Question 1

Under the Uniform Commercial Code, a buyer in the ordinary course of business:

Accepted Answer

A "buyer in the ordinary course of business" is one who, in good faith, buys goods from a person dealing in goods of that type without knowing that the sale violates the ownership rights of any third party. Under the Uniform Commercial Code, buyers in the ordinary course take goods free of any security interest in the goods that their seller may have given a third party.

Question 2

Which of the following terms is closely related to destination contracts?

Accepted Answer

Ex-ship is closely related to destination contracts. It does not specify a particular ship but places the expense and risk on the seller until the goods are unloaded from whatever ship is used.

Question 3

Which of the following statements is true of a negotiable document of title?

Accepted Answer

Sometimes when the goods are being shipped by a professional carrier, the parties will use a negotiable document of title. For instance, a seller may ship the goods to the buyer with payment due on delivery. The document of title (a negotiable bill of lading) serves as the contract between the seller and the shipper as well as identifies who has title and control of the goods.

Question 4

Under the Uniform Commercial Code, if a contract is silent about the place of delivery, the goods are to be delivered:

Accepted Answer

Under the Uniform Commercial Code, if a contract is silent about the place for delivery, the goods are to be delivered at the seller's place of business. The only exception to this rule is in the case of contracts dealing with identified goods that both parties at the time of contracting know are located someplace other than the seller's place of business. In such a case, the site of the goods is the place for delivery.

Question 5

If a contract merely requires the seller to ship the goods, title passes to the buyer when the:

Accepted Answer

If a contract merely requires the seller to ship the goods, title passes to the buyer when the seller delivers the goods to the carrier. If the contract requires delivery of the goods by the seller, title passes to the buyer when the goods are delivered and tendered to the buyer.

Question 6

Jane gave her car for maintenance to Bell Corp., a company that deals in used cars and maintenance of cars. One of the employees at Bell Corp. accidentally sold Jane's car to Fiona. Under these circumstances, which of the following statements is correct?

Accepted Answer

An exception to the general common law rule on title is the "entrusting rule." Anyone who entrusts goods to a merchant who regularly deals in such goods gives that merchant the power to give good title to a "buyer in the ordinary course." The purpose of this exception is to promote commerce by giving buyers the knowledge that they will get good title to goods they purchase in the ordinary course of their sellers' business.

Question 7

When a contract is silent about the time for performance:

Accepted Answer

The Uniform Commercial Code takes the same position as the common law when the parties' contract is silent about the time for performance. Performance in such cases must be tendered within a reasonable time.

Question 8

If a buyer rejects tender of the goods, title:

Accepted Answer

In some instances, the buyer will reject the goods, perhaps because he does not believe that they conform to the contractual specifications. If the buyer rejects tender of the goods, title will automatically be revested in the seller.

Question 9

When, at the time of contracting, the goods are in the hands of a third-party bailee and are covered by a document of title, the risk passes to the buyer when he or she:

Accepted Answer

When, at the time of contracting, the goods are in the hands of a third-party bailee and are covered by a document of title (negotiable or nonnegotiable), the risk passes when the buyer receives the document of title. When no document of title is involved, the risk passes when the bailee acknowledges the buyer's right to possession.

Question 10

Which of the following statements is true of voidable title?

Accepted Answer

A seller who has voidable title can pass good title to a good faith purchaser for value (2-403[l]). Sellers may obtain voidable title by impersonating another person when acquiring the goods from their rightful owner, paying for the goods with a bad check, failing to pay for goods sold on a "cash sale" basis, or obtaining the goods in some other fraudulent manner.

Question 11

Which of the following is true of an FAS (free alongside) contract?

Accepted Answer

FAS (free alongside) is commonly used in maritime contracts and is normally accompanied by the name of a specific vessel and port. The seller must deliver the goods alongside the vessel at his or her own risk and expense.

Question 12

In a shipment contract, "FOB" stands for _____.

Accepted Answer

FOB stands for "free on board." It is a term commonly used in shipping contracts that calls for the seller to deliver the goods free of expense and at the seller's risk to the place designated.

Question 13

Which of the following is the basic purpose for making exceptions to the Uniform Commercial Code's general rules on "buyers in the ordinary course of business"?

Accepted Answer

An exception made by the Uniform Commercial Code concerns buyers in the ordinary course of business. The basic purpose of this exception is to protect those who innocently buy from merchants, thereby promoting confidence in such commercial transactions.

Question 14

Ellie took her diamond ring to Portman Jewelers Corp. for routine cleaning. An employee at the store sold the ring to Daniel who was unaware that the ring belonged to Ellie. Which of the following statements is true in this case?

Accepted Answer

Under the "entrusting rule" of the Uniform Commercial Code, Daniel in the ordinary course of business from the dealer obtained good title to the ring. Therefore, Ellie can sue the store for conversion but cannot recover the ring from Daniel.

Question 15

A buyer has a retail store in Florida and the seller is a manufacturer in California. If the buyer orders goods from the seller and the goods are shipped "FOB Florida," which of the following statements is true?

Accepted Answer

In destination contracts, an FOB term coupled with the place of destination of the goods puts the expense and risk of delivering the goods to that destination on the seller.

Question 16

Patty buys a Persian rug from James, a plumber, in an online auction. James called Patty on Wednesday to inform her that she submitted the winning bid and that she could pick it up anytime or he would ship the rug to her on Friday. On Thursday, the rug was destroyed in a garage fire at James' house. Which of the following statements is true in this case?

Accepted Answer

The risk of loss passes to the buyer on receipt of the goods if the seller is a merchant. If the seller is not a merchant, the risk passes to the buyer when the seller tenders (offers) delivery of goods (2-509[3]).

Question 17

_____ means "honesty in fact in the transaction concerned."

Accepted Answer

A seller who has voidable title can pass good title to a good faith purchaser for value. Good faith means "honesty in fact in the transaction concerned" (1-201[19]), and a buyer has given "value" if he or she has given any consideration sufficient to support a simple contract (1-201[44]).

Question 18

According to the Uniform Commercial Code, title to goods passes to the buyer:

Accepted Answer

If a contract calls for the seller to deliver a negotiable document of title to the goods (like a warehouse receipt or a bill of lading) to the buyer, title passes when the document of title is delivered. The document of title (signifying the right to control the goods) will not be surrendered to the buyer until she pays for the goods.

Question 19

Under the Uniform Commercial Code, which of the following statements is true for the identification of goods to the contract?

Accepted Answer

If delivery is to be made without moving the goods, title passes at the time and place of contracting if the goods have been identified to the contract. Identification may result from the contract description of the goods (if they are distinct from other goods in the seller's possession) or from actions of the seller, such as setting aside or marking the goods.

Question 20

Beck Inc., a food processing company in Chicago, placed a phone order with Gary, a vineyard owner in California, for a certain quantity of perishable products. The shipping term was "CIF" with payment to be made on delivery. Gary contracted with a carrier to deliver the goods to Beck Inc. However, he neglected to ship the goods under refrigeration. The goods were loaded on a non-refrigerated boxcar and as a result the product was spoiled when it reached Chicago. Under these circumstances, _____.

Accepted Answer

Under these circumstances, Gary bears the risk of loss because, under a CIF shipment, the seller bears the expense and the risk of loading the goods. 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.

Quiz 19: Formation and Terms of Sales Contracts