Business Law, 8e (Cheeseman)
Chapter 19 Title to Goods and Risk of Loss
1) Article 2 of the Uniform Commercial Code establishes precise rules for determining the
passage of title in sales contracts.
2) Common law places the risk of loss of goods on the party to whom the title of goods were to
be passed.
3) Article 2 of the UCC adopts rules for risk of loss that are closely tied to title.
4) In a lease transaction, the title to the leased goods passes to the lessee.
5) Goods that are part of a larger mass of goods are identified when the specific merchandise is
designated.
6) Goods that are already in existence but which are to be sold at a future date are known as
future goods.
7) The UCC allows the title of goods to be passed without its identification.
8) An undeveloped real estate property is an example of future goods.
9) A shipment contract requires the seller to deliver goods to a destination specified in the sales
contract.
10) In a destination contract, title passes to the buyer when the seller tenders delivery of the
goods at the specified delivery address.
11) A shipment contract requires the seller to ship the goods to the buyer via a common carrier.
12) If a document of title is required, title passes when and where the seller delivers the goods to
the buyer.
13) If no document of title is required, title only passes at the time and place of delivery.
14) A document of title requires the seller to deliver the goods at the buyer’s destination.
15) In an F.O.B. point of shipment, the buyer bears the risk of loss while the goods are in transit.
16) In an F.A.S. port of shipment, the buyer bears the shipping costs and the risk of loss during
transport.
17) In an F.O.B. place of destination, the buyer has to bear the expense and risk of loss until the
goods are tendered at the place of destination.
18) The term “Ex-ship” requires the seller to bear the expense and risk of loss until the goods are
unloaded from the ship at its port of destination.
19) In a no-arrival, no-sale contract, the seller is not required to deliver replacement goods to the
buyer.
20) C.&F. is a pricing term that means that the price includes the cost of the goods and the costs
of insurance and freight.
21) In a destination contract, the seller is required to replace any goods lost in transit.
22) The delivery term of “no-arrival, no-sale” can be added to a shipment contract.
23) The bailee acquires the title to the goods when the goods are in his or her possession.
24) Acceptance of nonconforming goods is a breach of contract by the buyer.
25) In a sale on approval, there is no sale unless and until the buyer accepts the goods.
26) In a sale or return contract, the buyer has the option of returning all the goods to the seller.
27) In a sale or return contract, the risk of loss and title is with the seller even when the buyer
takes possession of the goods.
28) In a sale on approval, the risk of loss and title to the goods remain with seller till the buyer’s
acceptance.
29) A consignment is treated as a sale or return contract under the UCC.
30) In the case of an ordinary lease, if the lessor is a merchant, the risk of loss remains with the
lessor even after the lessee receives the goods.
31) In a case in which a buyer purchases goods from a thief who has stolen them, the purchaser
does not acquire title to the goods.
32) A person with voidable title to goods can transfer the goods title to a good faith purchaser for
value.
33) The real owner cannot reclaim goods from a good faith purchaser.
34) An entrusted merchant has the power to transfer all rights in the goods to a buyer in the
ordinary course of business.
35) A seller has voidable title interest to goods if he or she obtained the goods through fraud.
36) In which of the following does the title to the goods pass from the seller to the buyer?
A) option contract
B) rental agreement
C) lease
D) sale of goods
37) What kinds of goods are termed as future goods?
A) goods that exist but are to be sold at a future date
B) goods that are not yet in existence
C) goods that can be sold partly in the present and partly at a later date
D) goods that exist without a title
38) Which of the following contracts is an example of future goods?
A) an option contract for a real estate property
B) a contract to buy a car from a dealer
C) a preordered video game
D) a contract to sell a newborn animal
39) In a finance lease contract, the title to goods is passed from ________.
A) lessor to lessee
B) supplier to lessor
C) supplier to lessee
D) lessee to lessor
40) The term ________ refers to the legal, tangible evidence of ownership of goods.
A) tenure
B) title
C) possession
D) pledge
41) In a shipment contract, when is the title to the goods considered to have passed to the buyer?
A) when the seller makes the offer to the buyer
B) when the seller hands over the goods to the common carrier
C) when the seller tenders delivery of the goods at the specified destination
D) when the goods are at the time and place of the shipment
42) In a destination contract, when is the title to the goods considered to have passed to the
buyer?
A) when the buyer specifies a specific destination in the sales contract
B) when the seller tenders delivery of the goods at the specified destination
C) when the seller makes the shipping arrangements
D) when the seller hands over the goods to the common carrier
43) A(n) ________ is an actual piece of paper, such as a warehouse receipt or bill of lading,
which is required in some transactions of pickup and delivery of sold goods.
A) destination contract
B) letter of credit
C) document of title
D) acceptance draft
44) Which of the following is true for the passage of title in a contract requiring a document of
title?
A) The title passes when the shipping arrangements are made.
B) The title passes at the time and place of contracting.
C) The title passes when the destination of delivery is first mentioned in the contract.
D) The title passes when and where the seller delivers the document to the buyer.
45) Which of the following is an example of delivery of goods without moving them?
A) a contract requiring a document of title
B) a shipment contract
C) a destination contract
D) a contract with the term ex-ship
46) Thomas signed a sales contract with Bricklay’s, a firm that supplies bricks for private
individuals. The contract specified the type and amount of bricks needed, and that Thomas would
pick up the bricks from the Bricklay’s warehouse 15 days later. Thomas received a document of
title, but failed to pick up the goods on the stipulated date. In this scenario, at what point of time
is the title to goods passed over to Thomas?
A) when the sales contract was signed by both Thomas and Bricklay’s
B) when Thomas received the document of title
C) when Thomas picks up the bricks from the Bricklay’s warehouse
D) when the stipulated date of pick-up of the bricks expires
47) Nebula Crystals, a firm in New York that manufactures crystal figurines, was contracted by
Ruth from Florida to deliver a thousand such crystal figurines. The contract required the firm to
deliver and tender the goods alongside the vessel SS Dew Express at the New York harbor.
Which of the following shipment term expresses such conditions?
A) no-arrival, no-sale
B) Ex-ship
C) F.A.S. port of shipment
D) C.I.F.
48) ________ is a shipping term in a contract that requires the seller to bear the expense and risk
of loss until the goods are unloaded from the ship at its port of destination.
A) Ex-ship
B) No-sale, no arrival
C) Free on board point of shipment
D) C.I.F.
49) Which of the following is true for the shipping term free on board point of shipment?
A) It requires the seller to bear the expense and risk of loss until the goods are tendered to the
buyer at the place of destination.
B) It refers to a pricing term that includes the cost of the goods, and the costs of insurance, and
freight.
C) It requires the seller to bear the expense and risk of loss of the goods until delivery has been
tendered.
D) The buyer bears the shipping expense and risk of loss while the goods are in transit.
50) Which of the following is true of a contract with the no-arrival, no-sale term?
A) The buyer bears shipping costs and the risk of loss during transport.
B) The seller does not have to deliver replacement goods to the buyer in case of damages.
C) The seller does not have to bear the expense and risk of loss of the goods during
transportation.
D) The buyer has to arrange for the shipment to be handed over to a carrier.
51) How are the shipping terms C.I.F. and F.O.B. point of shipment similar to each other?
A) Both require the seller to bear the expense and risk of loss until the goods are tendered to the
buyer at the place of destination.
B) Both require the seller to bear the expenses and risk of loss when handing the shipment to a
carrier.
C) Both require the seller to deliver and tender the goods alongside the named vessel provided by
the buyer.
D) Both require the seller to bear the expense and risk of loss until the goods are unloaded from
the ship at its port of destination.
52) Which of the following parties to a shipping contract bears the risk of loss of goods during
transport?
A) the seller
B) the carrier
C) the buyer
D) the seller and the carrier
53) The ________ bears the risk of loss during transportation in a destination contract.
A) buyer
B) seller
C) carrier
D) shipper
54) Which of the following would contain the term “no-arrival, no-sale” in their contract?
A) shipment contract
B) destination contract
C) a contract to sell real estate
D) consignment contract
55) Larry, a merchant seller, had contracted with Simon, to buy welding equipments. The
contract stipulated that Larry would pick up the equipments from Simon’s warehouse on the 14th
day from the date of the contract. But Larry could not make the pick up on that date and before
he could do so on the 15th day, the warehouse was burned down by miscreants. In this situation,
who bears the risk of loss of the goods that were to be received by Larry?
A) The risk of loss lies with Larry for delaying the pick up.
B) The risk of loss lies with Simon for not protecting the goods.
C) The risk of loss is equally shared by Larry and Simon.
D) The risk of loss is shifted to the persons responsible for the fire.
56) Which of the following is true of a destination contract containing a “no-arrival, no-sale”
clause?
A) The seller is required to bear the expense and risk during transportation.
B) The seller is required to replace any goods lost in transit.
C) The buyer does not have to pay for destroyed goods.
D) The risk of loss passes once the shipping has been arranged.
57) A holder of goods who is not a seller or a buyer is referred to as a(n) ________.
A) consignor
B) broker
C) bailee
D) consignee
58) According to the UCC, which of the following parties holds the risk of loss for the damage
caused to the car?
A) The risk is to be borne by Kenneth.
B) Mr. Henderson has to take up the loss.
C) Quartent Cars must take the risk of loss.
D) The risk is to be borne jointly by Mr. Henderson and Quartent Cars.
59) What role does Mr. Henderson fulfill in the contract?
A) the seller
B) the consignee
C) the bailee
D) the supplier
60) If Mr. Henderson had refused the document of title provided by Kenneth, who would have
borne the risk of loss to the car?
A) The risk is to be borne jointly by Quartent Cars and Kenneth.
B) The risk is to be borne by Kenneth.
C) The risk is to be borne by Quartent Cars.
D) The risk is to be borne by Mr. Henderson.
61) In which of the following cases is a buyer in breach of a sales contract?
A) if the buyer refuses to accept nonconforming goods
B) if the buyer accepts noncorforming goods
C) if the buyer refuses to accept conforming goods
D) if the buyer asks replacements for defective goods
62) In the event that the goods are destroyed in transit, which of the following parties would bear
the risk of loss as per the sales contract?
A) Jason would bear the risk of loss irrespective of the fate of the goods.
B) FlyByNight would bear the risk of loss as they had the responsibility to deliver the goods.
C) RyBy Toys would bear the risk as they shipped nonconforming goods.
D) The risk of loss would be shared between RyBy Toys and Jason.
63) What was the nature of the contract between Jason and RyBy Toys?
A) lease contract
B) destination contract
C) option contract
D) shipment contract
64) Which of the following represents an instance of breach of contract?
A) Jason refusing the delivery of toys
B) Jason accepting the delivery of toys
C) RyBy shipping the toys without remote-controllers
D) FlyByNight delivering the toys without remote-controllers
65) A(n) ________ involves the seller entrusting possession of goods to a buyer on a trial basis.
A) destination contract
B) option contract
C) unequivocal transaction
D) conditional sale
66) The term ________ refers to a type of sale in which there is no actual sale unless and until
the buyer accepts the goods.
A) consignment
B) sale or return contract
C) sale on approval
D) option contract
67) Which of the following is a difference between a sale or return contract and a sale on
approval contract?
A) For sale or return, the risk of loss is borne by the buyer; while in a sale on approval, it is
borne by the seller.
B) For sale or return, the goods are sold to the buyer; while in a sale on approval, the buyer is
allowed a time period to test the goods.
C) For sale or return, failure to notify rejection is not acceptance; while in a sale on approval,
failure to notify rejection is acceptance.
D) For sale or return, goods sold can be returned; while in a sale on approval, goods sold can
never be returned.
68) ________ refers to an arrangement in which a seller delivers goods to a buyer to sell on his
or her behalf.
A) Consignment
B) Void entitlement
C) Entrustment
D) Leasing
69) What is the role of a financing statement in a consignment if the consignor files it?
A) It protects the consignor from bearing a risk of loss for the goods.
B) It protects the consignor from possible payment revocation by the consignee.
C) It gives the buyer’s creditors claim over the goods.
D) It gives the seller’s creditors claim over the goods.
70) A consignment deal would be an example of a(n) ________.
A) unconditional contract
B) sale or return contract
C) sale or approval contract
D) unequivocal contract
71) A title for goods obtained by a seller through fraud, impersonation, or a dishonored check is
referred to as a ________.
A) unenforceable title
B) voidable title
C) conditional title
D) unequivocal title
72) Robert steals a truckload of plasma televisions that belong to Karson Electronics Store in an
armed robbery. He then resells it to Stu-Mart, who is unaware of the stolen nature of the goods.
Karson Electronics Store then traces the plasma televisions to Stu-Mart. Robert is also arrested
for the theft. Which of the following is true for Karson Electronics’ legal course for reclaiming
the televisions or damages?
A) Stu-Mart is a good-faith purchaser here and as such does not have to hand over the televisions
to Karson.
B) Stu-mart must hand over the televisions to Karson as their title to the goods is void.
C) Karson’s only recourse is against Robert to claim damages.
D) Karson’s cannot reclaim the goods, but can sue Stu-Mart for negligence and damages.
73) Who can legally claim ownership over the watch in court?
A) Jonathan
B) Steve
C) Knell Watches
D) Kevin
74) According to the entrustment rule, what legal recourse does Steve have to reclaim the watch
or collect damages?
A) Steve can sue Kevin for damages.
B) Steve can sue Knell Watches for damages.
C) Steve can reclaim the watch from Jonathan.
D) Steve cannot reclaim the watch but can sue Jonathan for damages.
75) What kind of title did Jonathan hold over the watch when he fraudulently bought the watch?
A) an unequivocal title
B) a conditional title
C) a voidable title
D) a void title
76) Which of the following is a good faith purchaser?
A) a person who buys goods from a person with a voidable title
B) a person who buys stolen goods without being aware of it
C) a buyer who agrees to hold goods for a person till the delivery of the goods is made
D) a buyer to whom goods are delivered by a seller to sell on the seller’s behalf
77) What is the method of identification of goods specified under UCC guidelines?
78) What is the passage of title to goods?
79) When is a buyer in breach of a sales contract?
80) How does the UCC treat goods that were fraudulently obtained?
81) Give an account of the rules established by Revised Article 2 and Revised Article 2A of the
UCC for electronic sales contracts.