Question

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.       

Answer 1

Carla purchases goods from Karen making a 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

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.

Here in this Liability to Karen for the payment ends with Carla Only. As per the UCC article 2, Joe will have the complete title, hence whoever purchased from him can have the complete transfer of title of good.

In question it is said Bettey take good title under the above rule, it is true. Further, it is said She may not have the title of goods if it is purchased from the Carla which is false, she enjoys the title of goods is she purchased from carls also without any problem, as the liability ends here with only Carla only.

Question: A buyer can have an insurable interest in goods even though the buyer has neither possession nor title to the goods.

Answer: True

Explanation: After the seller identifies the property for selling, and the buyer after identified property and if he is having an interest, Then the buyer may take the necessary insurance coverage for his interested goods before the risk has passed on to them.

Question: An insurable interest in goods can be held by either a buyer or a seller, but no both at the same time.

Answer: False

Explanation: After the seller identifies the property for selling, and the buyer after identified property and if he is having an interest, Then the buyer may take the necessary insurance coverage for his interested goods before the risk has passed on to them. Similarly, a seller also makes insurance coverage even after the title of items has passed because of secure interest particularly for securing his payment.

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