Question 1

Southern Distribution,Inc.,signs a receipt for goods that will also serve as a contract for the goods' transport. 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 legal document that serves as both a receipt of the goods being transported and a contract for the transportation of those goods. The fact that Southern Distribution, Inc. signed a receipt for goods that will also serve as a contract for transportation indicates that this is likely a bill of lading. The other options (destination contract, shipment contract, and warehouse receipt) do not necessarily encompass both the receipt and transportation contract aspects of a bill of lading.

Question 2

Levi,a well-known lumber dealer with a good reputation,buys a load of lumber and pays for it with a check that is later dishonored.Sam,who is unaware of the bad check,buys the lumber from Levi.Sam is
A)agood faith purchaser.
B)abad faith purchaser.
C)aninsolvent purchaser.
D)abailee.

Accepted Answer

Sam is a good faith purchaser because he bought the lumber from Levi with the good faith belief that Levi had the right to sell it. The fact that Levi's check bounced after the sale does not affect Sam's status as a good faith purchaser. Levi's actions do not create any legal responsibility for Sam.

Question 3

Motor Coach Corporation,a U.S.firm,orally agrees to sell six vehicles to National Tours,Ltd.,a Canadian firm.Motor Coach fails to deliver and National Tours sues to enforce the agreement.Under the CISG,National Tourscan prove the terms by
A)any means.
B)a writing or electronic record only.
C)witnesses only.
D)a writing,electronic record,or witnesses,but no other means.

Accepted Answer

Under the CISG (United Nations Convention on Contracts for the International Sale of Goods), the terms of a contract can be proven by any means, including oral testimony, as it does not require a written contract or specific formality for the sale of goods.

Question 4

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

Accepted Answer

The term "F.O.B. Sweets" means "Free on Board" at the location of Sweets Store. This indicates that the risk of loss passes to the buyer, Sweets Store, once the goods are shipped. Since the chocolate was lost in transit, Tasty Candies, Inc. bears the loss.

Question 5

Secure Courier,Inc.,has a requirements contract with Petro Distribution Corporation that obligates Petro to supply Secure with all the gasoline it needs for its delivery vehicles for one year at $2.30 per gallon.A clause inserted in small print in the contract by Secure,and not noticed by Petro,states,"The buyer reserves the right to reject any shipment for any reason without liability." For six months,Secure orders and Petro delivers under the contract without any controversy.Then,because of a war in the Middle East,the price of gasoline to Petro increases substantially.Petro tells Secure it cannot possibly fulfill their contract unless Secure agrees to pay $2.50 per gallon.Secure,in need of the gasoline,agrees in writing to modify the contract.Later that month,Secure learns it can buy gasoline at $2.40 per gallon from Refined Oil Company.Secure refuses delivery of its most recent order from Petro,claiming,first that the contract allows it to do so without liability,and second,that it is required to pay only $2.30 per gallon if it accepts the delivery.Discuss Secure's contentions.

Accepted Answer

The answer of Secure Courier,Inc.,has a requirements contract with Petro...

Question 6

Elizabeth buys a car from Silas,who is sixteen years old.Elizabeth then wants to sell the car to her neighbor,John.Elizabeth's title to the car is
A)valid.
B)voidable.
C)void.
D)good.

Accepted Answer

When Elizabeth bought the car from Silas, who is only sixteen years old, the contract was a voidable contract. This means that Elizabeth has the option to either void the contract or go ahead with the transaction. If she decides to go ahead with the transaction, her title to the car becomes voidable as well. Therefore, she cannot transfer a valid title to John.

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 Slick,a merchant who sells new and used television sets.By accident,one of Slick'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

Sweetwater Café orders five gallons of transfat-free cooking oil from Restaurant Supply,Inc.The seller mistakenly ships the wrong oil,which the buyer keeps,despite the nonconform-ity.The oil is destroyed in a kitchen fire.The loss is suffered by
A)Sweetwater and Restaurant Supply,but not Sweetwater customers.
B)Sweetwater,Restaurant Supply,and Sweetwater customers.
C)Sweetwater only.
D)Restaurant Supply only.

Accepted Answer

According to the scenario, Sweetwater Café ordered transfat-free cooking oil but received the wrong oil, which they kept despite the nonconformity. This means that Sweetwater willingly accepted and assumed the risk of using the nonconforming oil. Therefore, they are solely responsible for any damages or losses incurred due to the use of the wrong oil, such as the kitchen fire that destroyed it. Restaurant Supply, Inc. is not liable for the loss since Sweetwater voluntarily accepted and used the nonconforming oil, even though it was the wrong product. Sweetwater customers are not affected by this scenario since the loss only pertains to Sweetwater's operation.

Question 9

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 ex-ists 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 party stands to suffer a financial loss if an insured event (such as the crop failing) occurs. In this case, Good Food and Home Farms have an insurable interest in the rice since they have already invested resources in the crop's planting and maintenance. Interstate Grocery does not have an insurable interest because they have yet to take ownership of the rice and have not invested in its production. Therefore, the insurable interest exists in Good Food and Home Farms, but not Interstate Grocery.

Question 10

Thorpe buys an HD TV from Viewpoint Electronics store,which agrees to keep the TV for Thorpe until he picks it up.Before Thorpe gets the TV,a fire destroys the store and the set.The loss is suffered by
A)neither Thorpe nor Viewpoint
B)Thorpe and Viewpoint.
C)Thorpe only.
D)Viewpoint only.

Accepted Answer

The loss is suffered by Viewpoint only since they were in possession of the TV at the time the fire occurred. Thorpe had not taken possession of the TV yet, so he is not responsible for the loss.

Question 11

Fay pays $800 for a new iPad to Global Goods,Inc.Global holds the iPad until Fay picks it up.Global is
A)a bailee.
B)a consignee.
C)a lessee.
D)a seller.

Accepted Answer

Global Goods, Inc. is the seller because they sold the iPad to Fay.

Question 12

A-1 Furnishings,Inc.,agrees to lease a desk to Business Resources,Inc.(BRI),which requests that the desk be left outside City Warehouse for BRI to pick up.Before BRI retrieves the desk,it is stolen.The loss is suf-fered by
A)A-1 Furnishings and BRI,but not City Warehouse.
B)A-1 Furnishings,BRI,and City Warehouse.
C)A-1 Furnishings only.
D)BRI only.

Accepted Answer

The risk of loss typically transfers to the lessee (BRI) once the lessor (A-1 Furnishings) has delivered the goods to the specified location, even if the lessee has not yet taken possession.

Quiz 14: The Formation of Sales and Lease Contracts

Southern Distribution,Inc.,signs a receipt for goods that will also serve as a contract for the goods' transport. This is

Levi,a well-known lumber dealer with a good reputation,buys a load of lumber and pays for it with a check that is later dishonored.Sam,who is unaware of the bad check,buys the lumber from Levi.Sam is

Motor Coach Corporation,a U.S.firm,orally agrees to sell six vehicles to National Tours,Ltd.,a Canadian firm.Motor Coach fails to deliver and National Tours sues to enforce the agreement.Under the CISG,National Tourscan prove the terms by

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

Elizabeth buys a car from Silas,who is sixteen years old.Elizabeth then wants to sell the car to her neighbor,John.Elizabeth's title to the car is

Sweetwater Café orders five gallons of transfat-free cooking oil from Restaurant Supply,Inc.The seller mistakenly ships the wrong oil,which the buyer keeps,despite the nonconform-ity.The oil is destroyed in a kitchen fire.The loss is suffered by

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 ex-ists in

Thorpe buys an HD TV from Viewpoint Electronics store,which agrees to keep the TV for Thorpe until he picks it up.Before Thorpe gets the TV,a fire destroys the store and the set.The loss is suffered by

Fay pays $800 for a new iPad to Global Goods,Inc.Global holds the iPad until Fay picks it up.Global is

A-1 Furnishings,Inc.,agrees to lease a desk to Business Resources,Inc.(BRI) ,which requests that the desk be left outside City Warehouse for BRI to pick up.Before BRI retrieves the desk,it is stolen.The loss is suf-fered by