Question 1

Bernie's stereo has been damaged when his niece spilled some juice on it.He takes it to High Fidelity Co.to be fixed.Five days later,when he returns to the store to pick it up,he finds out that a clerk had sold it to a customer,thinking it was part of their used items inventory.Which of the following is true?

Accepted Answer

If the third party buyer was a good faith purchaser, Bernie will not be able to get his stereo back as he entrusted his stereo to High Fidelity, which gives them the power to transfer rights to a good faith purchaser.

Question 2

The term F.O.B.:

Accepted Answer

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

Question 3

Which of the following statements about sale on approval is correct? 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.

Accepted Answer

In a sale on approval, the buyer can return the goods if not satisfied, the goods are not subject to the buyer's creditors until accepted, and there is no sale until acceptance.

Question 4

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 5

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 6

The Grand Hotel of Jonesville,Kentucky,purchased 200 chairs from Holton Furniture,whose business is in Minnesota.The purchase order included the following term: "F.O.B.Minneapolis,MN." The contract makes no mention of risk of loss or title.The contract can be described as a:

Accepted Answer

The inclusion of the term "F.O.B. Minneapolis, MN" indicates that the contract is a shipment contract. This means that the title and risk of loss transfer to the buyer as soon as the goods are delivered to the carrier in Minneapolis.

Question 7

In the case Valley Forge Insurance Co.v.Great American Insurance Co.,the court ruled that:

Accepted Answer

The court ruled that title had not passed to Kennedy as the full purchase price had not been paid. In this case, Kennedy had only paid a portion of the purchase price and still owed the seller for the car. Therefore, until the full payment was made, the title remained with the seller and the risk of loss also remained with the seller.

Question 8

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 9

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 10

What are the requirements for the doctrine of entrustment to apply?

Accepted Answer

All of the requirements listed (A, B, and C) must be met for the doctrine of entrustment to apply. The goods must be entrusted to a merchant who deals in goods of the kind, the entrustee may transfer the rights of the entruster only if the buyer is a purchaser in ordinary course, and the owner must have delivered the goods to a merchant or permitted him to retain them.

Question 11

Microchip 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 Microchip 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 the computer free of Acme's security interest, giving him a good title.

Question 12

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 13

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

The risk of loss transfers to the buyer when the seller tenders the goods to the carrier, or in this case, the buyer. However, Beth did not take possession of the car before the fire occurred, so the risk of loss still fell on Mike, the seller. Therefore, Beth is not responsible for the loss and Mike cannot hold her accountable for the damaged car.

Question 14

Which of the following statements about the good faith purchaser is correct?

Accepted Answer

All of the above statements are correct. A good faith purchaser is also called a bona fide purchaser, and he/she must have given value for the goods. Additionally, he/she may acquire good title from a seller with voidable title, which means that the seller has the power to transfer ownership, even though there may be a defect in the title.

Question 15

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 answer of Sanco contracted to sell 1,000 cases of...

Question 16

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

Accepted Answer

Jane is the rightful owner of the camcorder, and she has the right to recover it from Sid, regardless of whether Sid knew that the camcorder was stolen.

Question 17

Which of the following statements about identification is correct?

Accepted Answer

Identification allows the buyer to obtain insurance, occurs at conception for unborn animals, and is necessary before the title can pass.

Question 18

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

The answer of Graham,an adult,purchases a car from a minor,and...

Question 19

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

The risk of loss had not yet transferred to Kurtz Industries since the goods were nonconforming. As such, Kurtz will not be liable for the purchase price. The risk of loss would have transferred if the goods had been conforming and the F.O.B. point had been reached. As for the loss incurred during transportation, it will be covered by the party who had an insurable interest in the goods at the time of the loss, which would likely be Marco Manufacturing as the owner/seller of the goods.

Question 20

In the case Harmon v.Dunn,the court addressed the issue of:

Accepted Answer

The case Harmon v. Dunn addressed the passing of risk of loss when there is no breach of contract and the goods are held by a bailee. Specifically, the case dealt with the responsibility of a railroad company to compensate a farmer for crop damage caused by a train that caught fire while passing through the farmer's property. The court held that the railroad company was responsible for compensating the farmer as the bailee, despite the absence of any breach of contract.

Quiz 19: Ownership and Risk