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B-1
ALTERNATE CASE PROBLEM ANSWERS
CHAPTER 21
TITLE, RISK, AND INSURABLE INTEREST
21-1A. Risk of loss
The court relied on UCC 2–501(1), which states, “Where tender or delivery of goods so fails to
conform to the contract as to give a right of rejection, the risk of their loss remains on the seller
21-2A. Entrustment rule
The trial court held that Bobby Locke could not recover from the Arabi Grain & Elevator Co.,
concluding that Worthco Farm Center, Inc., had entrusted the corn to Hobby, as the manager,
and that thus, Hobby had the power to transfer all of Worthco’s rights to the corn to elevator
company. The appellate court agreed with the trial court. Under the UCC, entrusting property
can result in the owner’s loss of title to the property if the entrustee is a merchant who deals in
21-3A. Entrustment rule
The court held that First Team “occup[ied] the status of a good faith buyer in the ordinary course
of business.” Thus, it was not required to return the tractor. The court pointed out that the
“primary rationale behind the entrusting provisions is aimed at protecting the buyer who
B-2 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 21
purchases the entrusted goods in the ordinary course of business. Thus, the owner takes the
risk by placing or leaving his chattel with a merchant of his own choosing who could convert or
otherwise misdeal it.” But “the statute requires, from an objective viewpoint, that the entruster
21-4A. Sales by nonowners
No. A seller has voidable title to any goods obtained by fraud, paid for by a check that is later
dishonored, purchased on credit when the seller is insolvent, or purchased from a minor. A
seller with voidable title can pass good title to a good faith purchaser, however. Since Mangum
21-5A. Entrustment rule
The court noted that UCC 2–403(2) provides that “any entrusting of possession of goods to a
merchant who deals in goods of that kind gives him power to transfer all rights of the entruster
to a buyer in the ordinary course of business.” A buyer in the ordinary course of business is “a
APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 21 B-3
21-6A. Risk of loss
Pocasset has the risk of loss. Section 2–319 of the UCC, in defining the F.O.B. term, and case
21-7A. Title
The court issued a judgment in favor of Petroleum Sales, finding its relationship to the
contamination too remote to impose liability. Parks Hiway appealed to the Alaska Supreme
21-8A. Risk of loss
The court ruled in favor of Olmstead. The court determined that the risk of loss passed to
McKenzie by “contrary agreement” of the parties under UCC 2–509(4), finding that McKenzie
instructed Olmstead to park the trailer outside the fenced area and secure the trailer with a
B-4 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 21
21-9A. Shipment and destination contracts
The Connecticut state court in which the action was brought held that Cardwell violated the
statute. The court ordered him to stop selling tickets in Connecticut for more than $3 over the
fixed price of each ticket, ordered restitution to Lupovitch in the amount of $185, and assessed a
21-10A. Shipment and destination contracts
When delivery is to occur without moving goods, “if the goods are at the time of contracting
already identified and no documents are to be delivered, title passes at the time and place of
contracting,” under UCC 2–401(3)(b). In this case, the court held that a sale took place “in May
