Question

True or False:

1. Diane purchases a $1,200 television set from Best Buy, paying for the set with a check that later bounces. Before Best Buy realizes that Diane’s check is no good, Diane resells the television set, in its unopened box, to Patty for $350. Patty has no knowledge of Diane’s bad check. Using UCC Article 2 voidable title rules, Best Buy will be able to recover the television set from Patty.          
2. One of the important distinctions between the UCC’s voidable title and void title rules is that the voidable title situation involves a voluntary transfer of the goods by the seller while the void title situation does not.                                  
3. 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.                                                                                                                    
4. 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.                                                                                          
5. A buyer can have an insurable interest in goods even though the buyer has neither possession nor title to the goods.
6. An insurable interest in goods can be held by either a buyer or a seller, but no both at the same time.                                                                                          
7. 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.                                                      
8. 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.                                                                        
9. A transaction involving goods is considered a sale on approval if the goods are delivered primarily for use.                                                                                  

10. 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.

Answer 1

(1)

Answer: False

Explanation: According to UCC's article 2 a purchaser with a voidable title rule has the power for transferring the good title to a good faith purchaser for value even though when the goods delivered to him were by exchanging a  cheque later which found to be dishonest.  Moreover, UCC's Article 2 protects good faith purchasers who are innocent who are actually unaware of how the items were purchased by their seller will be protected by not making them liable to the obligation up their end to the seller of their good to his purchaser.

Hence here best buy will not able to recover goods from the patty, Only Diane is liable to best buy.

(2) One of the important distinctions between the UCC’s voidable title and void title rules is that the voidable title situation involves a voluntary transfer of the goods by the seller while the void title situation does not.

Answer: True

Explanation: Under a  voidable title the purchaser has the right to transfer goods as explained in the above case. In the case of the void title, it doesn't exist legally and the buyer does not acquire title, which is actually protecting the rights of owners of the goods from the theft. in the case of void title, there is no voluntarily giving of goods like in Voidable title. Hence the statement is true.