Question 1

Quality Computer Company agrees to sell one hundred hard drives to Retail Electronics,Inc.The hard drives,which Retail Electronics ex?pressly requires to have certain amounts of memory,are to be shipped "F.O.B.Retail Electronics distribution center in Memphis,TN." When the drives arrive,Retail Electronics rejects them and informs Quality Computer that the drives do not conform to Retail Electronics' memory re?quirement.A few hours later,the drives are destroyed in a fire at Retail Electronics' distribution center.Will Quality Computer succeed in a suit against Retail Electronics for the cost of the goods?

Accepted Answer

The answer of Quality Computer Company agrees to sell one...

Question 2

Tone Style Stores orders leather jackets from Universa Clothing Company.Universa mistakenly ships denim jackets,which Tone rejects and returns via Valu Transport,Inc.During the return,the jackets are lost.The loss is suffered by
A)Tone only.
B)Tone and Universa,but not Valu.
C)Tone,Universa,and Valu.
D)Universa only.

Accepted Answer

The answer of Tone Style Stores orders leather jackets from...

Question 3

Diners Cafe orders five gallons of corn oil from EZ Distributors,Inc.EZ mistakenly ships olive oil,which Diners keeps,despite the nonconformity.The oil is destroyed in a fire.The loss is suffered by
A)Diners and EZ,but not Diners' customers.
B)Diners,EZ,and Diners' customers.
C)Diners only.
D)EZ only.

Accepted Answer

Diners is the only party that suffers the loss since they kept the nonconforming olive oil and it was destroyed in the fire. EZ Distributors may be liable for the mistake in shipping the incorrect oil, but they do not suffer a direct loss from the destruction of the oil. Diners' customers are not involved in this transaction and therefore do not suffer any loss.

Question 4

Regal Recreation Sales,Inc. ,allows Sandy to take a Regal boat for a "test run." Sandy 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 Sandy tried the boat for a few hours before deciding to buy it. In a sale on approval, the buyer has the right to return the goods within a specified time period if they are not satisfactory.

Question 5

NuStores accepts a shipment of DVD players from Open-Ur-Eyes Video,Inc.NuStores later discovers a defect in the players,revokes acceptance,and returns the players via Playback,Inc.During the return,the play?ers are lost.The loss is suffered by
A)NuStores only.
B)NuStores and Open-Ur-Eyes,but not Playback.
C)NuStores,Open-Ur-Eyes,and Playback.
D)Open-Ur-Eyes only.

Accepted Answer

The answer of NuStores accepts a shipment of DVD players...

Question 6

Li'l Jewelry Store orders display racks from Mark-Up Supplies,Inc.(MSI).MSI mistakenly ships racks of the wrong size and color,which Li'l rejects and returns via Nevermind Shipping Company.During the return,the racks are lost.The loss is suffered by
A)Li'l only.
B)Li'l and MSI,but not Nevermind.
C)Li'l,MSI,and Nevermind.
D)MSI only.

Accepted Answer

The answer of Li'l Jewelry Store orders display racks from...

Question 7

In the following situations,two parties claim the same goods.Who is most likely to prevail in each circumstance? Explain.
(a)Olan steals Phil's television set and sells it to Quincy,an innocent purchaser,for value.Phil learns Quincy has the set and demands its return.
(b)Riley takes his television set for repair to Silky,a merchant who sells new and used television sets.By accident,one of Silky's employees sells the set to Tuna,an innocent purchaser-customer,who takes possession.Riley wants his set back from Tuna.

Accepted Answer

The answer of In the following situations,two parties claim the...

Question 8

Office Applications Company (OAC)orders six laser printers from Printing Products,Inc.(PPI),to be delivered by PPI.Before PPI's truck ar?rives with the goods,OAC tells PPI it will not pay.The printers are lost in transit.The loss is suffered by
A)OAC only.
B)OAC to the extent of a deficiency in PPI's insurance coverage only.
C)PPI to the extent of a deficiency in OAC's insurance coverage only.
D)PPI only.

Accepted Answer

The answer of Office Applications Company (OAC)orders six laser printers...

Question 9

Deep Storage Company holds goods for EZ Sales Corporation,which con?tracts to sell them to Fabric Stores,Inc.The goods are to be delivered without being moved and are represented by a negotiable bill of lading.The risk of loss passes to Fabric Stores
A)if Deep refuses to honor the bill of lading.
B)if EZ gives the bill of lading to Deep.
C)if the goods are lost due to an "act of God."
D)when Fabric Stores receives the bill of lading.

Accepted Answer

The risk of loss passes to the buyer, Fabric Stores, upon their receipt of the negotiable bill of lading, which represents the goods held by Deep Storage Company. This is typically the point of delivery in a shipment contract, and it signifies that the buyer has taken ownership and assumed responsibility for the goods.

Question 10

Peak Sales Corporation orders goods from Quick Stock Company.Peak plans to market the goods to consumers generally.Quick identifies the goods.Before they are shipped to Peak,an insurable interest in the goods exists in
A)Peak and Quick,but not consumers generally.
B)Peak,Quick,and consumers generally.
C)Peak only.
D)Quick only.

Accepted Answer

An insurable interest exists in both Peak and Quick because Quick has identified the goods for Peak, but consumers generally do not have an insurable interest as they have not yet purchased or taken possession of the goods.

Question 11

Good Food Corporation buys from Home Farms,Inc. ,a rice crop that Home Farms plans to plant and harvest during the next growing season.Good Food plans to sell the rice to Interstate Grocery Stores.After the rice is planted,but before it is harvested,an insurable interest in the rice exists in
A)Good Food and Home Farms,but not Interstate Grocery.
B)Good Food,Home Farms,and Interstate Grocery.
C)Good Food only.
D)Home Farms only.

Accepted Answer

An insurable interest exists when a person or entity would suffer a financial loss if the insured event occurs. In this case, Home Farms has an insurable interest in the rice because they stand to lose financially if the crop fails. Good Food also has an insurable interest because they have already purchased the rice and would lose money if the crop fails. However, Interstate Grocery does not have an insurable interest because they have not yet purchased the rice and would not suffer a financial loss if the crop fails.

Question 12

Orange Music,Inc. ,sells Pad-brand MP3 players to Quik Pik Stores and other retailers.Orange has an insurable in?ter?est in the players as long as
A)Orange remains in business.
B)Orange retains title to the goods.
C)the goods are in existence.
D)there is no risk of loss.

Accepted Answer

Orange Music, Inc. has an insurable interest in the Pad-brand MP3 players as long as they retain title to the goods. This means that they have a financial interest in the players and would suffer a loss if the goods were damaged or lost. As long as they continue to own the goods, they have an insurable interest.

Quiz 15: Title and Risk of Loss

Tone Style Stores orders leather jackets from Universa Clothing Company.Universa mistakenly ships denim jackets,which Tone rejects and returns via Valu Transport,Inc.During the return,the jackets are lost.The loss is suffered by

Diners Cafe orders five gallons of corn oil from EZ Distributors,Inc.EZ mistakenly ships olive oil,which Diners keeps,despite the nonconformity.The oil is destroyed in a fire.The loss is suffered by

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

NuStores accepts a shipment of DVD players from Open-Ur-Eyes Video,Inc.NuStores later discovers a defect in the players,revokes acceptance,and returns the players via Playback,Inc.During the return,the play?ers are lost.The loss is suffered by

Li'l Jewelry Store orders display racks from Mark-Up Supplies,Inc.(MSI) .MSI mistakenly ships racks of the wrong size and color,which Li'l rejects and returns via Nevermind Shipping Company.During the return,the racks are lost.The loss is suffered by

Office Applications Company (OAC) orders six laser printers from Printing Products,Inc.(PPI) ,to be delivered by PPI.Before PPI's truck ar?rives with the goods,OAC tells PPI it will not pay.The printers are lost in transit.The loss is suffered by

Deep Storage Company holds goods for EZ Sales Corporation,which con?tracts to sell them to Fabric Stores,Inc.The goods are to be delivered without being moved and are represented by a negotiable bill of lading.The risk of loss passes to Fabric Stores

Peak Sales Corporation orders goods from Quick Stock Company.Peak plans to market the goods to consumers generally.Quick identifies the goods.Before they are shipped to Peak,an insurable interest in the goods exists in

Good Food Corporation buys from Home Farms,Inc. ,a rice crop that Home Farms plans to plant and harvest during the next growing season.Good Food plans to sell the rice to Interstate Grocery Stores.After the rice is planted,but before it is harvested,an insurable interest in the rice exists in

Orange Music,Inc. ,sells Pad-brand MP3 players to Quik Pik Stores and other retailers.Orange has an insurable in?ter?est in the players as long as