Question 1

What is a "sale or return" contract?

Accepted Answer

In a sale or return contract, the goods

Question 2

Beck Inc., a food processing company in Chicago, placed a phone order with Gary, a vineyard owner in California, for a certain quantity of perishable products. The shipping term was "CIF" with payment to be made on delivery. Gary contracted with a carrier to deliver the goods to Beck Inc. However, he neglected to ship the goods under refrigeration. The goods were loaded on a non-refrigerated boxcar and as a result the product was spoiled when it reached Chicago. Under these circumstances, _____.

Accepted Answer

A)  neither Gary nor Beck Inc. bears the risk of loss as the goods are insured 
B)  Beck Inc. bears the risk of loss because, under a CIF shipment, the buyer has to bear all risks 
C)  Beck Inc. bears the risk of loss as the contract did not mention that Gary will guarantee their delivery 
D)  Gary bears the risk of loss because, under a CIF shipment, the seller bears the expense and the risk of loading the goods 
A)  neither Gary nor Beck Inc. bears the risk of loss as the goods are insured 
B)  Beck Inc. bears the risk of loss because, under a CIF shipment, the buyer has to bear all risks 
C)  Beck Inc. bears the risk of loss as the contract did not mention that Gary will guarantee their delivery 
D)  Gary bears the risk of loss because, under a CIF shipment, the seller bears the expense and the risk of loading the goods

Question 3

Which of the following statements is true of voidable title?

Accepted Answer

A)  Sellers may obtain voidable title by paying for goods sold on a "cash sale" basis. 
B)  Sellers may obtain voidable title by paying for the goods with a good check. 
C)  Sellers may obtain voidable title by impersonating another person when acquiring the goods from their rightful owner. 
D)  Sellers may obtain voidable title by obtaining the goods without using fraudulent means. 
A)  Sellers may obtain voidable title by paying for goods sold on a "cash sale" basis. 
B)  Sellers may obtain voidable title by paying for the goods with a good check. 
C)  Sellers may obtain voidable title by impersonating another person when acquiring the goods from their rightful owner. 
D)  Sellers may obtain voidable title by obtaining the goods without using fraudulent means.

Question 4

Which of the following is the basic purpose for making exceptions to the Uniform Commercial Code's general rules on "buyers in the ordinary course of business"?

Accepted Answer

A)  To protect the rights of sellers 
B)  To place the burden of loss on the good faith purchasers 
C)  To promote commerce by giving buyers the knowledge that they will get good value for goods that they purchase 
D)  To protect those who innocently buy from merchants, thereby promoting confidence in such commercial transactions 
A)  To protect the rights of sellers 
B)  To place the burden of loss on the good faith purchasers 
C)  To promote commerce by giving buyers the knowledge that they will get good value for goods that they purchase 
D)  To protect those who innocently buy from merchants, thereby promoting confidence in such commercial transactions

Question 5

Patty buys a Persian rug from James, a plumber, in an online auction. James called Patty on Wednesday to inform her that she submitted the winning bid and that she could pick it up anytime or he would ship the rug to her on Friday. On Thursday, the rug was destroyed in a garage fire at James' house. Which of the following statements is true in this case?

Accepted Answer

A)  James bears the loss as he has not delivered the goods. 
B)  James bears the loss as he has tendered delivery of goods. 
C)  Patty bears the loss as James is not a merchant. 
D)  Patty bears the loss as James was only providing a service. 
A)  James bears the loss as he has not delivered the goods. 
B)  James bears the loss as he has tendered delivery of goods. 
C)  Patty bears the loss as James is not a merchant. 
D)  Patty bears the loss as James was only providing a service.

Question 6

Jane gave her car for maintenance to Bell Corp., a company that deals in used cars and maintenance of cars. One of the employees at Bell Corp. accidentally sold Jane's car to Fiona. Under these circumstances, which of the following statements is correct?

Accepted Answer

A)  Jane cannot recover the car from Fiona because under the Uniform Commercial Code, Bell Corp. could give good title to a buyer in the ordinary course of business. 
B)  Jane can recover the car from Fiona because Bell Corp. did not have ownership to the car when it was sold to Fiona. 
C)  Jane can recover the value of the car from Fiona or Bell Corp. because neither Bell Corp. nor Fiona had title to the car. 
D)  Jane cannot recover the value of the car from Bell Corp. because she is a nonmerchant. 
A)  Jane cannot recover the car from Fiona because under the Uniform Commercial Code, Bell Corp. could give good title to a buyer in the ordinary course of business. 
B)  Jane can recover the car from Fiona because Bell Corp. did not have ownership to the car when it was sold to Fiona. 
C)  Jane can recover the value of the car from Fiona or Bell Corp. because neither Bell Corp. nor Fiona had title to the car. 
D)  Jane cannot recover the value of the car from Bell Corp. because she is a nonmerchant.

Question 7

The Uniform Commercial Code distinguishes between merchants and nonmerchants by holding nonmerchants to a higher standard in all cases.

Accepted Answer

A) True 
 B)False

Question 8

"FAS" is a commonly used shipping term that creates a destination contract.

Accepted Answer

A) True 
 B)False

Question 9

Anyone who entrusts goods to a merchant who regularly deals in such goods gives that merchant the power to give good title to a buyer in the ordinary course of business.

Accepted Answer

A) True 
 B)False

Question 10

What is a "sale on approval" contract?

Accepted Answer

In a sale on approval, the goods are del

Question 11

Which of the following is true of an FAS (free alongside) contract?

Accepted Answer

A)  The seller must deliver the goods alongside the vessel at his or her own risk and expense. 
B)  The seller must deliver the goods alongside the vessel at the buyer's risk and expense. 
C)  It does not include maritime contracts. 
D)  It is not accompanied by the name of a specific vessel or port. 
A)  The seller must deliver the goods alongside the vessel at his or her own risk and expense. 
B)  The seller must deliver the goods alongside the vessel at the buyer's risk and expense. 
C)  It does not include maritime contracts. 
D)  It is not accompanied by the name of a specific vessel or port.

Question 12

A buyer has a retail store in Florida and the seller is a manufacturer in California. If the buyer orders goods from the seller and the goods are shipped "FOB Florida," which of the following statements is true?

Accepted Answer

A)  The seller bears the expense and risk of delivering the goods to Florida. 
B)  Neither the seller nor the buyer bears the risk of delivering the goods as the goods are insured. 
C)  The seller is allowed to charge a nominal fee for delivering the goods. 
D)  The buyer bears the risk of loss as he is responsible for taking possession of the goods. 
A)  The seller bears the expense and risk of delivering the goods to Florida. 
B)  Neither the seller nor the buyer bears the risk of delivering the goods as the goods are insured. 
C)  The seller is allowed to charge a nominal fee for delivering the goods. 
D)  The buyer bears the risk of loss as he is responsible for taking possession of the goods.

Question 13

If a buyer rejects tender of the goods, title:

Accepted Answer

A)  will be retained with the buyer. 
B)  can be retained if the contract does not describe the goods. 
C)  will automatically be revested in the seller. 
D)  can be retained only for a limited period of time. 
A)  will be retained with the buyer. 
B)  can be retained if the contract does not describe the goods. 
C)  will automatically be revested in the seller. 
D)  can be retained only for a limited period of time.

Question 14

Under the Uniform Commercial Code, a buyer in the ordinary course of business:

Accepted Answer

A)  takes goods free of any security interest in the goods that his or her seller may have given a third party. 
B)  is a person who transacts only with nonmerchants. 
C)  does not act in good faith. 
D)  is one who buys goods from a merchant, knowing that the sale violates the ownership rights of a third party. 
A)  takes goods free of any security interest in the goods that his or her seller may have given a third party. 
B)  is a person who transacts only with nonmerchants. 
C)  does not act in good faith. 
D)  is one who buys goods from a merchant, knowing that the sale violates the ownership rights of a third party.

Question 15

The lease of goods is the transfer of ownership to tangible personal property in exchange for money, other goods, or the performance of services.

Accepted Answer

A) True 
 B)False

Question 16

Unless the parties agree to the contrary, the Uniform Commercial Code (UCC) says that the goods ordered are to be delivered in a multiple-lot shipment.

Accepted Answer

A) True 
 B)False

Question 17

Adam offered to buy automobile batteries from Ben. Adam's purchase order was complete with respect to all material terms except price, which was omitted. If Ben accepts Adam's offer, and the price of automobile batteries is well established in the industry, which of the following statements is true?

Accepted Answer

A)  A contract cannot be formed between Adam and Ben if the price is not included. 
B)  A contract can be formed between Adam and Ben only if it can be proved that the parties intended to enter a contract to discuss the price. 
C)  A contract can be formed between Adam and Ben, but the price will be treated as a proposed addition to the contract which must be accepted by both parties. 
D)  A contract can be formed between Adam and Ben even though the price term was omitted. 
A)  A contract cannot be formed between Adam and Ben if the price is not included. 
B)  A contract can be formed between Adam and Ben only if it can be proved that the parties intended to enter a contract to discuss the price. 
C)  A contract can be formed between Adam and Ben, but the price will be treated as a proposed addition to the contract which must be accepted by both parties. 
D)  A contract can be formed between Adam and Ben even though the price term was omitted.

Question 18

_____ means "honesty in fact in the transaction concerned."

Accepted Answer

A)  Good value 
B)  Good faith 
C)  Good risk 
D)  Good title 
A)  Good value 
B)  Good faith 
C)  Good risk 
D)  Good title

Question 19

If a buyer repudiates a contract for identified, conforming goods before risk of loss has passed to him/her, _____.

Accepted Answer

A)  the buyer is liable for a commercially reasonable time for any loss or damage to the goods that is not covered by the seller's insurance 
B)  the seller is liable for a commercially reasonable time for any loss or damage to the goods 
C)  the buyer and the seller must share the loss equally 
D)  the buyer is not liable for any loss or damage to the goods 
A)  the buyer is liable for a commercially reasonable time for any loss or damage to the goods that is not covered by the seller's insurance 
B)  the seller is liable for a commercially reasonable time for any loss or damage to the goods 
C)  the buyer and the seller must share the loss equally 
D)  the buyer is not liable for any loss or damage to the goods

Question 20

Which of the following statements is true of an insurable interest in goods?

Accepted Answer

A)  Buyers have an insurable interest in goods at the moment they pay for the goods. 
B)  Buyers have an insurable interest in goods at the moment they get the title to the goods. 
C)  Sellers have an insurable interest in goods at the moment the goods are identified to the contract. 
D)  Sellers have an insurable interest in their goods as long as they have title to the goods or a security interest in them. 
A)  Buyers have an insurable interest in goods at the moment they pay for the goods. 
B)  Buyers have an insurable interest in goods at the moment they get the title to the goods. 
C)  Sellers have an insurable interest in goods at the moment the goods are identified to the contract. 
D)  Sellers have an insurable interest in their goods as long as they have title to the goods or a security interest in them.

Exam 19: Formation and Terms of Sales Contracts

What is a "sale or return" contract?

Which of the following statements is true of voidable title?

Which of the following is the basic purpose for making exceptions to the Uniform Commercial Code's general rules on "buyers in the ordinary course of business"?

Jane gave her car for maintenance to Bell Corp., a company that deals in used cars and maintenance of cars. One of the employees at Bell Corp. accidentally sold Jane's car to Fiona. Under these circumstances, which of the following statements is correct?

The Uniform Commercial Code distinguishes between merchants and nonmerchants by holding nonmerchants to a higher standard in all cases.

"FAS" is a commonly used shipping term that creates a destination contract.

Anyone who entrusts goods to a merchant who regularly deals in such goods gives that merchant the power to give good title to a buyer in the ordinary course of business.

What is a "sale on approval" contract?

Which of the following is true of an FAS (free alongside) contract?

A buyer has a retail store in Florida and the seller is a manufacturer in California. If the buyer orders goods from the seller and the goods are shipped "FOB Florida," which of the following statements is true?

If a buyer rejects tender of the goods, title:

Under the Uniform Commercial Code, a buyer in the ordinary course of business:

The lease of goods is the transfer of ownership to tangible personal property in exchange for money, other goods, or the performance of services.

Unless the parties agree to the contrary, the Uniform Commercial Code (UCC) says that the goods ordered are to be delivered in a multiple-lot shipment.

_____ means "honesty in fact in the transaction concerned."

If a buyer repudiates a contract for identified, conforming goods before risk of loss has passed to him/her, _____.

Which of the following statements is true of an insurable interest in goods?

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