Exam 21: Title, Risk, and Insurable Interest

If the goods are so nonconforming that the buyer has the right to reject them, the risk of loss does not pass to the buyer.

The entrustment rule basically allows innocent buyers to obtain legitimate title to goods purchased from merchants even if the merchants do not have good title.

When a bailee is holding goods that are to be delivered under a contract without being moved, the risk of loss cannot pass to a buyer.

Quest Outdoor Store orders RiverRun-brand kayaks from Sports Merchandise, Inc. Sports Merchandise mistakenly ships kayaks of the wrong size, which Quest rejects and returns via Trans-State Shipping Company. During the return, the kayaks are lost. The loss is suffered by

Fits Like A Glove Shoes, Inc., and Retail Footwear Stores enter into a contract for a sale of shoes. The contract indicates that the price includes transportation costs to a specific destination by including the term

Grocers Mart buys one hundred cases of berries from Hilltop Farms. The parties agree that the berries will be transported "F.O.B. Hilltop Farms" via Refrigerated Trucking Company. Refrigerated's truck and the berries are lost in a fire following an accident. The loss of the berries is suffered by

Consumers Choice store accepts a shipment of EZ2U-brand tablets from Digital Devices, Inc. Consumers Choice later discovers a defect in the tablets, revokes acceptance, and returns the tablets via GoBack, Inc. During the return, the tablets are lost. The loss is suffered by

Candy Corporation orders Double Chocolate Bars from Edibles Distribution Company. Edibles identifies the goods. Before they are shipped to Candy Corporation, an insurable interest in the goods exists in

Liz buys a car from Midtown Motors, paying with a check that is later dishonored. Liz later offers the car to Nick for cash. As the seller in the transaction with Nick, Liz's title to the car is

Varoom Motors, Inc., allows Weber to take a Xtrem-brand motorcycle for a "test run." Weber tries the cycle for a few hours, returns, and buys it. This is

If a lessor is a merchant, the risk of loss passes to a lessee when the lessee takes physical possession of the goods.

Even if goods are not identified to the contract, the title and risk of loss can still pass from the seller to the buyer.

Quaff n' Quench Café buys twenty-five crates of oranges from Reynaldo Produce, Inc. The parties agree to ship the oranges "F.O.B. Quaff n' Quench " via Swiftline Trucking Company. The oranges rot in transit. The loss is suffered by

When a lessee sells leased equipment to a third party, the lessor cannot, under any circumstances, recover the equipment from the buyer.

Identification, risk of loss, and insurable interest are all concepts that are involved in determining the rights and liabilities of parties to a contract.

In the following situations, two parties claim the same goods. Who is most likely to prevail in each circumstance? Explain. (a) Czeslaw steals Denise's Ultra HD TV set and sells it to Ezra, an innocent purchaser, for value. Denise learns that Ezra has the set and demands its return. (b) Gwendolyn takes her all-terrain vehicle (ATV) for repair to Hank's Sales & Repair, a merchant who fixes and sometimes sells used ATVs. By accident, one of Hank's employees sells Gwendolyn's ATV to John, an innocent purchaser-customer, who takes possession. Gwendolyn wants her ATV back from John.

Ursula buys a Verismooth boat from a Watercraft store, which agrees to keep the boat for Ursula until she picks it up. Before Ursula gets the boat, an unforeseen tornado destroys the store and the boat. The loss of the boat is suffered by

When a document of title is required, title passes to a buyer when and where the document is delivered.

With nonconforming goods, the risk of loss does not pass to the buyer until the defects are cured or the buyer accepts the goods in spite of the defects.

Megan, an agent for Nabob's, a department store, orders one hundred dresses from Original Designs Inc. Absent a specific agreement between the parties to the contrary, title will pass to Nabob's when