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Q:
Documents of title include:
A. stock and bonds.
B. dock warrants and dock receipts.
C. certificates of deposit.
D. conditional sales contracts.
Q:
A conditional sales contract is an example of a(n):
A. chattel paper.
B. document of title.
C. negotiable instrument.
D. investment property.
Q:
Under the UCC, a fixture is defined as:
A. goods bought primarily for business, personal, or household use.
B. goods held for sale or lease to be used under contracts of service.
C. goods that are so affixed to real property that they are considered a part of the real property.
D. goods other than inventory, farm products, or consumer goods.
Q:
Obtaining a security interest enforceable against third parties is a:
A. two-step process consisting of attachment and priority.
B. two-step process consisting of priority and perfection.
C. three-step process consisting of priority, attachment, and perfection.
D. two-step process consisting of attachment and perfection.
Q:
If the creditor has possession of the collateral, the security agreement:
A. should specify the collateral.
B. need not be in writing.
C. need not specify the collateral.
D. should be in writing.
Q:
A perfected security interest in fixtures has priority over the conflicting interest of an owner of the real property if the security interest is a purchase money security interest.
Q:
The agreement between the creditor and the debtor may authorize the creditor to repossess the collateral in case of default.
Q:
Article 9 of the UCC does not define what constitutes default.
Q:
The law covering security interests in personal property is contained in:
A. Article 6 of the Uniform Commercial Code.
B. Article 4 of the Uniform Commercial Code.
C. Article 3 of the Uniform Commercial Code.
D. Article 9 of the Uniform Commercial Code.
Q:
An interest in fixtures that a creditor obtains to secure performance of an obligation is called a(n):
A. ownership equity.
B. financial leverage.
C. security interest.
D. income trust.
Q:
Change of possession of commercial collateral from the debtor to the creditor/secured party perfects the security interest.
Q:
A creditor who loans money to enable a consumer to buy goods can obtain perfection of a security interest by attaching the security interest to the goods.
Q:
If state law requires a certificate of title for motor vehicles, then a creditor who takes a security interest in a vehicle can rely on attachment of its security interest in the car to perfect it.
Q:
Under the UCC, when more than one security interest in the same collateral has been filed, the first security interest to be filed has priority over any that is filed later.
Q:
A retailer of consumer goods who relies on attachment of a security interest to perfect its security interest does not prevail over other creditors of the debtor-buyer.
Q:
If no maturity date is stated in the financing statement, it is valid for six months.
Q:
A security interest is not legally enforceable against a debtor until it is attached to a particular item or items of the debtor's property
Q:
The attachment of the security interest to the collateral automatically gives the secured party a security interest in the proceeds of the disposal of the collateral by the debtor.
Q:
A creditor can perfect a security interest by filing a public notice it.
Q:
Describe the distinction between a surety and a guarantor.
Q:
Andy bought a bicycle on credit from a dealer. Andy being a minor, his father agreed to be a surety for him on the purchase. When Andy failed to repay the debt within the stipulated time, the dealer filed a lawsuit against Andy's father. What defense can Andy's father use to avoid paying the dealer?
Q:
What is a possessory lien? Give an example.
Q:
Arnold purchased real estate known as Parcel A, subject to a preexisting mortgage, in favor of Local National Bank. Bridget purchased real estate known as Parcel B, assuming a preexisting mortgage on it in favor of Local National. After each purchase took place, there were defaults on the debts that gave rise to the mortgages referred to. Though Local National instituted and completed foreclosure proceedings with regard to each of the two mortgages, it did not yield enough funds to pay off the debt in full. Therefore, Local National made demands on Arnold and Bridget for payment of the deficiency owed on Parcel A and on Parcel B respectively. Explain if Local National is entitled to receive the deficiencies it seeks from Arnold and Bridget.
Q:
Define strict foreclosure.
Q:
An interest in personal property that a creditor obtains to secure payment of an obligation is a security interest.
Q:
Instruments are goods that will be so affixed to real property that they are considered a part of the real property.
Q:
In a deed of trust transaction, when a trustee sells the property and the proceeds generate a surplus:
A. it is paid to the borrower.
B. it is paid to the lender.
C. it is paid to the trustee.
D. it goes to the state.
Q:
In a deed of trust transaction, when a trustee sells the property and the proceeds generate a deficiency:
A. the borrower is relieved of all obligations to the lender.
B. the lender may sue the borrower on the debt and recover a judgment.
C. the lender may sue the trustee.
D. the trustee may sue the borrower.
Q:
Under which of the following contract devices for using real estate as security for an obligation does the seller usually retain title until the property is paid for?
A. Mortgage
B. Land sales contract
C. Deed of trust
D. Strict foreclosure
Q:
People who contract to furnish labor or materials to improve real estate:
A. can claim a lien on the property until they are paid.
B. cannot claim any lien on the property.
C. can claim any lien on a property irrespective of statutory requirements.
D. cannot foreclose their lien on the property.
Q:
The provider of materials or labor is not entitled to a lien:
A. if the property is a public property.
B. if materials are not furnished for the improvement of a particular property.
C. if the materialman is not a general contractor.
D. if the property is under a land sales contract.
Q:
Which of the following is true of a land contract?
A. The seller agrees to convey the title when the full price is paid.
B. The trustee holds legal title to the property put up as security.
C. If a buyer defaults, the seller does not have the right to declare a forfeiture.
D. The title to property is conveyed if partial payment has been made.
Q:
Linda and David borrowed $10,000 from the Smart Loan Company and executed a mortgage on their home to Smart Loan as security for the note. Smart Loan did not record the mortgage. If Linda and David sell their home to Sheila, and Sheila is not aware of the mortgage:
A. the mortgage is as valid for Sheila as to Linda and David.
B. the mortgage is not valid for Sheila.
C. the mortgage is valid for future creditors only.
D. the mortgage is invalid for all parties.
Q:
If mortgagors sell the interest in their property without the consent of the mortgagee:
A. they have acted illegally.
B. the sale does not affect the mortgagee's interest in the property.
C. the mortgagee will lose his/her interest in the property.
D. the mortgagee will lose all claims against the mortgagor.
Q:
_____ implies that the creditor has no right to a deficiency and the debtor has no right to any surplus.
A. Foreclosure
B. Mortgage
C. Strict foreclosure
D. Possessory lien
Q:
This is a contract device for securing the balance due the seller on the purchase price of real estate.
A. Deed of trust
B. Land contract
C. Mortgage
D. Materialman's lien
Q:
In a deed of trust transaction:
A. the buyer agrees to pay the purchase price over a period of time.
B. the surplus proceeds from a sale of property goes to the trustee.
C. the trustee can sell the property at a judicial sale.
D. the borrower deeds to the trustee the property that is to be put up as security.
Q:
Possessory liens give the lienholder the right to keep possession of the debtor's property:
A. for a reasonable period of time after the debt has been paid.
B. until the debtor regains possession by fraud or other illegal act.
C. until the reasonable charges for the service have been paid.
D. even if possession of the goods has not been entrusted to the lienholder.
Q:
Artisans who retain goods are liable for conversion if they:
A. return the goods before the debt has been paid.
B. keep the goods without the right to a lien.
C. lose the goods to the debtor in a fraudulent manner.
D. sell the goods.
Q:
An employee from Dr. Don's Automobile Hospital, Inc. made a house call to Horner's home to repair his car. It was repaired in Horner's garage. When Horner defaulted on the bill, Dr. Don went to his house to take possession of the car, claiming that the corporation had a lien on the car by virtue of the work performed on it. On the basis of these facts, it can be said that:
A. the employee is entitled to the possession of the car because he was the one who performed the repairs on the car.
B. Dr. Don is justified in his actions as the corporation did have a lien on the car by virtue of the work performed on it by its employee.
C. the corporation has no lien on the car because the employee did not notify Horner at the time of the repairs that a lien would be claimed.
D. the corporation has no lien on the car, because its employee came to Horner's house to make the repairs and so Horner never gave up possession of his car to Dr. Don's.
Q:
Which of the following statements concerning foreclosure of liens is true?
A. The lienholder need not give notice to the debtor for holding a sale of the possessed goods.
B. Even if there is a statutory procedure, the lienholder must first bring a lawsuit against the debtor.
C. The right of a lienholder to possess goods does not automatically give the lienholder the right to sell the property.
D. The lienholder cannot have the property sold at a judicial sale.
Q:
If there are cosureties and one of them has had to pay the principal's debt, the cosurety who paid the debt has a claim against the other cosureties because of:
A. the right of subrogation.
B. the right to contribution.
C. the right of strict foreclosure.
D. the right to reimbursement.
Q:
_____ of the Uniform Commercial Code sets out a comprehensive scheme for regulating security interests in personal property and fixtures.
A. Article 3
B. Article 5
C. Article 6
D. Article 9
Q:
Under the common law, airlines were entitled to liens to secure the reasonable value of the services they perform because:
A. they provided labor to improve personal property that belongs to someone else.
B. they provided food and lodging to their customers.
C. they were required by law to provide the service to anyone who seeks it.
D. they made all their profits only through such liens.
Q:
A common law lien essentially includes:
A. only possession by the improver or provider of services.
B. only a debt created by the improvement or provision of services concerning the goods.
C. possession by the improver as well as debt created by the improvement.
D. an improvement which does not become a part of the property.
Q:
If the surety has to perform the principal's obligation, then the surety acquires all the rights that the creditor had against the principal. This is known as the surety's:
A. right to contribution.
B. right of subrogation.
C. right to compensation.
D. right to reimbursement.
Q:
Amanda and Janice were cosureties for their friend Haley on a loan contract. When Haley failed to repay the loan within the stipulated time, Janice paid the whole obligation as her surety. Janice is now entitled to collect half the amount of liability from Amanda in accordance with her ___.
A. right to contribution
B. right of subrogation
C. right to reimbursement
D. right to compensation
Q:
If Jack is a surety for John, Jack's right to reimbursement would include:
A. the right to any collateral in the possession of the creditor.
B. the right to recover from the principal the costs paid on the principal's obligation.
C. the right to recover costs plus interest paid on the principal's obligation.
D. all the rights that the creditor had.
Q:
A surety could avoid liability for a principal's default if the principal had refused to pay the seller-creditor because:
A. the principal was a minor and therefore lacked the capacity to contract.
B. the principal had filed for bankruptcy.
C. the principal was induced to contract with the seller-creditor by fraud or duress.
D. the principal was insane.
Q:
(p. 871, 872) Accommodation sureties:
A. are people paid for serving as a surety.
B. are protected by the courts at a higher level than other types of sureties.
C. have no protection from the court.
D. are professional companies which take payment for acting as a surety.
Q:
A surety's right to recover his/her costs from the principal once he/she performs or pays the principal's obligations is known as ___.
A. the right to fair compensation
B. the right of subrogation
C. the right to reimbursement
D. the right to contribution
Q:
Which of the following statements is true for unsecured credit?
A. Only consumers use unsecured credit for their personal transactions.
B. The creditor may require the debtor to convey to the creditor a lien on the debtor's property.
C. When goods are delivered on unsecured credit, the creditor retains all rights in the goods.
D. The unsecured credit transaction involves maximum risk to the creditor.
Q:
A surety:
A. is liable for the performance of another person's duty.
B. is not liable for the payment of the principal's debts.
C. is held for higher liability than a guarantor.
D. is not entitled to be reimbursed by the principal.
Q:
John agreed to act as surety for a loan taken by his son, Frank, from the Third National Bank. The terms of the loan provided that Frank would pay the loan off in 12 monthly installments at 10%. If Frank renegotiates the terms of the loan with the bank and is now obligated to pay the loan off in 12 monthly installments at 9%, which of the following statements is true?
A. Renegotiation of the note by Frank does not relieve John of liability as surety because the new terms are more favorable than the original terms.
B. John must notify the bank in writing that he no longer wishes to act as surety in order to avoid liability under the new terms.
C. John must notify Frank in writing that he no longer wishes to act as surety in order to avoid liability under the new terms.
D. John is no longer obligated because his responsibilities as a surety cannot be changed without his consent.
Q:
A guarantor is a person who:
A. joins with the person who is primarily liable in promising to make the payment or to perform the duty.
B. does not join in making a promise, but makes a separate promise and agrees to be liable on the happening of a certain event.
C. is held for higher liability than a surety.
D. has personal defenses if the principal refuses to pay.
Q:
Which of the following defenses goes to the merits of a primary contract and can be used by a surety?
A. Lack of consideration
B. Lack of capacity
C. Insanity
D. Bankruptcy
Q:
The owner (mortgagor) of property subject to a mortgage cannot sell the interest in the property without the consent of the mortgagee.
Q:
Strict foreclosure is normally limited to situations where the amount of the debt exceeds the value of the property.
Q:
In a land sales contract, the seller usually retains legal title and does not turn over the deed until the property is paid for.
Q:
In a deed of trust' transaction, the borrower deeds to the trustee the property that is to be put up as security.
Q:
Persons who contract to furnish labor or materials to improve real estate are not entitled to claim a lien on the property.
Q:
The right of a lienholder to possess goods automatically gives him/her the right to immediately sell the property if the charges are not paid.
Q:
The common law lien and most of the statutory liens are known as possessory liens.
Q:
A surety's right of subrogation means that if the surety has to pay the principal's obligation, the surety acquires all the rights that the creditor had against the principal.
Q:
A guarantor's promise must be made in writing to be enforceable under the statute of frauds.
Q:
A surety could avoid liability for a principal's default by using the principal's bankruptcy as a defense.
Q:
The rights and liabilities of both sureties and guarantors are substantially equivalent.
Q:
If the creditor allows the principal an extension of time to perform the contract, compensated sureties are relieved of liability unless they consent to the extension of time.
Q:
Rita cosigned a promissory note for $500 at the Federal Credit Union for her friend Sue. If Sue defaults on the note, Rita can not only collect $500 from her but also get the Federal Credit Union's rights against Sue.
Q:
Describe the limitations on the bank's right or duty to charge the depositor's account for the check.
Q:
Will a drawee bank be liable to the drawer of the check while a stop-payment order is in effect? If yes, under what circumstances will the drawee bank be liable?
Q:
Explain the difference between a certified check, a cashier's check, and a teller's check.
Q:
If you buy a pair of jackets and charge it to your MasterCard account, secured credit has been extended to you.
Q:
A surety is a person who is liable for the payment of another person's debt.
Q:
The Electronic Funds Transfer Act (EFTA) now addresses many of the issues that arise out of consumer use of EFT systems, while _____ of the Uniform Commercial Code deal/s with the funds transfers that are outside the EFTA.
A. Article 4A
B. Regulation E
C. Articles 3 and 4A of the UCC
D. Article 3 and Regulation E
Q:
Which of the following is an electronic funds transfer system?
A. Check truncation.
B. Point-of-sale terminals.
C. Expedited recredit..
D. Check 21.
Q:
The EFTA differs from the FCBA regarding:
A. consumer's liability when the EFT card is stolen.
B. bank's liability if it makes unauthorized transfers.
C. the consumer's liability for unauthorized electronic funds transfers.
D. the financial institution's liability to the consumer for failure to make or stop payments.
Q:
Which of the following statements is true of wire transfers?
A. Article 4A, which covers wire transfers, includes consumer payments that are covered by EFTA.
B. International wire transfer systems are known as " Fedwire."
C. The Federal Reserve operates a domestic wire transfer system that can be made through CHIPS.
D. Electronic funds transfers between business and financial institutions are generally referred to as wholesale wire transfers.
Q:
Which article of the Uniform Commercial Code covers electronic funds transfers between businesses and financial institutions?
A. Article 1A
B. Article 4A
C. Article 3A
D. Article 2A
Q:
For improper execution or failure to execute payment orders, banks can be liable:
A. to the originators, for their expenses in the transaction along with incidental expenses and interest losses.
B. to the beneficiaries, for their incidental expenses.
C. to the originators, for consequential damages.
D. to both the originators and beneficiaries, for consequential damages even though the written agreement of the receiving bank does not provide for it.