Carla purchases goods from Karen making payment with a check that later bounces. Carla transfers the goods to Joe, a good faith purchaser for value, before Karen discovers what has happened. Joe, in turn, sells the goods to Betty who knows all about the bounced check involving Carla.

True or False:

  1. Carla purchases goods from Karen making payment with a check that later bounces. Carla transfers the goods to Joe, a good faith purchaser for value, before Karen discovers what has happened. Joe, in turn, sells the goods to Betty who knows all about the bounced check involving Carla. Under the UCC’s umbrella, or shelter rule, Betty can take good title to the goods from Joe even though she could not have taken good title had she purchased the goods from Carla.
  2. Sony has a warehouse filled with 5,000 Model 320X VCR’s. Sears contracts with Sony to purchase 3,000 of the VCR’s. In order to properly identify the 3,000 units to be sold to Sears Sony must physically separate the units from the remaining 2,000 units.
  3. A buyer can have an insurable interest in goods even though the buyer has neither possession nor title to the goods.
  4. An insurable interest in goods can be held by either a buyer or a seller, but no both at the same time.
  5. For an “F.O.B. shipping point” contract, the risk of loss passes from the seller to the buyer when the goods reach the buyer.
  6. Under the residual risk of loss provisions of UCC Article 2, if the seller is a merchant, the risk of loss does not pass to the buyer until the buyer takes physical possession of the goods.
  7. A transaction involving goods is considered a sale on approval if the goods are delivered primarily for use.

8. If a buyer accepts goods, and then rightfully rejects those goods, the determination of who bears the risk of loss will depend upon whether or not the buyer has insurance coverage.

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