Title & Risk of Loss Flashcards
Under the Sales Article of the UCC, which of the following events will result in the risk of loss passing from a merchant seller to a buyer?
(I) Tender of the goods at the seller’s place of business
(II)Use of the seller’s truck to deliver the goods
(I) (II)
Yes Yes
Yes No
No Yes
No No
No No
The risk of loss starts with the seller. In neither of these situations does it pass to the buyer. The seller’s use of his or her own truck does nothing to affect the risk of loss until there is tender at buyer’s place of business or residence. Likewise, the seller’s placing of the goods at seller’s own place of business does not pass risk of loss if the buyer is to pick up the goods. Since the seller is a merchant, risk of loss does not pass until the buyer takes possession of the goods.
Wrong Answer
Yes No
The risk of loss starts with the seller. In neither of these situations does it pass to the buyer. The seller’s use of his or her own truck does nothing to affect the risk of loss until there is tender at buyer’s place of business or residence. Likewise, the seller’s placing of the goods at seller’s own place of business does not pass risk of loss if the buyer is to pick up the goods. Since the seller is a merchant, risk of loss does not pass until the buyer takes possession of the goods.
Lazur Corp. agreed to purchase 100 radios from Wizard Suppliers, Inc. Wizard is a wholesaler of small home appliances and Lazur is an appliance retailer. The contract required Wizard to ship the radios to Lazur by common carrier, “F.O.B. Wizard Suppliers, Inc. Loading Dock.” Risk of loss for the radios during shipment to Lazur would be on
A. Lazur, because the risk of loss passes when the radios are delivered to the carrier.
B. Wizard, because the risk of loss passes only when Lazur receives the radios.
C. Wizard, because it is a shipment contract.
D. Lazur, because title to the radios passes to Lazur at the time of shipment.
A. Lazur, because the risk of loss passes when the radios are delivered to the carrier.
This is a shipment contract, because it is F.O.B, seller’s loading dock. In a shipment contact, the risk of loss passes as soon as the seller places the goods with a common carrier. Any damage that then happens during shipment falls on the buyer. Had the contract read F.O.B, Lazur, then the risk would not pass until delivery was tendered to Lazur, because it would have been a destination contract.
Wrong answer
B. Wizard, because the risk of loss passes only when Lazur receives the radios.
This is a shipment contract, because it is F.O.B, seller’s loading dock. In a shipment contact, the risk of loss passes as soon as the seller places the goods with a common carrier. Any damage that then happens during shipment falls on the buyer. Had the contract read F.O.B, Lazur, then the risk would not pass until delivery was tendered to Lazur, because it would have been a destination contract.
West purchased a painting from Noll, who is not in the business of selling art. West is picking up the painting from Noll. Noll tendered delivery of the painting after receiving payment in full from West. West informed Noll that West would be unable to take possession of the painting until later that day. Thieves stole the painting before West returned.
The risk of loss
A. Remained with Noll, because West had not yet received the painting.
B. Remained with Noll, because the parties agreed on a later time of delivery.
C. Passed to West at the time the contract was formed and payment was made.
D. Passed to West on Noll’s tender of delivery.
D. Passed to West on Noll’s tender of delivery.
In this case, there is a contract for delivery of goods without physical movement not represented by a document of title. Since Noll is a nonmerchant, risk of loss passes to West upon Noll’s tender of delivery. Thus, delivery need not be actually made for risk of loss to pass from seller to buyer. Delivery is tendered when, as was the case in this question, the goods are made available for a reasonable time for pick-up by the buyer.
Wrong Answer
C. Passed to West at the time the contract was formed and payment was made.
In this case, there is a contract for delivery of goods without physical movement not represented by a document of title. Since Noll is a nonmerchant, risk of loss passes to West upon Noll’s tender of delivery. Thus, delivery need not be actually made for risk of loss to pass from seller to buyer. Delivery is tendered when, as was the case in this question, the goods are made available for a reasonable time for pick-up by the buyer.
Bond purchased a painting from Wool, who is not in the business of selling art. Wool tendered delivery of the painting after receiving payment in full from Bond. Bond informed Wool that Bond would be unable to take possession of the painting until later that day. Thieves stole the painting before Bond returned.
The risk of loss
A. Passed to Bond at Wool’s tender of delivery.
B. Passed to Bond at the time the contract was formed and payment was made.
C. Remained with Wool, because the parties agreed on a later time of delivery.
D. Remained with Wool, because Bond had not yet received the painting.
A. Passed to Bond at Wool’s tender of delivery.
In absence of agreement, where the buyer takes possession of the goods without a contractual obligation to ship or deliver by the seller, and the goods are not represented by a document of title, if the seller is a nonmerchant, risk of loss passes from seller to buyer at the time the seller tenders delivery. Bond suffers the loss.
Wrong Answer
B. Passed to Bond at the time the contract was formed and payment was made.
Risk of loss for goods to be delivered without movement (not to be shipped or delivered at buyer’s destination) passes from seller to buyer if the seller is a nonmerchant at the time the seller tenders delivery. It does not pass until this time, thus, risk has not yet passed at time of contract formation or payment.
