Question 1

Home Appliance Corporation contracts with Instate Trucking Company to take a selection of appliance repair parts to Journey Airlines, Inc., with Journey to transport the goods to a KeepSafe Company warehouse. Instate Trucking, Journey Airlines, and KeepSafe each acknowledge possession of the goods by a document of title. Instate Trucking, Journey Airlines, and KeepSafe are
A) ​bailees.
B) ​buyers.
C) ​lessees.
D) ​none of the choices.

Accepted Answer

Instate Trucking, Journey Airlines, and KeepSafe are all bailees, as they have possession of the goods and are responsible for their safekeeping and delivery to the next party in the chain of custody.

Question 2

Safety Supply Corporation in New York sells a truckload of protective suits, masks, and other safety gear to Toxic Recovery, Inc., in Connecticut, "F.O.B. New York." Safety Supply arranges with US Truckline to transport the goods. The cost of the transport will be paid by
A) ​Safety Supply.
B) ​Toxic Recovery.
C) ​US Truckline.
D) ​Toxic Recovery's clients by an increase in the price of loss control services.

Accepted Answer

FOB (free on board) means that the seller (Safety Supply) is responsible for the goods until they are loaded onto the truck. Therefore, Safety Supply is responsible for the cost of transport.

Question 3

Big Red Drinks, Inc. contracts to buy two tons of cranberries from Super Fruits, Inc. The contract states that Super Fruits is required to ship the cranberries to Big Red Drinks by Speedy Wind Air Freight. The contract is
A) ​a bill of lading.
B) ​a destination contract.
C) ​a shipment contract.
D) ​a warehouse receipt.

Accepted Answer

The contract between Big Red Drinks, Inc. and Super Fruits, Inc. is a shipment contract since it specifies that Super Fruits is responsible for shipping the two tons of cranberries to Big Red Drinks. In a shipment contract, the seller is responsible for delivering the goods to the carrier, but the buyer assumes the risk of loss or damage during transportation.

Question 4

Roasters Corporation and Outdoor Barbecues, Inc., enter into a contract for a sale of a commercial grill. The contract requires Roasters to deliver the goods to Speedy Delivery Company for transport to Outdoor. Risk of loss passes to Outdoor when
A) ​Roasters delivers the goods to Speedy.
B) ​Roasters and Outdoor enter into their contract.
C) ​Speedy transports the goods to Outdoor.
D) ​Outdoor begins to use the grill.

Accepted Answer

According to the contract terms, Roasters is responsible for delivering the goods to Speedy Delivery Company for transport to Outdoor. Therefore, the risk of loss passes to Outdoor when Roasters delivers the goods to Speedy Delivery Company.

Question 5

A contract between Fresh Fruit Corporation and Green Grocer, Inc., requires Fresh Fruit to deliver goods to Green Grocer's place of business. This is
A) ​a bill of lading.
B) ​a destination contract.
C) ​a shipment contract.
D) ​a warehouse receipt.

Accepted Answer

A destination contract requires the seller to deliver goods to a specific place, which in this case is Green Grocer's place of business. This is different from a shipment contract where the seller is only responsible for delivering the goods to a carrier for transportation. A bill of lading is a document that serves as evidence of the contract for carriage of goods by sea, and a warehouse receipt is a document acknowledging the receipt of goods into a warehouse.

Question 6

Pipes & Culverts Company orders six irrigation pumps from Quality Plumbing, Inc. The pumps are stored in Restorers Warehouse. Under the terms of the order, Quality must give Pipes & Culverts a warehouse receipt for the goods, which the buyer will then pick up. Title to the goods passes to Pipes & Culverts when
A) ​Quality stores the drives.
B) ​Pipes & Culverts orders the drives.
C) ​Pipes & Culverts picks up the drives.
D) ​Quality gives Pipes & Culverts a warehouse receipt for the drives.

Accepted Answer

Title to the goods usually passes to the buyer when the seller delivers a warehouse receipt for the goods. In this case, Quality Plumbing, Inc. must give Pipes & Culverts a warehouse receipt for the pumps, and title to the goods will pass to Pipes & Culverts when they receive the warehouse receipt. Therefore, the correct answer is D - Quality gives Pipes & Culverts a warehouse receipt for the drives.

Question 7

Outdoor Outfitters Store contracts to buy fifty tents from Pitched Camp, Inc. Unless the contract states otherwise, it is assumed to be
A) ​none of the choices.
B) ​a destination contract.
C) ​a shipment contract.
D) ​a delivery ex-ship.

Accepted Answer

The answer of Outdoor Outfitters Store contracts to buy fifty...

Question 8

Commercial Rents Corporation agrees to lease a pressure washer to Delivery Trucks, Inc., which agrees to pick it up at E Street Warehouse. Before Delivery Trucks retrieves the washer, it is stolen. The loss is suffered by
A) ​Commercial Rents.
B) ​Delivery Trucks.
C) ​E Street Warehouse.
D) ​the thief.

Accepted Answer

The lease agreement likely states that the equipment is being leased to Delivery Trucks, Inc. in good condition and that it is the responsibility of Delivery Trucks to return it in the same condition. The theft of the equipment does not fall under the responsibility of Delivery Trucks, and Commercial Rents Corporation would likely have insurance or other means to cover the loss.

Question 9

Quaff n' Quench Café buys twenty-five crates of oranges from Reynaldo Produce, Inc. The parties agree to ship the oranges "F.O.B. Quaff n' Quench " via Swiftline Trucking Company. The oranges rot in transit. The loss is suffered by
A) ​Quaff n' Quench.
B) ​Sham.
C) ​F.O.B.
D) ​Reynaldo.

Accepted Answer

Since the agreement was to ship the oranges F.O.B. Quaff n' Quench, which means the ownership and responsibility for the goods transfers to Quaff n' Quench once they are loaded onto the carrier, the loss is suffered by Reynaldo Produce, Inc. as they are the ones who contracted the carrier and are responsible for the safe delivery of goods.

Question 10

​Brad leaves an iPod at Computer Sales & Repair (CSR) to have the battery replaced. CSR sells the iPod to Doris, who does not know that it belongs to Brad. Brad can recover from
A) ​no one.
B) ​CSR.
C) ​Doris.
D) ​Apple, Inc., the maker of the iPod.

Accepted Answer

CSR had a duty to either return the iPod to Brad or hold onto it as a bailee until he could pick it up. By selling the iPod to Doris, they breached this duty and can be held liable for conversion. Doris can be considered a bona fide purchaser, meaning she bought the iPod in good faith and without knowledge of Brad's ownership. Therefore, Brad cannot recover from her. Neither Apple, Inc. nor any other party is responsible for the actions of CSR and Doris.

Question 11

Liz buys a car from Midtown Motors, paying with a check that is later dishonored. Liz later offers the car to Nick for cash. As the seller in the transaction with Nick, Liz's title to the car is
A) ​valid.
B) ​voidable.
C) ​void.
D) ​good.

Accepted Answer

The answer of Liz buys a car from Midtown Motors,...

Question 12

Mountainside Coffee Company and Nature's Cuisine, Inc., enter into a contract for a sale of coffee beans. The contract includes the term "F.O.B. Ocean City," which is the location of Nature's Cuisine. This means that the contract is​
A) ​a bill of lading.
B) ​a destination contract.
C) ​a shipment contract.
D) ​a warehouse receipt.

Accepted Answer

The answer of Mountainside Coffee Company and Nature's Cuisine, Inc.,...

Question 13

Megan, an agent for Nabob's, a department store, orders one hundred dresses from Original Designs Inc. Absent a specific agreement between the parties to the contrary, title will pass to Nabob's when
A) ​Megan signs the contract.
B) ​Original Designs signs the contract.
C) ​Original Designs physically delivers the dresses.
D) ​Nabob's pays for the dresses.

Accepted Answer

According to the Uniform Commercial Code (UCC), title passes to the buyer (Nabob's) when the seller (Original Designs) physically delivers the goods to the buyer. Therefore, title will pass to Nabob's when Original Designs physically delivers the dresses, as stated in option C.

Question 14

Ursula buys a Verismooth boat from a Watercraft store, which agrees to keep the boat for Ursula until she picks it up. Before Ursula gets the boat, an unforeseen tornado destroys the store and the boat. The loss of the boat is suffered by
A) ​Ursula.
B) ​Verismooth.
C) ​Watercraft.
D) the government agency that failed to foresee the tornado.

Accepted Answer

The Watercraft store is liable for the loss of the boat because it agreed to keep the boat for Ursula until she picked it up. This means that the Watercraft store had a duty to take care of the boat and to return it to Ursula in the same condition in which it was received. The Watercraft store failed to do this, and as a result, Ursula lost her boat.

Question 15

Varoom Motors, Inc., allows Weber to take a Xtrem-brand motorcycle for a "test run." Weber tries the cycle for a few hours, returns, and buys it. This is
A) ​a bailment.
B) ​a lease.
C) ​a sale on approval.
D) ​a sale or return.

Accepted Answer

This is a sale on approval because Weber tested the motorcycle and then decided to purchase it. In a sale on approval, the buyer takes possession of the goods to try them out and has the option to return them if they are not satisfied.

Question 16

NutriRich, Inc., sells fifty cases of Omega 3 capsules to Good Health stores, but before Good Health takes physical possession, the cases are lost. Under the UCC, the parties' rights and obligations with respect to the loss depend on the concept of
A) ​identification.
B) ​insurable interest.
C) ​risk of loss.
D) ​title.

Accepted Answer

The answer of NutriRich, Inc., sells fifty cases of Omega...

Question 17

Grocers Mart buys one hundred cases of berries from Hilltop Farms. The parties agree that the berries will be transported "F.O.B. Hilltop Farms" via Refrigerated Trucking Company. Refrigerated's truck and the berries are lost in a fire following an accident. The loss of the berries is suffered by
A) ​Grocers.
B) ​Hilltop.
C) ​Refrigerated.
D) ​all of the parties as tenants in common in equal measure.

Accepted Answer

"F.O.B. Hilltop Farms" means "Free On Board" at Hilltop Farms, indicating that the risk of loss passes to Grocers Mart once the berries are delivered to the carrier, Refrigerated Trucking Company. Therefore, Grocers Mart bears the loss.

Question 18

Roofing Company buys asphalt roofing tiles from Shingles, Inc. The parties agree that the tile will be shipped "F.O.B. Shingles's warehouse" to Roofing's location via Shipping Corporation. The tiles are lost in transit. The loss is suffered by
A) ​Shipping.
B) ​Shingles.
C) ​Roofing.
D) ​Roofing's customers by an increase in the prices of goods and services.

Accepted Answer

Since the agreement was that the tiles would be shipped F.O.B. Shingles's warehouse, the risk of loss during transit passes to Roofing Company once the tiles are handed over to the carrier, Shipping Corporation. Therefore, Roofing Company would suffer the loss of the tiles.

Question 19

Fits Like A Glove Shoes, Inc., and Retail Footwear Stores enter into a contract for a sale of shoes. The contract indicates that the price includes transportation costs to a specific destination by including the term
A) ​C.I.F.
B) ​delivery ex-ship.
C) ​F.A.S.
D) ​F.O.B.

Accepted Answer

F.O.B. (Free on Board) is a term indicating that the seller is responsible for the goods until they are loaded onto the shipping vessel, after which the buyer assumes responsibility. In this case, the price includes transportation costs to a specific destination, which means that the seller is responsible for arranging shipping and conveying the goods to the destination named by the buyer.

Question 20

​Pam buys from Midtown Motors a used sport utility vehicle (SUV). The SUV was manufactured by GEM Vehicles, Inc., and previously owned by Ron. Regarding title to the SUV, Pam acquires
A) ​whatever title Midtown had.
B) ​whatever title Gem had.
C) ​whatever title Ron had.
D) ​no title.

Accepted Answer

When Pam buys the SUV from Midtown Motors, she acquires whatever title Midtown had for the vehicle. As a dealer, Midtown would have acquired legal title to the SUV when it was traded in or purchased from Ron. Pam would not acquire title from Gem as they are the manufacturer and likely not the legal owner of the specific vehicle. Pam also would not acquire title from Ron as he is the previous owner and has already transferred ownership to Midtown Motors.

Quiz 21: Title, Risk, and Insurable Interest

Safety Supply Corporation in New York sells a truckload of protective suits, masks, and other safety gear to Toxic Recovery, Inc., in Connecticut, "F.O.B. New York." Safety Supply arranges with US Truckline to transport the goods. The cost of the transport will be paid by

Big Red Drinks, Inc. contracts to buy two tons of cranberries from Super Fruits, Inc. The contract states that Super Fruits is required to ship the cranberries to Big Red Drinks by Speedy Wind Air Freight. The contract is

Roasters Corporation and Outdoor Barbecues, Inc., enter into a contract for a sale of a commercial grill. The contract requires Roasters to deliver the goods to Speedy Delivery Company for transport to Outdoor. Risk of loss passes to Outdoor when

A contract between Fresh Fruit Corporation and Green Grocer, Inc., requires Fresh Fruit to deliver goods to Green Grocer's place of business. This is

Outdoor Outfitters Store contracts to buy fifty tents from Pitched Camp, Inc. Unless the contract states otherwise, it is assumed to be

Commercial Rents Corporation agrees to lease a pressure washer to Delivery Trucks, Inc., which agrees to pick it up at E Street Warehouse. Before Delivery Trucks retrieves the washer, it is stolen. The loss is suffered by

Quaff n' Quench Café buys twenty-five crates of oranges from Reynaldo Produce, Inc. The parties agree to ship the oranges "F.O.B. Quaff n' Quench " via Swiftline Trucking Company. The oranges rot in transit. The loss is suffered by

Brad leaves an iPod at Computer Sales & Repair (CSR) to have the battery replaced. CSR sells the iPod to Doris, who does not know that it belongs to Brad. Brad can recover from

Liz buys a car from Midtown Motors, paying with a check that is later dishonored. Liz later offers the car to Nick for cash. As the seller in the transaction with Nick, Liz's title to the car is

Mountainside Coffee Company and Nature's Cuisine, Inc., enter into a contract for a sale of coffee beans. The contract includes the term "F.O.B. Ocean City," which is the location of Nature's Cuisine. This means that the contract is

Megan, an agent for Nabob's, a department store, orders one hundred dresses from Original Designs Inc. Absent a specific agreement between the parties to the contrary, title will pass to Nabob's when

Ursula buys a Verismooth boat from a Watercraft store, which agrees to keep the boat for Ursula until she picks it up. Before Ursula gets the boat, an unforeseen tornado destroys the store and the boat. The loss of the boat is suffered by

Varoom Motors, Inc., allows Weber to take a Xtrem-brand motorcycle for a "test run." Weber tries the cycle for a few hours, returns, and buys it. This is

NutriRich, Inc., sells fifty cases of Omega 3 capsules to Good Health stores, but before Good Health takes physical possession, the cases are lost. Under the UCC, the parties' rights and obligations with respect to the loss depend on the concept of

Grocers Mart buys one hundred cases of berries from Hilltop Farms. The parties agree that the berries will be transported "F.O.B. Hilltop Farms" via Refrigerated Trucking Company. Refrigerated's truck and the berries are lost in a fire following an accident. The loss of the berries is suffered by

Roofing Company buys asphalt roofing tiles from Shingles, Inc. The parties agree that the tile will be shipped "F.O.B. Shingles's warehouse" to Roofing's location via Shipping Corporation. The tiles are lost in transit. The loss is suffered by

Fits Like A Glove Shoes, Inc., and Retail Footwear Stores enter into a contract for a sale of shoes. The contract indicates that the price includes transportation costs to a specific destination by including the term

Pam buys from Midtown Motors a used sport utility vehicle (SUV) . The SUV was manufactured by GEM Vehicles, Inc., and previously owned by Ron. Regarding title to the SUV, Pam acquires