Cengage Advantage Books: Law for Business 19th Edition by John Ashcroft,Katherine Ashcroft,Martha Patterson

Exercise 12

Italian Designer Import Outlet, Inc. d/b/a Casa Italia (Italia) sold men's clothing from several different suppliers, each with separate agreements regarding payments and returns. For example, with respect to one manufacturer, Cantoni I.T.C. USA, Inc. (Cantoni), approximately 70 percent of Italia's inventory was supplied directly from Cantoni's parent in Italy, with the balance from Uomonuovo, Gucci, and Xegna. For some transactions, payment was made "up front," for others, half payment "up front" with the balance due in 60 days, and for others, payment was not made until after both retail sale and the expiration of any time period for returns. A steam pipe burst in Italia's retail facility, and Italia made a claim for water damage to inventory to New York Central Mutual Fire Insurance Company (Mutual). Mutual declined coverage for certain items on the basis that Italia only held them for consignment purposes, and did not actually "own" those items. Italia claimed all the items had been sold to Italia on a "sale or return" basis. Was this situation best characterized as consignment or sale or return?