Chapter 17: "Title, Risk, and Insurable Interest"

Question 1

Shipment contract

Answer 1

seller required to deliver goods into the hands of the carrier, title passes to the buyer at that time. All contact assumed to be shipment if nothing to the contrary in the contract.

Question 2

Destination contract

Answer 2

title does not pass until goods tendered at named destination (location identified by buyer)

Question 3

F.O.B(free on board)

Answer 3

Indicates that the selling price of goods includes transportation costs to the specific F.O.B. place named in the contract. The seller pays the expenses and carries the risk of loss to the F.O.B. place named [UCC 2-319(1)]. If the named place is the place from which the goods are shipped (for example, the seller’s city or place of business), the contract is a shipment contract. If the named place is the place to which the goods are to be shipped (for example, the buyer’s city or place of business), the contract is a destination contract.

Question 4

F.A.S. (free alongside)

Answer 4

Requires that the seller, at his or her own expense and risk, deliver the goods alongside the carrier before risk passes to the buyer [UCC 2-319(2)]. An F.A.S. contract is essentially an F.O.B. contract for ships.

Question 5

C.I.F or C.& F.(cost, insurance, and freight or just cost and freight)

Answer 5

Requires, among other things, that the seller “put the goods in possession of a carrier” before risk passes to the buyer [UCC 2-320(2)]. (These are basically pricing terms, and the contracts remain shipment contracts, not destination contracts.)

Question 6

Delivery ex-ship(delivery from the carrying vessel)

Answer 6

Means that risk of loss does not pass to the buyer until the goods are properly unloaded from the ship or other carrier [UCC 2-322].

Question 7

The UCC replaces the common law concept of title with all of the following EXCEPT:

a. product liability.	
b. insurable interest.	
c. identification.	
d. risk of loss.

Answer 7

a. product liability.

Question 8

Identification is significant because it gives the buyer or lessee the right to insure the goods.

a. True
b. False

Answer 8

a. True
Title and risk of loss cannot pass to the buyer from the seller unless the goods are identified to the contract. Identification gives the buyer or lessee the right to have an insurable interest in the goods and the right to recover from third parties who have damaged the goods.

Question 9

Any goods that are not in existence at the time of contracting are known as future goods.

a. True
b. False

Answer 9

a. True

Question 10

In the sale or lease of most future goods, identification occurs when the seller or lessor ships, marks, or otherwise designates the goods as those in which the contract refers.

a. True
b. False

Answer 10

a. True
The exceptions are that if a sale or lease involves unborn animals to be born within 12 months after contracting, identification takes place when the animals are conceived. Additionally, if a sale involves crops that are to be harvested within 12 months (or the next harvest season), identification takes place when the crops are planted. See Identification.

Question 11

Under the UCC, a bill of lading is:

a. the same thing as a shipment contract when perishable goods are shipped.	
b. a payment by the buyer of goods to a seller.	
c. a receipt of goods signed by a carrier and a contract for transportation of the goods.

Answer 11

c. a receipt of goods signed by a carrier and a contract for transportation of the goods.

A bill of lading specifies what goods a carrier is transporting. At the same time, it serves as a contract for the transportation of these goods.