycles, Inc. Like most consignments, Open Road's deal with Pedro Cycles is
A) a bailment.
B) a sale.
C) a delivery ex-ship.
D) a lease.

Accepted Answer

A bailment is a legal relationship in which one person (the bailor) gives possession of an item to another person (the bailee) for a specific purpose, such as storage or sale, without transferring ownership. In this case, Pedro Cycles still owns the motorcycles and has given possession to Open Road for the purpose of selling them on consignment.

Question 2

Finished Furnishings, Inc., agrees to lease an Oak Top-brand desk to Research Resources, Inc. (RRI), which agrees to pick it up at Streetside Warehouse. Before RRI retrieves the desk, it is stolen. The loss is suffered by
A) Perfect Furnishings.
B) Oak Top.
C) Streetside Warehouse.
D) RRI.

Accepted Answer

RRI bears the risk of loss because it had not yet taken possession of the desk. Once RRI takes possession, the risk of loss transfers to them.

Question 3

Twyla buys a Voracious-brand 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 of the bike is suffered by
A) no one.
B) Voracious.
C) Twyla.
D) U-Pik-It.

Accepted Answer

The answer of Twyla buys a Voracious-brand bicycle from U-Pik-It...

Question 4

Harley's Home Store buys furniture from Relax-a-by Furniture, Inc. The parties agree that the furniture will be shipped "F.O.B. Relax-a-by's warehouse" to Harley's via Jiffy Shipping Corporation. The furniture is lost in transit. The loss is suffered by
A) Jiffy Shipping.
B) Relax-a-by Furniture.
C) Harley's Home Store.
D) F.O.B.

Accepted Answer

Since the agreement was F.O.B. (Free on Board) Relax-a-by's warehouse, the risk of loss or damage to the goods passes from Relax-a-by Furniture to Harley's Home Store once the goods leave Relax-a-by's warehouse. Therefore, Harley's Home Store bears the risk of losing the furniture during transit.

Question 5

NuStores accepts a shipment of QuikView-brand 3D HD DVD players from Open-Ur-Eyes, Inc. NuStores later discovers a defect in the players, revokes acceptance, and returns the players via Playback, Inc. During the return, the players are lost. The loss is suffered by
A) NuStores.
B) Playback.
C) QuikView.
D) Open-Ur-Eyes.

Accepted Answer

The answer of NuStores accepts a shipment of QuikView-brand 3D...

Question 6

Town Style Stores orders Hidebound-brand leather jackets from Cowhide & Cotton Company (CCC). CCC mistakenly ships denim jackets, which Town rejects and returns via Valu Transport, Inc. During the return, the jackets are lost. The loss is suffered by
A) Town.
B) Hidebound.
C) Valu.
D) CCC.

Accepted Answer

The answer of Town Style Stores orders Hidebound-brand leather jackets...

Question 7

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) identification.
B) insurable interest.
C) risk of loss.
D) title.

Accepted Answer

The parties' rights and obligations with respect to the loss depend on the concept of risk of loss. The UCC provides several rules to determine who bears the risk of loss in a commercial transaction. If the contract does not specify who bears the risk of loss, it generally falls on the party who has control of the goods when the loss occurs. In this case, since Uri had not yet transferred physical possession of the goods to Wanda when they were lost, Uri is likely to bear the risk of loss.

Question 8

Dragonaire Corporation contracts with Excel Trucking Company to take goods to Fly-By Airlines, Inc., with Fly-By to transport the goods to a Geo Storage Company warehouse. Excel, Fly-By, and Geo each acknowledge possession of the goods by a document of title. Excel, Fly-By, and Geo are
A) bailees.
B) consignees.
C) lessees.
D) sellers.

Accepted Answer

Excel Trucking Company, Fly-By Airlines, Inc., and Geo Storage Company are bailees because they acknowledge possession of the goods by a document of title. As bailees, they have temporary possession and control of the goods but do not own them.

Question 9

Mitchell buys 100 bales of hay from New Grain Fields. The parties agree that the hay will be transported "F.O.B. New Grain Fields" via Farm County Trucking Company. Farm County's truck and the hay are lost in a fire following an accident. The loss is suffered by
A) Mitchell.
B) New Grain Fields.
C) Farm County Trucking.
D) all of the parties as tenants in common in equal measure.

Accepted Answer

F.O.B. (Free on Board) means that once the goods are loaded onto the truck at the seller's location, the buyer assumes responsibility for the goods and any damage or loss that occurs during shipment. Therefore, Mitchell is responsible for the loss of the hay and any accompanying insurance claims.

Question 10

Crest Jewelers buys diamonds from Paramount 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.

Accepted Answer

This transaction is a sale or return because Crest Jewelers is buying the diamonds with the understanding that they can return any unsold stones to Paramount Gems instead of paying for them.

Question 11

Catchy Gadgets Corporation and Discount Outlets, Inc., enter into a contract for a sale of kitchenware. The contract requires Catchy to deliver the goods to Rapido Carrier Company for transport to Discount's warehouse. Risk of loss passes to Discount when
A) Catchy delivers the goods to Rapido.
B) Catchy and Discount enter into their contract.
C) Rapido transports the goods to Discount's warehouse.
D) Discount sells the goods to its customers.

Accepted Answer

The answer of Catchy Gadgets Corporation and Discount Outlets, Inc.,...

Question 12

Delicioso Tea Company and Savory Stores, Inc., enter into a contract for a sale of organic tea. The contract includes the term "F.O.B. River City," which is Savory's location. This means that the contract is
A) a bill of lading.
B) a destination contract.
C) a shipment contract.
D) a warehouse receipt.

Accepted Answer

The answer of Delicioso Tea Company and Savory Stores, Inc.,...

Question 13

Pie Sales Corporation orders ReadyMade-brand pies from Savory Foods Company. Savory identifies the goods. Before they are shipped to Pie Sales, an insurable interest in the goods exists in
A) Pie Sales and Savory Foods.
B) ReadyMade and Savory Foods.
C) Pie Sales and ReadyMade.
D) all of the parties as tenants in common.

Accepted Answer

The answer of Pie Sales Corporation orders ReadyMade-brand pies from...

Question 14

Leasing Equipment Corporation (LEC) agrees to lease five computer workstations to Mapmakers, Inc. Before any interest in the workstations can pass from LEC to Mapmakers, they must be
A) in existence and identified as the goods in the contract.
B) in LEC's physical possession.
C) in Mapmakers's physical possession.
D) listed in a document of title and filed in the appropriate state office.

Accepted Answer

The requirement for the computer workstations to be in existence and identified in the contract is necessary for the lease agreement to be valid. Possession is not necessary for the transfer of interest, and there is no requirement for a document of title.

Question 15

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

Accepted Answer

An insurable interest exists when a person or entity would suffer a financial loss if the property insured is damaged or destroyed. In this scenario, Essen and Fallow have an insurable interest as they would incur a financial loss if the rice crop is damaged or destroyed before it is harvested. Gourmet Grocery does not have an insurable interest as they do not own the rice crop and would not suffer a financial loss if it is damaged or destroyed. Therefore, the correct answer is A – Essen and Fallow, but not Gourmet Grocery.

Question 16

Suki leaves a Update-brand watch at Timepiece Sales & Repair to be fixed. Timepiece sells the watch to Vera, who does not know that the watch belongs to Suki. Suki can recover from
A) no one.
B) Timepiece.
C) Vera.
D) Update.

Accepted Answer

Timepiece had a duty to return the watch to its rightful owner, Suki. By selling the watch to Vera, Timepiece breached that duty and is liable for the wrongful sale of the watch. Vera, the purchaser of the watch, is a bona fide purchaser and therefore has the right to keep the watch. Suki cannot recover from Vera in this situation. However, Suki can recover from Timepiece for the value of the watch or the return of the watch itself. The manufacturer Update is not liable in this scenario as they did not have any involvement in the sale or repair of the watch by Timepiece.

Question 17

Laraby, a representative for Merchandise Shipping Company, delivers a bill of lading to Caitlin, the owner of Dockside Warehouse. A bill of lading is
A) an invoice for payment for loading and carting verified by a seller.
B) an order to ship goods signed by a buyer.
C) a receipt for goods signed by a carrier.
D) a receipt issued by a warehouser for goods in a warehouse.

Accepted Answer

A bill of lading is a receipt for goods signed by a carrier, acknowledging the receipt of the goods for shipment and detailing the conditions of the agreement between the carrier and the shipper. It serves as a legal contract and proof of ownership of the goods during transit. Option A describes an invoice, option B describes a purchase order, and option D describes a warehouse receipt.

Question 18

Wild Alaskan sockeye salmon that fill the hold of Dexter's fishing boat are fungible if the fish are
A) alike naturally, by agreement, or by trade usage.
B) fundamentally different.
C) fun, good, and edible.
D) rotting due to a broken freezer in the hold.

Accepted Answer

Fungibility means that the items being traded or exchanged are interchangeable or identical in their value, quality, and quantity. In the case of the Wild Alaskan sockeye salmon, if they are all of the same species and size, then they are considered fungible. The other options (B, C, and D) do not relate to the concept of fungibility.

Question 19

Matrix Material Corporation in New Jersey sells fifty tons of fabric to Natural Fit Clothing, Inc., in Ohio, "F.O.B. New Jersey." Matrix arranges with Outbound Truckline to transport the goods. The cost of the transport will be paid by
A) Matrix.
B) Natural Fit.
C) New Jersey.
D) Outbound.

Accepted Answer

The answer of Matrix Material Corporation in New Jersey sells...

Question 20

Marine Recreation, Inc., allows Nels to take a Marine Recreation boat for a "test run." Nels 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.

Accepted Answer

This is a sale on approval, as Nels is allowed to test the boat before deciding to buy it. This means that the sale is contingent on Nels' approval, and he is not bound to purchase the boat if he is not satisfied with it.

Quiz 20: Title, Risk, and Insurable Interest

Open Road Showroom sells new and used motorcycles. Some of the motorcycles are held on consignment, including six consigned by Pedro Cycles, Inc. Like most consignments, Open Road's deal with Pedro Cycles is

Finished Furnishings, Inc., agrees to lease an Oak Top-brand desk to Research Resources, Inc. (RRI) , which agrees to pick it up at Streetside Warehouse. Before RRI retrieves the desk, it is stolen. The loss is suffered by

Twyla buys a Voracious-brand 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 of the bike is suffered by

Harley's Home Store buys furniture from Relax-a-by Furniture, Inc. The parties agree that the furniture will be shipped "F.O.B. Relax-a-by's warehouse" to Harley's via Jiffy Shipping Corporation. The furniture is lost in transit. The loss is suffered by

NuStores accepts a shipment of QuikView-brand 3D HD DVD players from Open-Ur-Eyes, Inc. NuStores later discovers a defect in the players, revokes acceptance, and returns the players via Playback, Inc. During the return, the players are lost. The loss is suffered by

Town Style Stores orders Hidebound-brand leather jackets from Cowhide & Cotton Company (CCC) . CCC mistakenly ships denim jackets, which Town rejects and returns via Valu Transport, Inc. During the return, the jackets are lost. The loss is suffered by

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

Dragonaire Corporation contracts with Excel Trucking Company to take goods to Fly-By Airlines, Inc., with Fly-By to transport the goods to a Geo Storage Company warehouse. Excel, Fly-By, and Geo each acknowledge possession of the goods by a document of title. Excel, Fly-By, and Geo are

Mitchell buys 100 bales of hay from New Grain Fields. The parties agree that the hay will be transported "F.O.B. New Grain Fields" via Farm County Trucking Company. Farm County's truck and the hay are lost in a fire following an accident. The loss is suffered by

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

Catchy Gadgets Corporation and Discount Outlets, Inc., enter into a contract for a sale of kitchenware. The contract requires Catchy to deliver the goods to Rapido Carrier Company for transport to Discount's warehouse. Risk of loss passes to Discount when

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

Pie Sales Corporation orders ReadyMade-brand pies from Savory Foods Company. Savory identifies the goods. Before they are shipped to Pie Sales, an insurable interest in the goods exists in

Leasing Equipment Corporation (LEC) agrees to lease five computer workstations to Mapmakers, Inc. Before any interest in the workstations can pass from LEC to Mapmakers, they must be

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 exists in

Suki leaves a Update-brand watch at Timepiece Sales & Repair to be fixed. Timepiece sells the watch to Vera, who does not know that the watch belongs to Suki. Suki can recover from

Laraby, a representative for Merchandise Shipping Company, delivers a bill of lading to Caitlin, the owner of Dockside Warehouse. A bill of lading is

Wild Alaskan sockeye salmon that fill the hold of Dexter's fishing boat are fungible if the fish are

Matrix Material Corporation in New Jersey sells fifty tons of fabric to Natural Fit Clothing, Inc., in Ohio, "F.O.B. New Jersey." Matrix arranges with Outbound Truckline to transport the goods. The cost of the transport will be paid by

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