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Exam 20: Title, Risk, and Insurable Interest

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Question 21

Multiple Choice

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Town Style Stores orders Hidebound-brand leather jackets from Cowhide & Cotton Company (CCC) . CCC mistakenly ships denim jackets, which Town rejects and returns via Valu Transport, Inc. During the return, the jackets are lost. The loss is suffered by

A) Town.
B) Hidebound.
C) Valu.
D) CCC.

E) A) and D)
F) B) and C)

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Question 22

Multiple Choice

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Crest Jewelers buys diamonds from Paramount Gems to resell with the right to return the unsold stones in lieu of payment. This is

A) a bailment.
B) a consignment.
C) a sale on approval.
D) a sale or return.

E) B) and D)
F) C) and D)

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Question 23

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Both the buyer and the seller can have an insurable interest in identical goods at the same time.

Marine Recreation, Inc., allows Nels to take a Marine Recreation boat for a "test run." Nels tries the boat for a few hours, returns, and buys it. This is

A seller has an insurable interest in goods as long as the goods are in existence.

In a sale or return, title and risk of loss remain with the seller until the buyer accepts the goods.

Twyla buys a Voracious-brand bicycle from U-Pik-It Bike Store, which agrees to keep the bike for Twyla until she picks it up. Before Twyla gets the bike, a fire destroys the store and the bike. The loss of the bike is suffered by

When a buyer breaches a contract, the risk of loss immediately shifts to the buyer.

A consignment is treated as a sale or return and governed by Article 2.

Mitchell buys 100 bales of hay from New Grain Fields. The parties agree that the hay will be transported "F.O.B. New Grain Fields" via Farm County Trucking Company. Farm County's truck and the hay are lost in a fire following an accident. The loss is suffered by

Delicioso Tea Company and Savory Stores, Inc., enter into a contract for a sale of organic tea. The contract includes the term "F.O.B. River City," which is Savory's location. This means that the contract is

Quality Computer Company agrees to sell one hundred hard drives to Retail Electronics, Inc. The hard drives, which Retail Electronics expressly requires to have certain amounts of memory, are to be shipped "F.O.B. Retail Electronics distribution center in Memphis, TN." When the drives arrive, Retail Electronics rejects them and informs Quality Computer, claiming that the drives do not conform to Retail Electronics' memory requirement. A few hours later, the drives are destroyed in a fire at Retail Electronics' distribution center. Will Quality Computer succeed in a suit against Retail Electronics for the cost of the goods

If a sale involves unborn animals to be born within twelve months after contracting, identification takes place when the animals are born.

Fungible goods are goods that can be delivered only by transport.

A receipt issued by a warehouser for goods stored in a warehouse is a bill of lading.

A lessee acquires whatever title the lessor has to the goods.

Under a shipment contract, the risk of loss passes to the buyer when the goods are delivered to the carrier.

Open Road Showroom sells new and used motorcycles. Some of the motorcycles are held on consignment, including six consigned by Pedro Cycles, Inc. Like most consignments, Open Road's deal with Pedro Cycles is

Pie Sales Corporation orders ReadyMade-brand pies from Savory Foods Company. Savory identifies the goods. Before they are shipped to Pie Sales, an insurable interest in the goods exists in

When a seller keeps the goods for pickup, if the seller is a merchant, the risk of loss passes to a buyer on tender of delivery.