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PlastiCo Contracted to Buy 45,000 Litres of a Chemical from Natural

Question 15

Multiple Choice

PlastiCo. contracted to buy 45,000 litres of a chemical from Natural Chemicals Ltd. The chemical still had to be refined at the time the contract was made. Once it was refined, Natural had it pumped into 2,200-litre barrels, and loaded them onto a truck owned by Heavy Haulage Inc., a common carrier. Suppose PlastiCo. was not in bankruptcy but was only insolvent. Prior to its insolvency, it had realized that the chemical was going to be surplus for it and had sold its rights to the shipment to Tiny Co. and had instructed Heavy Haulage to deliver it to Tiny. By the time Natural contacts Heavy to stop the delivery in transitu, Heavy has already delivered the barrels to Tiny.


A) Although Tiny had no notice of the stoppage in transitu and it had bought the shipment in good faith for a reasonable price, nevertheless Tiny has no rights to the barrels since PlastiCo. would have had no rights to them, so Tiny cannot keep them unless it pays Natural. It can then recover the money it paid already to PlastiCo.
B) Since Tiny bought the rights to the barrels in good faith at their proper value, and PlastiCo. had no notice of the stoppage in transitu, Tiny has the right to keep them and Natural must look to PlastiCo. for payment of the purchase price.
C) Natural is entitled to place a lien on the barrels, preventing Tiny from using their contents until Natural is paid by PlastiCo.
D) Although Tiny had no notice of the stoppage in transitu and it had bought the shipment in good faith for a reasonable price, nevertheless Tiny has no rights to the barrels since PlastiCo would have had no rights to them, so Tiny cannot keep them unless it pays Natural. It can then recover the money it paid already to PlastiCo. and Natural is entitled to place a lien on the barrels, preventing Tiny from using their contents until Natural is paid by PlastiCo.
E) Since Tiny bought the rights to the barrels in good faith at their proper value, and PlastiCo. had no notice of the stoppage in transitu, Tiny has the right to keep them and Natural must look to PlastiCo. for payment of the purchase price and Natural is entitled to place a lien on the barrels, preventing Tiny from using their contents until Natural is paid by PlastiCo.

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