Question 1

Marco Manufacturing contracted to sell Kurtz Industries 3,000 iron clasps.The contract specified: F.O.B.Kurtz Industries.Upon arrival and inspection,the goods were rejected by Kurtz Industries because they did not conform to the contract specifications.In transit back to Marco Manufacturing,the common carrier's truck overturned and completely destroyed the clasps.Which statement is correct?

Accepted Answer

Since the goods were rejected by Kurtz Industries for not conforming to the contract specifications, the risk of loss had not yet transferred. Therefore, Kurtz will not be liable for the purchase price. The loss will be on the shoulders of Marco Manufacturing since they still owned the goods.

Question 2

Imogene takes her diamond solitaire ring to Sparkle Jewelry Shop to have the prongs holding the diamond retipped and have the ring cleaned.The clerk at Sparkle says she will have to leave the ring and that it should be ready in about a week.When Imogene returns in a week to get her ring,she finds out that the ring has been sold.Which of the following is true?

Accepted Answer

Sparkle Jewelry Shop had the power to transfer all of Imogene's rights in the ring to a good faith buyer in the ordinary course of business. This is known as the "entrustment rule" and it allows merchants who regularly deal with certain types of goods (such as jewelry) to sell those goods in the normal course of business, even if they do not own them, as long as they received the goods from someone who had the right to transfer them. Therefore, even though Imogene left her ring with Sparkle for repairs, Sparkle had the authority to sell the ring to a good faith buyer. Imogene would still have a claim against Sparkle for any damages she suffered as a result of the sale.

Question 3

The term F.O.B.:

Accepted Answer

The answer of The term F.O.B.:
...

Question 4

Mayco has received goods from Wallace pursuant to a sale or return agreement.If Mayco subsequently declares bankruptcy,the goods will be:

Accepted Answer

Under a sale or return agreement, goods are subject to the claims of the buyer's creditors while in the buyer's possession, according to Section 2-326 of the Uniform Commercial Code.

Question 5

In which case does the buyer receive no title to the goods he purchases?

Accepted Answer

In both scenarios described in options A and C, Max did not have valid ownership of the goods when he sold them to the buyer. In option A, Max stole the goods, and in option C, Max used fraud to obtain them. In both cases, the buyer cannot receive good title to the goods, regardless of whether they acted in good faith and gave value for the purchase. Therefore, the buyer does not have legal ownership of the goods in these situations.

Question 6

On impulse,you purchase a travel trailer and ask your acquaintance,Max,if you can leave the trailer at the edge of his restaurant's parking lot until you can have a concrete pad built to store the trailer on your property.Max agrees.When you return for the trailer the next week,it is gone and you find out that Max sold it.You can:

Accepted Answer

Max did not have any ownership interest in the trailer, so he could not legally sell it. The trailer was left in his care temporarily, but that did not give him the right to sell it.

Question 7

A contract that requires a seller to deliver goods to the carrier is:

Accepted Answer

A shipment contract requires the seller to deliver goods to the carrier for transportation. The buyer assumes responsibility for the goods once they are in the carrier's possession. In a destination contract, the seller is responsible for delivering the goods to a specified destination. CIF (Cost, Insurance, and Freight) and COD (Cash on Delivery) refer to different terms of payment and do not specify delivery requirements of the seller.

Question 8

Marco sells goods to Byron for his personal use on the basis that the goods may be returned if Byron is not satisfied with them.The sale is:

Accepted Answer

The sale is a "sale on approval," meaning that the goods can be returned if the buyer is not satisfied with them. This type of transaction is governed by the UCC (Uniform Commercial Code). A "sale or return" involves the buyer purchasing goods with the option to return them for a refund or credit, while a consignment involves the seller sending goods to a retailer to be sold on their behalf, and outside the UCC means that the transaction is not subject to the regulations of the Uniform Commercial Code.

Question 9

A gun manufacturer in Helena,Montana agrees to sell guns and ammunition to the ATF in Washington,D.C.The terms of the contract specify that the goods are to be shipped "FOB,Chicago." When does the buyer acquire title and risk of loss?

Accepted Answer

The answer of A gun manufacturer in Helena,Montana agrees to...

Question 10

Graham,an adult,purchases a car from a minor,and subsequently sells it to Harlow,another adult.Harlow paid full value for the car and had no reason to know that Graham had purchased the car from a minor.Which of the following best describes this situation?

Accepted Answer

Graham had a voidable title because he purchased the car from a minor, who can void the contract. However, when Harlow, a good faith purchaser for value, bought the car, he obtained good title.

Question 11

The identification of goods permits the buyer to:

Accepted Answer

The identification of goods allows the buyer to obtain insurance on the goods and take title to the goods in any manner that the parties agree upon. Therefore, both option A and B are correct. Option C is not correct as entering into a contract with the seller doesn't necessarily require identifying goods.

Question 12

Mike sold his car to Beth,who was to pick the car up at Mike's house by 12:00 noon on September 1.Mike was at his house waiting for Beth but she was late.In fact,when Beth arrived she discovered Mike's home and the car destroyed by a fire that started at 1:00 p.m.The risk of loss falls on:

Accepted Answer

According to the common law, the risk of loss passes to the buyer when the seller tenders the goods. In this case, Mike was ready, willing, and able to tender the car at 12:00 noon, which means that he had fulfilled his obligation as a seller. Therefore, the risk of loss falls on Beth since she had not taken possession of the car at the time of the loss. The UCC has specific provisions for the risk of loss, but since this is a case of a sale under common law, the UCC does not apply.

Question 13

Assume that Bubba orders 15 cases of BBQ chips from Mays Potato Chips for his restaurant,Bubba's BBQ.Mays ships 15 cases of regular chips by mistake.If Bubba decides to keep the regular chips,in spite of the nonconformity with the contract,then the destruction of the chips when a water pipe breaks in the food storage room will result in:

Accepted Answer

Bubba accepted delivery of the nonconforming chips, which means that he willingly took possession of the goods knowing that they did not meet the requirements of the contract. Therefore, he assumes the risk of loss if something happens to the chips, such as the water pipe breaking. Mays is not responsible for the loss in this situation.

Question 14

Sanco contracted to sell 1,000 cases of oil to AMF.The oil is located in a public warehouse,which has issued a warehouse receipt for it.Which of the following is correct?

Accepted Answer

The risk of loss typically passes to the buyer when the buyer receives the document of title, such as a warehouse receipt, which represents the goods.

Question 15

Rayco Ski Shop purchased 500 pairs of skis from Skitron.Rayco is located in Colorado.Skitron's business is in Tennessee.The purchase order included the following term: "F.O.B.Colorado." The contract makes no mention of risk of loss or title.The contract can be described as a:

Accepted Answer

The term "F.O.B. Colorado" indicates a destination contract, meaning the seller (Skitron) is responsible for the goods until they reach the buyer's location (Rayco in Colorado).

Question 16

Dick steals Jane's camcorder and sells it to Sid.Jane can recover the camcorder from Sid:

Accepted Answer

The answer of Dick steals Jane's camcorder and sells it...

Question 17

Which of the following sales would fall within the bulk sales provisions of Article 6?

Accepted Answer

The bulk sales provisions of Article 6 apply to the sale of a substantial part of a store's inventory. This is because it is considered to be a sale of the significant portion of assets of a business. The sale of equipment or furniture (such as chairs in a barber's shop) would not typically fall under the bulk sales provisions. The sale of an office building may or may not be subject to the bulk sales provisions depending on the specific circumstances.

Question 18

Hill Computers is a retailer,which buys its inventory from Acme Co.on credit,giving Acme a security interest in the inventory.Hubert buys a computer from Hill in the normal course of business.Hubert's title in the computer is:

Accepted Answer

Hubert, as a buyer in the ordinary course of business, takes good title to the computer free of Acme's security interest.

Question 19

Tuan,Inc.contracted to buy 200 monogrammed blankets from Titex,Inc.Tuan paid for the blankets in advance.Before segregating and monogramming the blankets,Tuan filed for bankruptcy.Tuan will not be able to recover the blankets because:

Accepted Answer

Since the blankets were not identified to the contract, Titex still technically owned them at the time of Tuan's bankruptcy filing, and therefore they would not be considered Tuan's property that could be recovered through the bankruptcy process.

Question 20

In a consignment contract,the consignee:

Accepted Answer

The consignee in a consignment contract is the party who takes goods from the consignor with the intention of reselling them. However, the goods remain the property of the consignor until they are sold. This means that the goods are subject to the claims of the consignee's creditors, as they are not the legal owner of the goods. Therefore, choice B is the best answer.

Quiz 21: Ownership And Risk