Question 1

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...

Question 2

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...

Question 3

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

Accepted Answer

The answer of Fay pays $800 for a new iPad...

Question 4

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

Accepted Answer

Silas, being sixteen years old, lacks the capacity to enter into a contract. Therefore, the contract between Elizabeth and Silas is voidable at the option of Silas. Since Silas has the right to avoid the contract, Elizabeth's title to the car is also voidable. Therefore, Elizabeth's title to the car is not valid but voidable.

Question 5

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

Accepted Answer

Both Summit and OverStock have an insurable interest in the goods before they are shipped. OverStock has an interest as the seller and owner until delivery, and Summit has an interest as the buyer once the goods are identified to the contract. Consumers generally do not have an insurable interest at this stage.

Question 6

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

Accepted Answer

The answer of Sweets Store buys chocolate from Tasty Candies,...

Question 7

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 nonconformity. The oil is destroyed in a kitchen fire. The loss is suffered by

Accepted Answer

Sweetwater is the only party that suffers the loss because they received nonconforming goods and chose to keep them, assuming the risk of any defects or damage that may occur. Restaurant Supply is not responsible for the loss because they shipped the correct goods and had no knowledge of the possibility of a kitchen fire. Sweetwater customers are not affected because they did not consume the oil before it was destroyed.

Question 8

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

Accepted Answer

A bill of lading is a document that acknowledges receipt of goods and serves as a contract for their transportation. It includes details such as the type of goods, their quantity, and their destination. A destination contract is a type of contract that specifies where the goods will be delivered, but it does not necessarily cover the transportation of the goods. A shipment contract is a type of contract that covers the transportation of the goods, but it does not necessarily specify the destination. A warehouse receipt is a document that acknowledges receipt of goods for storage in a warehouse, but it does not necessarily cover their transportation.

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 exists in

Accepted Answer

An insurable interest exists in the rice for those who would suffer a financial loss if the rice crop were to be destroyed, such as Good Food and Home Farms who have invested money in planting the crop. Interstate Grocery does not have an insurable interest as they have not yet taken ownership of the rice and have not invested any money in its cultivation.

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

Accepted Answer

The loss is suffered by Viewpoint only because they had a duty to keep the TV safe until Thorpe picked it up. Once the store was destroyed, Viewpoint can no longer fulfill their duty to Thorpe and must bear the loss themselves. Thorpe did not yet take possession of the TV, so he has not suffered a loss.

Question 11

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(n)

Accepted Answer

Sam is a good faith purchaser because he purchased the lumber from Levi without knowing that the payment made was by a dishonored check. Sam assumed that Levi had the right to sell the lumber and had no reason to doubt his authority. As a result, Sam's ownership of the lumber is not affected by Levi's bad check.

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 suffered by

Accepted Answer

The answer of A-1 Furnishings, Inc., agrees to lease a...

Quiz 15: The Formation of Sales and Lease Contracts