Title and Risk of Loss

Question 1

Define “Tender”

Answer 1

The seller’s holding out to the buyer the goods in a reasonable manner, for a reasonable time, to allow the buyer to take possession of the goods.

Question 2

When does the risk of loss pass in a warehouse (third-party) delivery?

Answer 2

Risk of loss and title pass to the buyer when the buyer has all necessary documents and the goods are available for pickup.

Question 3

Describe the free-on-board place of destination term

Answer 3

Risk of loss and title pass from seller to buyer when goods have been tendered to the buyer at the destination

Question 4

Describe the general rule regarding passage of title and risk of loss

Answer 4

In absence of agreement, the time title and risk of loss to identified goods passes from the seller to the buyer is dependent on the contract’s delivery terms

Question 5

When does the title/risk of loss pass for sales on approval?

Answer 5

Title and risk of loss remain with the seller until the buyer accepts

Question 6

What does the acronym “FOB” mean?

Answer 6

Free on board; it is a shipping term.

Question 7

At what point does title/risk of loss pass when the terms are free on board the buyer’s place (city, warehouse, or residence)?

Answer 7

Upon the seller’s tender of conforming goods at the place of contract destination

Question 8

When does title/risk of loss pass when the shipping terms of cost, insurance, and freight are used?

Answer 8

When the seller:

1. )Delivers identified conforming goods to the carrier;
2. )Obtains a negotiable bill(s) of lading covering transportation to named destination;
3. )Procures an insurance policy; and
4. )Forwards all documents to the buyer

Question 9

When does title/risk of loss pass when delivery is required by the seller without physical movement and the goods are represented by a nonnegotiable document of title?

Answer 9

1. )Title passes to the buyer upon receipt of the document.
2. )Risk of loss passes after the buyer receives the document and has a reasonable time to present the document to receive the goods

Question 10

What does the acronym “BFP” stand for?

Answer 10

Bona fide purchaser or good-faith purchaser (pure heart and an empty head because they do not know of any problems with the title)

Question 11

What does the acronym “CIF” mean?

Answer 11

Cost, insurance, and freight; it is a shipping term

Question 12

When does the passage of title occur in a nondelivery contract?

Answer 12

If there is a document of title, title passes when the buyer has the document.
If there are other documents, title passes when the buyer has those documents.

If there are no documents, title passes at the time of contracting.

Question 13

How is the title/risk of loss affected by the passage of goods in a sale or return?

Answer 13

1. )Passes upon possession of the buyer.

2. )Returns to the seller if the buyer returns properly the goods

Question 14

When does title/risk of loss pass when delivery is required by a seller with no physical movement and the goods are not represented by a document title?

Answer 14

1. )Title passes when the contract is made.
2. )If the seller is a merchant, risk of loss does not pass until the buyer gets possession.
3. )If the seller is a nonmerchant, risk of loss passes upon the seller’s tender of goods to the buyer

Question 15

Describe the free-on-board place of shipment term

Answer 15

Risk of loss and title pass from seller to buyer when the goods are delivered to the carrier

Question 16

Define “future goods.”

Answer 16

Goods that are to be manufactured under the terms of a contract; their identification occurs when the goods are in existence and are shipped, marked, or otherwise designated for buyer

Question 17

When does title/risk of loss occur for a sale or return?

Answer 17

Title and risk of loss pass as with an ordinary complete sale of goods

Question 18

When does title/risk of loss pass in free alongside shipping terms?

Answer 18

Title and risk of loss pass upon seller’s delivery of conforming goods alongside the vessel in the manner usual in that port or on a dock designated and provided by the buyer

Question 19

Define “identification.”

Answer 19

It occurs when goods are shipped, marked, or otherwise designated for the buyer; identification must occur before title and risk of loss pass

Question 20

Describe determination of “place of delivery.”

Answer 20

Unless the contract provides for shipment, delivery is the seller’s place of business or residence. There are no delivery terms under Uniform Commercial Code Article 2 unless provided for in the contract

Question 21

What does the acronym “C&F” mean?

Answer 21

Cost and freight; it is a shipping term

Question 22

Define “voidable title.”

Answer 22

Title to goods that has come through a voidable contract, as when a minor purchases a car and then sells it to a third party

Question 23

What effect does a breach of a contract have on the passage of risk of loss?

Answer 23

Risk of loss does not pass until goods are conforming; if they never conform, risk of loss does not pass and return is at seller’s risk

Question 24

Define “fungible goods.”

Answer 24

Fungible goods are those that cannot be distinguished either because of homogenous qualities or because they are so mixed together. They are identified when shipped, marked, or otherwise designated

Question 25

When does title/risk of loss pass for a sale on approval?

Answer 25

Neither title nor risk of loss pass until acceptance by the buyer

Question 26

When does title/risk of loss pass when delivery is required by a seller with no physical movement and the goods are represented by a negotiable document of title?

Answer 26

Title and risk of loss pass upon buyer’s receipt of the document

Question 27

Define “void title.”

Answer 27

A thief in the chain of title

Question 28

At what point does title/risk of loss pass when the terms are free on board the seller’s place (city, business, warehouse, or ship point)?

Answer 28

Delivery of conforming goods to carrier

Question 29

What does the acronym “FAS” mean?

Answer 29

Free alongside vessel (ship); it is a shipping term.

Question 30

When does the risk of loss pass in a nondelivery contract?

Answer 30

If the seller is a merchant, risk of loss passes when the buyer has actual receipt. If the seller is a nonmerchant, risk of loss passes when goods are tendered to the buyer

Question 31

List the ways in which a buyer can accept title of goods

Answer 31

1. )Due notification of acceptance
2. )Failure to reject within trial period
3. )Does any act inconsistent with seller’s ownership

Question 32

Describe the differences between the timing of risk of loss and the title in shipment contracts and nonshipment contracts

Answer 32

In shipment contracts, risk of loss and title pass at the same time. In nonshipment contracts, risk of loss and title do not pass at the same time, and passage depends on whether there is a document of title and whether there is a merchant or nonmerchant seller for risk of loss