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Exam 22: Title, Risk of Loss, and Insurable Interest

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Question 41

Multiple Choice

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In a(n) ________, title passes to the buyer at the time and place of shipment.

A) transfer contract
B) consumer purchase contract
C) delivery contract
D) origin contract
E) purchase for resale contract

F) B) and D)
G) D) and E)

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Question 42

True/False

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If an owner entrusts the possession of goods to a merchant who deals in goods of that kind, the merchant has no authority to transfer any rights in the goods to a buyer in the ordinary course of business.

A) True
B) False

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Question 43

Multiple Choice

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Which statement is correct regarding CIF agreements?

Renée goes to Great Deal and buys a plasma TV. She pays for it, and the store agrees to deliver it. Unfortunately, on the way to her house, the vehicle overheats and burns, destroying the truck and the TV inside. Renée asks for a refund or another TV. The store owner refuses on the basis that risk of loss had passed to Renée. What would be the result of a lawsuit between Renée and Great Deal under the UCC?

Which statement about the risk of loss at the time the goods were damaged is correct?

Fredrick shipped his goods to his buyer Asland via the common carrier UPS. This is known as a(n) ________.

Which of the following is true when the designation FAS is used?

[Scuba Supplies] The Dive Shop ordered ten Mega2000 Diving Tanks, ten SuperSlick wetsuits, and ten pairs of Awesome swim fins from ScubaCo under a destination contract. The tanks were scheduled to be delivered first, and the remaining items would arrive the following day. Upon the first delivery, The Dive Shop noticed that ScubaCo sent ten Mega500 Diving Tanks, an inferior model. The Dive Shop's owner called ScubaCo and was told that ScubaCo had sold out of the Mega2000 model, but the Mega500 was the same price, was "pretty much the same", and The Dive Shop had to pay for the order or it would be in breach of contract. The following day, ScubaCo checked the remainder of the order which consisted of the wetsuits and fins and verified it to be correct. It delivered the remainder of the order, however, The Dive Shop refused delivery. On the way to its next delivery, the carrier truck ran off the side of the road and the goods were lost. -Toula is buying a delivery vehicle for her business and it will be available for her to pick up on Tuesday. On Monday, the day before her delivery truck is ready, Toula meets with her banker to complete the application for a small business loan. Can Toula use the delivery truck as collateral for the loan?

In a destination contract, the ________ bears the risk of loss while the goods are in transit.

[Singapore Sculptures] Mavis purchased a sculpture for her home in Hawaii from Juno, who owns an art gallery in Singapore. Mavis tells Juno she is concerned about shipping because there is no agreement between Singapore and Indonesia regarding piracy and she wants to ensure that Juno will be responsible for any damage to the sculpture until Mavis can pick it up on the dock when the ship arrives in Hawaii. Juno tells Mavis there are no longer any piracy concerns in the area and that he will be responsible for the sculpture until it is removed from the ship in Hawaii. Another customer, Adler, also purchases a sculpture. Juno delivers both sculptures to the dock. Mavis' sculpture is accompanied by their contract and Adler's sculpture is accompanied by a document containing the words "Deliver to the Order of Juno", and is endorsed by Juno. The ship travels through a storm, capsizes, and the sculptures are destroyed. -Who has the risk of loss for the sculpture purchased by Adler?

Which of the following is true regarding transportation costs when the designation FOB is used?

Most buyer breaches occur when a buyer changes his or her mind about the price of the goods.

A(n) ________ contract requires that the seller make proper shipping arrangements and deliver goods to the buyer via a common carrier, but not guarantee the safety of goods to their destination.

Assume a buyer and seller execute a contract in which the seller is going to deliver a couch later in the day to the buyer. With a simple delivery contract in which the seller is not a merchant, which party sustains a loss if, through no fault of either party, the couch is destroyed through fire prior to delivery?

Frieda purchased a large desk at a garage sale. She asked the seller if she could leave the desk at the side of the road so she could go home and get her pickup truck. When she returned, she found that the desk had been struck by a car and demolished. Can Frieda get her money back?

[Singapore Sculptures] Mavis purchased a sculpture for her home in Hawaii from Juno, who owns an art gallery in Singapore. Mavis tells Juno she is concerned about shipping because there is no agreement between Singapore and Indonesia regarding piracy and she wants to ensure that Juno will be responsible for any damage to the sculpture until Mavis can pick it up on the dock when the ship arrives in Hawaii. Juno tells Mavis there are no longer any piracy concerns in the area and that he will be responsible for the sculpture until it is removed from the ship in Hawaii. Another customer, Adler, also purchases a sculpture. Juno delivers both sculptures to the dock. Mavis' sculpture is accompanied by their contract and Adler's sculpture is accompanied by a document containing the words "Deliver to the Order of Juno", and is endorsed by Juno. The ship travels through a storm, capsizes, and the sculptures are destroyed. -Are Mavis' concerns about a lack of agreement between Singapore and Indonesia accurate?

[Kool Klothes] Cleo recently opened an exclusive designer clothing store. She contracts with Kool Klothes to sell their high-end designer line. The contract states Kool will ship clothes each week, and Cleo has a month to pay for the clothes or she can return any merchandise she does not sell. The arrangement works well for several months, but then Kool Klothes notices several suits Cleo returns via a courier service are damaged. Also, during a weekly delivery of the Kool Klothes truck, the driver gets into a car accident, and several formal ball gowns are damaged. -What type of contract does Cleo have with Kool Klothes?

Assume a buyer and seller execute a contract in which the seller is going to deliver a couch later in the day to the buyer. With a simple delivery contract in which the seller is a merchant, which party sustains a loss if, through no fault of either party, the couch is destroyed through fire prior to delivery?

A contract is a sale-or-return contract if the seller allows the buyer to take possession of the goods before deciding whether to complete the contract by making the purchase.

[Singapore Sculptures] Mavis purchased a sculpture for her home in Hawaii from Juno, who owns an art gallery in Singapore. Mavis tells Juno she is concerned about shipping because there is no agreement between Singapore and Indonesia regarding piracy and she wants to ensure that Juno will be responsible for any damage to the sculpture until Mavis can pick it up on the dock when the ship arrives in Hawaii. Juno tells Mavis there are no longer any piracy concerns in the area and that he will be responsible for the sculpture until it is removed from the ship in Hawaii. Another customer, Adler, also purchases a sculpture. Juno delivers both sculptures to the dock. Mavis' sculpture is accompanied by their contract and Adler's sculpture is accompanied by a document containing the words "Deliver to the Order of Juno", and is endorsed by Juno. The ship travels through a storm, capsizes, and the sculptures are destroyed. -What is the term used for the goods while they are in storage on board the ship?