Question 1

Moto Company sells new and used motorcycles.Some of the motorcycles are held on consignment,including six consigned by Nu Cycles,Inc.While the cycles are in Moto's possession,title to them is held by
A)Moto and Nu jointly.
B)Moto only.
C)Moto's creditors only.
D)Nu only.

Accepted Answer

When the motorcycles are held on consignment, Nu Cycles, Inc. retains title ownership until the motorcycles are sold. Moto only has possession of the motorcycles to sell them on behalf of Nu Cycles, Inc. Therefore, option B is the correct choice as Moto only has possession and not ownership of the motorcycles.

Question 2

Dirk steals Effie's necklace and sells it to Fiona.Effie can recover the neck?lace from Fiona
A)only if Fiona did not know that the necklace was stolen.
B)only if Fiona gave legally sufficient consideration for the necklace.
C)only if Fiona knew that the necklace was stolen.
D)under any circumstances.

Accepted Answer

The answer of Dirk steals Effie's necklace and sells it...

Question 3

Diamond Camera Shop receives lenses from Eye Optical,Inc. ,under a sale or return agreement.While the lenses are in Diamond's possession,ti?tle is held by
A)Diamond and Eye jointly.
B)Diamond only.
C)Diamond's creditors only.
D)Eye only.

Accepted Answer

Under a sale or return agreement, title remains with the seller (Eye Optical, Inc.) until the lenses are actually sold to a third party by Diamond Camera Shop. Therefore, Diamond Camera Shop only has possession of the lenses and not the title.

Question 4

Royal Cafe buys 100 bags of oranges from Sweet Citrus Company.The par?ties agree to ship the oranges "F.O.B.Royal" via Terrific Trucking Company.The oranges rot in transit.The loss is suf?fered by
A)Royal and Sweet,but not Terrific.
B)Royal,Sweet,and Terrific.
C)Royal only.
D)Sweet only.

Accepted Answer

Under "F.O.B. Royal," the risk of loss passes to the buyer (Royal Cafe) once the goods are shipped. However, since the term is "F.O.B. Royal," it indicates that the seller (Sweet Citrus Company) retains the risk until the goods reach the buyer's location. Therefore, Sweet Citrus Company bears the loss.

Question 5

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

Accepted Answer

Excel, Flight, and Geo all acknowledge possession of the goods by a document of title, which makes them bailees (i.e. temporary custodians of the goods). Consignees receive goods for the purpose of selling them on behalf of the owner, which is not the case here. Lessees rent property but do not necessarily have possession of the property, and sellers transfer ownership of goods in exchange for payment.

Question 6

Home Products Store buys furniture from Imperial Furniture,Inc.The par?ties agree that the furniture will be shipped "F.O.B.Imperial's warehouse" via Jiffy Shipping Corporation.The furniture is lost in transit.The loss is suffered by
A)Home Products and Imperial Furniture,but not Jiffy Shipping.
B)Home Products,Imperial Furniture,and Jiffy Shipping.
C)Home Products only.
D)Imperial Furniture only.

Accepted Answer

When shipping F.O.B. (free on board) from the seller's warehouse, the responsibility for the goods passes from the seller to the buyer once they leave the seller's warehouse. Therefore, in this scenario, Home Products bears the risk of loss since they took ownership of the furniture once it left Imperial Furniture's warehouse. Imperial Furniture is not responsible for the loss since they fulfilled their obligation by shipping the furniture as agreed. Jiffy Shipping Corporation may be liable for the loss if they were negligent in transporting the goods, but they are not automatically responsible since they were acting as a third-party carrier.

Question 7

Real Foods Corporation orders from Savory Company goods that are stored in an Uptown,Inc. ,warehouse.Real Foods pays for the goods,delivery is via the transfer of a negotiable warehouse receipt,and Real Foods moves the goods out of the warehouse.The risk of loss passes to Real Foods when it
A)orders the goods.
B)pays for the goods.
C)receives the negotiable warehouse receipt.
D)moves the goods out of the warehouse.

Accepted Answer

The answer of Real Foods Corporation orders from Savory Company...

Question 8

Mica buys 1,000 bales of hay from Nuevo Farms.The parties agree that the hay will be transported F.A.S.via Overland Transport,Inc.Nuevo Farms' truck carrying the hay explodes before reaching Overland Transport.The loss is suffered by
A)Mica and Nuevo Farms,but not Overland Transport.
B)Mica,Nuevo Farms,and Overland Transport.
C)Mica only.
D)Nuevo Farms only.

Accepted Answer

The answer of Mica buys 1,000 bales of hay from...

Question 9

Global Produce Corporation in Hawaii sells fifty tons of pineapple to Ideal Groceries,Inc. ,in California,F.O.B.Hawaii.The cost of transport?ing the produce to California will be paid by
A)California.
B)Global Produce
C)Ideal Groceries.
D)Hawaii.

Accepted Answer

According to the F.O.B (Free on Board) terms, the buyer (Ideal Groceries) bears the responsibility and cost of transportation from the port of loading (Hawaii) to the final destination (California). Therefore, the cost of transporting the produce to California will be paid by Ideal Groceries, not Global Produce or Hawaii.

Question 10

Sugary Treats Store buys chocolate from Tasty Candies,Inc.The parties agree that the chocolate will be shipped "F.O.B.Sugary Treats" via United Railroad Corporation.The chocolate is lost in transit.The loss is suffered by
A)Sugary Treats and Tasty Candies,but not United Railroad.
B)Sugary Treats,Tasty Candies,and United Railroad.
C)Sugary Treats only.
D)Tasty Candies only.

Accepted Answer

When goods are shipped "F.O.B. Sugary Treats," it means that the risk of loss remains with the seller, Tasty Candies, until the goods reach the buyer's location, Sugary Treats. Since the chocolate was lost in transit, Tasty Candies bears the loss.

Question 11

Perfect Fit Furnishings,Inc. ,agrees to lease a desk to Research Resources,Inc.(RRI),which requests that the desk be left outside Streetside Warehouse for RRI to pick up.Before RRI retrieves the desk,it is stolen.The loss is suf?fered by
A)Perfect Fit and RRI,but not Streetside Warehouse.
B)Perfect Fit only.
C)Perfect Fit,RRI,and Streetside Warehouse.
D)RRI only.

Accepted Answer

The answer of Perfect Fit Furnishings,Inc. ,agrees to lease a...

Question 12

Marvel Electronix orders thirty hard drives from Nano Computers,Inc.The hard drives are stored in Onyx Warehouse.Under the terms of the order,Nano must give Marvel a warehouse receipt for the goods,which Marvel will then pick up.Title to the goods passes to Marvel when
A)Nano gives Marvel a warehouse receipt for the goods.
B)Marvel orders the goods.
C)Marvel picks up the goods.
D)Onyx Warehouse stores the goods.

Accepted Answer

Title to the goods passes to Marvel when Nano gives Marvel a warehouse receipt for the goods, as per the terms of the order.

Question 13

Angie buys a lamp from Brite Lites Store,which agrees to keep it for Angie until she picks it up.Before Angie gets the lamp,a fire destroys the store and the lamp.The loss is suffered by
A)Angie and Brite Lites.
B)Angie only.
C)Brite Lites only.
D)neither Angie nor Brite Lites

Accepted Answer

The answer of Angie buys a lamp from Brite Lites...

Question 14

Barb pays $1,000 for a new computer to Computer Products Corporation,which pays Discount Warehouse,Inc. ,$50 to store the computer until Barb retrieves it.Discount Warehouse is
A)a bailee.
B)a consignee.
C)a lessee.
D)a seller.

Accepted Answer

Discount Warehouse is a bailee, as they are temporarily storing the computer for Barb.

Question 15

Gins pays $2,000 for a new HDTV to Imagine Corporation.Imagine holds the set until Gina picks it up.Imagine is
A)a bailee.
B)a consignee.
C)a lessee.
D)a seller.

Accepted Answer

The answer of Gins pays $2,000 for a new HDTV...

Question 16

Bree leaves a pair of new shoes at Chalky's Shoe Store to be dyed.Chalky's sells the shoes to Dian,who does not know that the shoes belong to Bree.Bree can recover from
A)Chalky's Shoe Store only.
B)Chalky's Shoe Store or Dian.
C)Dian only.
D)neither Dian nor Chalky's Shoe Store.

Accepted Answer

Bree left the shoes at Chalky's Shoe Store and did not sell or transfer ownership to anyone else. Therefore, Chalky's Shoe Store is still responsible for the shoes and Bree can only recover them from the store. Dian purchased the shoes in good faith and without knowledge of Bree's ownership, so she is not liable for returning them to Bree.

Question 17

Timekeep Watches,Inc. ,ships an assortment of timepieces to Unique Jewelers,Inc. ,which agrees to pay for items that are not re?turned within six months.This is
A)a bailment.
B)a consignment.
C)a sale on approval.
D)a sale or return.

Accepted Answer

This is a sale or return agreement, as Unique Jewelers, Inc. is only responsible for payment for items that are not returned within six months.

Question 18

Leo buys a boat from his neighbor Moe,who is a fishing guide.Moe agrees to keep the boat in his storage shed until Leo picks it up.A tree falls on Moe's shed and destroys the boat.The loss is suffered by
A)Leo and Moe.
B)Leo only.
C)Moe only.
D)neither Leo nor Moe.

Accepted Answer

Since Moe agreed to keep the boat in his storage shed until Leo picked it up, Moe assumed the responsibility of taking care of the boat until its transfer to Leo. Therefore, Moe would be responsible for any harm that comes to the boat while it was under his care. As a result, Leo, who had not yet acquired the boat, would not suffer any damages as a result of the tree dropping.

Question 19

Track & Truck Distribution,Inc. ,signs a receipt for goods that will also serve as a contract for the transportation of the goods.This is
A)a bill of lading.
B)a destination contract.
C)a shipment contract.
D)a warehouse receipt.

Accepted Answer

A bill of lading is a receipt given by a carrier (in this case, Track & Truck Distribution, Inc.) to a shipper (the party providing the goods) acknowledging that the goods have been received and are being transported. It serves as both a receipt and a contract for the transportation of the goods.

Question 20

Floors & More Store contracts to buy 100 carpets from Ground Cover,Inc.Unless the contract states otherwise,it is assumed that this is
A)a bill of lading.
B)a destination contract.
C)a shipment contract.
D)a warehouse receipt.

Accepted Answer

A shipment contract is a contract where the seller is responsible for delivering the goods to a carrier, and the buyer takes responsibility for receiving the goods from the carrier at the destination. This is the most commonly used contract in the sale of goods and is assumed if the contract does not state otherwise. Therefore, the best choice in this scenario is C - a shipment contract.

Quiz 15: Title and Risk of Loss

Moto Company sells new and used motorcycles.Some of the motorcycles are held on consignment,including six consigned by Nu Cycles,Inc.While the cycles are in Moto's possession,title to them is held by

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

Diamond Camera Shop receives lenses from Eye Optical,Inc. ,under a sale or return agreement.While the lenses are in Diamond's possession,ti?tle is held by

Royal Cafe buys 100 bags of oranges from Sweet Citrus Company.The par?ties agree to ship the oranges "F.O.B.Royal" via Terrific Trucking Company.The oranges rot in transit.The loss is suf?fered by

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

Home Products Store buys furniture from Imperial Furniture,Inc.The par?ties agree that the furniture will be shipped "F.O.B.Imperial's warehouse" via Jiffy Shipping Corporation.The furniture is lost in transit.The loss is suffered by

Real Foods Corporation orders from Savory Company goods that are stored in an Uptown,Inc. ,warehouse.Real Foods pays for the goods,delivery is via the transfer of a negotiable warehouse receipt,and Real Foods moves the goods out of the warehouse.The risk of loss passes to Real Foods when it

Mica buys 1,000 bales of hay from Nuevo Farms.The parties agree that the hay will be transported F.A.S.via Overland Transport,Inc.Nuevo Farms' truck carrying the hay explodes before reaching Overland Transport.The loss is suffered by

Global Produce Corporation in Hawaii sells fifty tons of pineapple to Ideal Groceries,Inc. ,in California,F.O.B.Hawaii.The cost of transport?ing the produce to California will be paid by

Sugary Treats Store buys chocolate from Tasty Candies,Inc.The parties agree that the chocolate will be shipped "F.O.B.Sugary Treats" via United Railroad Corporation.The chocolate is lost in transit.The loss is suffered by

Perfect Fit Furnishings,Inc. ,agrees to lease a desk to Research Resources,Inc.(RRI) ,which requests that the desk be left outside Streetside Warehouse for RRI to pick up.Before RRI retrieves the desk,it is stolen.The loss is suf?fered by

Marvel Electronix orders thirty hard drives from Nano Computers,Inc.The hard drives are stored in Onyx Warehouse.Under the terms of the order,Nano must give Marvel a warehouse receipt for the goods,which Marvel will then pick up.Title to the goods passes to Marvel when

Angie buys a lamp from Brite Lites Store,which agrees to keep it for Angie until she picks it up.Before Angie gets the lamp,a fire destroys the store and the lamp.The loss is suffered by

Barb pays $1,000 for a new computer to Computer Products Corporation,which pays Discount Warehouse,Inc. ,$50 to store the computer until Barb retrieves it.Discount Warehouse is

Gins pays $2,000 for a new HDTV to Imagine Corporation.Imagine holds the set until Gina picks it up.Imagine is

Bree leaves a pair of new shoes at Chalky's Shoe Store to be dyed.Chalky's sells the shoes to Dian,who does not know that the shoes belong to Bree.Bree can recover from

Timekeep Watches,Inc. ,ships an assortment of timepieces to Unique Jewelers,Inc. ,which agrees to pay for items that are not re?turned within six months.This is

Leo buys a boat from his neighbor Moe,who is a fishing guide.Moe agrees to keep the boat in his storage shed until Leo picks it up.A tree falls on Moe's shed and destroys the boat.The loss is suffered by

Track & Truck Distribution,Inc. ,signs a receipt for goods that will also serve as a contract for the transportation of the goods.This is

Floors & More Store contracts to buy 100 carpets from Ground Cover,Inc.Unless the contract states otherwise,it is assumed that this is