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

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Question 1

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Harold's department store sells Carl a stove. When does the risk of loss transfer to Carl in a simple delivery contract?

A) When Carl pays for the stove.
B) When Carl uses his credit card.
C) When Carl takes possession of the stove.
D) One day after goods are identified to the contract
E) When Harold's gives Carl a receipt of payment.

F) B) and D)
G) A) and C)

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Question 2

Multiple Choice

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With goods in bailment, when is an insurable interest created?

A) Only when either party has title to the goods
B) When either party has title or a risk of loss, but not under any other circumstances
C) When either party has title, risk of loss, or other economic interest attached to the goods
D) Two days after either party has title to the goods
E) Never. There is no such thing as an insurable interest in a goods-in-bailment contract

F) All of the above
G) A) and C)

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Question 3

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In cases where a shipment contract is vague or ambiguous on the issue, an origin contract will be presumed.

Which of the following is true regarding the status of a common carrier in relation to the seller?

[Wrecked Toaster] Ivan goes to upscale housewares store Smith-Napa to buy himself a nice new toaster, because his old one broke. The store does not have the model he wants in stock, but they can have it shipped from the warehouse directly to Ivan. It is agreed that the toaster will be placed with a common carrier for delivery. The contract between Ivan and Smith-Napa is ambiguous regarding whether the seller had the duty to deliver the goods only to the common carrier's hands or whether the seller had the duty to deliver the goods to Ivan's home. Unfortunately, on the way to Ivan's home, through no fault of the delivery driver, the delivery truck was involved in a collision, and the toaster was damaged beyond repair. -Ivan and Smith-Napa entered into which of the following contracts?

Which of the following is true regarding types of common-carrier delivery contracts?

Discuss the most common ways sales contracts are breached. What remedies are available to a buyer when a seller fails to provide the goods described in the contract? What are the UCC provisions regarding the consequences of a revocation of the contract?

[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. -With regard to the damaged suits, who bears the risk of loss?

________ occurs when purchased goods are in some kind of storage under the control of a third party, such as a warehouseman.

In the text's case of National Compressor Corp. v. Carrow and McGee, the court considered whether a buyer, who purchased a compressor that was subsequently destroyed in a fire on a third party's premises before the buyer took possession, had an insurable interest since title had not yet passed and thus could bring suit against the third party. What was the court's ruling?

[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. -With regard to the damage to the formal ball gowns, who bears the risk of loss?

[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. -If the contract between the parties had been an origin contract, who would bear the risk of loss for the second delivery?

The UCC lays out essentially four broad factual scenarios for the sale of goods, which of the following is not one of them?

The term tender of delivery refers to the moment the goods are available for the buyer to take.

[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. -Is ScubaCo correct that The Dive Shop must accept the ten Mega500 tanks?

What does "FOB" mean, when used as a shipping term?

Discuss when title and risk of loss pass to the buyer in a goods-in-bailment contract when (a) the seller has a negotiable document of title (b) the seller has a nonnegotiable document of title and (c) the seller has a contract or other instrument showing ownership that is not a negotiable or nonnegotiable document of title.

Which of the following is true if an owner entrusts the possession of goods to a merchant who deals in goods of that kind?

What was the court's ruling in City of Richmond v. Petroleum Marketers, Inc., the case in the text in which the court considered where the sale of petroleum occurred-where the contracts for the purchase of the oil were executed or where the goods were, in fact, delivered?

[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. -Assuming Adler must bear the risk of loss of his sculpture, if he sues the ship to recover damages, would the lawsuit likely be dismissed?