Chapter 23. Transfer of Title and Risk of Loss
1. Title to existing, identified goods can pass whenever the parties agree it will pass.
a. True
b. False
2. Under a shipment contract, the seller passes title to the buyer when the goods arrive.
a. True
b. False
3. Claraine obtained a necklace by criminal fraud punishable as larceny. If she sells the necklace to Sherry, who is a
good faith purchaser for value, Sherry obtains valid title.
a. True
b. False
4. The distinction between a void and voidable title is not important in determining the rights of good faith purchasers of
goods.
a. True
b. False
5. The buyer and seller of goods may not simultaneously hold insurable interests in the goods.
a. True
b. False
6. Mario, a minor, sells his bicycle to Jimmy for $150. A week later, Kelly, who does not know Mario, buys the bike
from Jimmy for $200. Mario, upon learning about Jimmy‘s sale of the bike, disaffirms his contract with Jimmy. Kelly
does not have valid title and must return the bike to Mario.
a. True
b. False
7. Future goods can be the subject of a present sale.
a. True
b. False
8. The UCC “risk of loss” rules depend on transfer of title.
a. True
b. False
9. Jerry bought a stereo from SX Company “on approval.” The risk of loss passed to Jerry when he took possession of
the stereo.
a. True
b. False
10. If goods are sold and delivered to buyer with an option to return them, the risk is on the buyer until they are returned.
a. True
b. False
11. Given a transaction involving two innocent persons, the true owner and the good faith purchaser for value, the law
will not disturb the legal title but will rule in favor of the one who has it.
a. True
b. False
12. The Code has expanded the rights of good faith purchasers with respect to sales by minors.
a. True
b. False
13. If the owner of goods entrusts them to a merchant, the merchant can transfer good title to the goods to a buyer in
the ordinary course of business even if the original owner does not want to sell the goods.
a. True
b. False
14. Carl ordered 1,000 sq. ft. of green carpet from RS Company. In error, RS Company shipped 1,000 sq. ft. of yellow
carpet. In this case, the risk of loss remains with the seller until Carl accepts the yellow carpet or RS Company
remedies the defect.
a. True
b. False
15. The bulk sales portion of the Code applies only to transfers in the ordinary course of business.
a. True
b. False
16. A major purpose of the bulk sales provisions of the Code is to protect the seller’s creditors.
a. True
b. False
17. The UCC and the common law are essentially the same in regard to their treatment of risk of loss or damage to
identified goods.
a. True
b. False
18. When delivery is to be made by physically moving the goods, title passes at the time and place at which the seller
completes performance with reference to delivery of the goods.
a. True
b. False
19. Security interests in goods are governed by the common law rather than the UCC.
a. True
b. False
20. A good faith purchaser acts honestly, gives value, and takes the goods without notice or knowledge of any defect in
the title.
a. True
b. False
21. Identification may be made by either the seller or the buyer.
a. True
b. False
22. A basic tenet of the law, as codified in the UCC, is that a purchaser of goods obtains such title as his transferor had
or had the power to transfer.
a. True
b. False
23. The seller has an insurable interest in goods even though he no longer owns them if he continues to retain a security
interest in them.
a. True
b. False
24. Dividing the risk and the shift of allocation of risk are options by agreement of both parties.
a. True
b. False
25. Kollenberg’s sold a substantial part of its equipment to Castillo Brothers. Nothing else was involved in the sale. The
sale of the equipment is a bulk transfer under the Code.
a. True
b. False
26. The UCC uses a transactional approach to risk of loss questions.
a. True
b. False
27. Steve sold his canoe to his neighbor Rhonda for $300. Steve then tells Rhonda, “I’ll put the canoe in my driveway and
you can pick it up any time tomorrow.” Steve retains risk of loss until Rhonda picks up the canoe.
a. True
b. False
28. If a contract is not clearly a destination or a shipment contract, the law assumes that it is a shipment contract.
a. True
b. False
29. Ralph buys a bicycle for his son. The transaction is considered a sale of goods under the UCC.
a. True
b. False
30. Except in a finance lease, the risk of loss passes to the lessee in a lease of personal property.
a. True
b. False
31. In a lease of personal property, title does not pass.
a. True
b. False
32. If goods are fungible, identification of a share of undivided goods occurs when the parties enter into the contract.
a. True
b. False
33. Z, a seller in Miami, enters into a contract which states that goods are to be delivered to X, a buyer, in New York.
Title is to remain with Z until delivery to X. This is:
a. a shipment contract.
b. an FOB Miami contract.
c. a destination contract.
d. a contract voidable by the buyer until delivery.
34. Community Hospital in Atlanta entered into a contract to buy delicate lab equipment from D & D Company in
Denver. The contract states shipping terms as FOB, Denver. While in transit the equipment was damaged beyond
repair by the carrier, Fly–by-Nite Air Lines. The carrier is in weak financial condition and refused to pay for the
equipment. In this case:
a. D & D Company must replace the equipment at no cost to the hospital.
b. Community Hospital has risk of loss.
c. D & D Company and Community Hospital will share the loss equally.
d. risk of loss will depend on which party chose Fly–by–Nite as the carrier.
35. Which of the following is/are required for a valid tender under the Code? The seller must:
a. put and hold conforming goods at the buyer’s disposition.
b. give notice to the buyer that the goods are available.
c. give notice at a reasonable time and keep the goods available for a reasonable period of time.
d. All of these are required.
36. Which of the following is true regarding identification of the goods under Article 2?
a. Only the buyer can identify the goods.
b. Identification of existing goods gives the buyer a special property interest.
c. Fungible goods are identified when the seller separates the contracted units from the whole.
d. All of these are correct.
37. A sale exists when the buyer takes:
a. title to the goods.
b. the risk of loss on the goods.
c. an insurable interest in the goods.
d. a special property interest in the goods.
38. Mark, a college student, agreed to sell his horse to Henry for $1,000. The contract required Mark to take the horse
on that same day to Idlewild Stables where Henry was going to board the horse. Henry paid Mark the money, patted
the horse and said, “I’m glad you‘re mine, you beauty,” and drove off. Mark then led the horse into the trailer and set
off for the two-hour drive to Idlewild. Has there been a sale?
a. No, not until delivery to Idlewild.
b. No, not until Henry sees the horse again.
c. Yes, since Henry already paid for it.
d. Yes, since the contract was made earlier in the day.
39. Howard stole a computer and then sold it to his friend Ivan for $100. Ivan has:
a. good title to the computerr, because he paid for it.
b. a voidable title to the computer.
c. a void title to the computer.
d. good title to the word computer if he is a good faith purchaser for value.
40. A seller has the right to transfer title:
a. in any case in which the seller has possession of the goods.
b. in all cases in which the seller has the power to transfer title.
c. even if the seller does not have either possession of or title to the goods, if he has authority to sell the goods
for the rightful owner.
d. only if the seller is the rightful owner of the goods.
41. Brenda agrees to lease a new car from Hyland Motors. Which of the following statements is true?
a. Brenda has no insurable interest in the car.
b. Brenda receives title at the time of her contract with Hyland Motors.
c. Hyland Motors retains an insurable interest in the car unless and until Brenda exercises an option to buy the
car.
d. None of the above.