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Q:
Bob, a forest-service engineer, buys a four-wheel-drive vehicle to use only for off-road recreational use. Under UCC Article 9, this vehicle would likely be characterized as
a. a consumer good.
b. an accession.
c. equipment.
d. inventory.
Q:
Best Credit Corporation lends funds to Cody, a consumer, to apply to the cost of a sport utility vehicle (SUV), which is the collateral for the loan. An enforceable security interest requires
a. a written agreement and Best's possession of the SUV.
b. a written agreement or Best's possession of the SUV.
c. a written agreement only.
d. Best's possession of the SUV only.
Q:
After a default, and before a secured party disposes of the collateral, a debtor can exercise the right of redemption.
Q:
To qualify as a commercially reasonable sale, a secured party's sale of collateral, after default and repossession, must be public.
Q:
On default, unless the security agreement states otherwise, the secured party has the right to repossess collateral.
Q:
A financing statement cannot be amended once it has been filed.
Q:
Under certain conditions, a purchase-money security interest will take priority over a previous creditor's interest in after-acquired property.
Q:
When two secured parties have perfected security interests in the same collateral, generally the first to perfect has priority.
Q:
A perfected security interest will always have priority over an unperfected security interest.
Q:
A debtor may give a creditor a security interest in inventory that the debtor expects to acquire in the future.
Q:
A continuation statement is effective only if it is filed within six months before the expiration of a financing statement.
Q:
A purchase-money security interest arises only when a seller provides a buyer with the "purchase money" to buy goods.
Q:
A financing statement is effective for five months from the date of filing.
Q:
Filing a financing statement with the appropriate public office is the only way to perfect a purchase-money security interest in consumer goods.
Q:
The state office in which a financing statement should be filed depends on the debtor's location.
Q:
To be valid, a financing statement must contain a description of the collateral.
Q:
A chair bought by a business office would be classified as a consumer good.
Q:
An authenticated security agreement can be in an electronic medium.
Q:
To create an enforceable security interest, the secured party must give value.
Q:
A security interest is not enforceable before the creditor's rights have attached to the collateral.
Q:
The person who owes the payment of a secured obligation is the secured party.
Q:
A security interest is enforceable only if the collateral is in the secured party's possession.
Q:
Drew and Earl are brothers. They agree to act as guarantors on a loan made by their sister, Flo. Flo defaults on the payments and Drew refuses to pay. Earl pays the debt. Earl can recover from
a. Drew and Flo under the right of proportionate liability.
b. Drew and Flo under the right of reimbursement.
c. Drew under the right of contribution and Flo under the right of subrogation.
d. no one, because the parties are brothers and sister.
Q:
Bill and Cody agree to guarantee Dave's debt. Bill's maximum liability is $60,000, and Cody's is $40,000. Dave owes $40,000 and is in default. Bill pays the creditor the entire amount. In the absence of an agreement to the contrary, Bill can recover from Cody
a. $0.
b. $16,000.
c. $20,000.
d. $40,000.
Q:
Jay is a surety for Karen's loan from Local Bank. Jay's right to be reimbursed by Karen after having paid her debt is the right of
a. contribution.
b. redemption.
c. reimbursement.
d. subrogation.
Q:
Fact Pattern 28-2
Amy signs a lease on behalf of Business Start-up, Inc. (BSI), with Cool Properties, Inc. As part of the lease, Amy signs a document titled "GUARANTY," which states that it is "an absolute guaranty" of the lease's performance.
Refer to Fact Pattern 28-2. The reason for the result, under the reasoning of the court in Case 28.2, JSV, Inc. v. Hene Meat Co., is that
a. Amy signed the lease "on BSI's behalf."
b. Amy signed a "GUARANTY."
c. Cool leases the property to different tenants at different times.
d. Cool wrongly insisted that Amy sign an alleged "GUARANTY."
Q:
Fact Pattern 28-2
Amy signs a lease on behalf of Business Start-up, Inc. (BSI), with Cool Properties, Inc. As part of the lease, Amy signs a document titled "GUARANTY," which states that it is "an absolute guaranty" of the lease's performance.
Refer to Fact Pattern 28-2. If BSI stops paying the rent, under the decision of the court in Case 28.2, JSV, Inc. v. Hene Meat Co., it is most likely that liability for the unpaid rent will be assessed against
a. Amy and BSI.
b. BSI only.
c. Cool only.
d. no one.
Q:
Fact Pattern 28-1
Beta Software Corporation is a new company that needs to borrow money to meet its payroll. Carl, president and owner of Beta, asks First National Bank to loan Beta the funds.Refer to Fact Pattern 28-1. If First National insists that Carl sign the loan application, making himself personally liable for payment only if Beta defaults, Carl will be
a. a guarantor only.
b. a surety only.
c. a guarantor and a surety.
d. none of the above.
Q:
Fact Pattern 28-1
Beta Software Corporation is a new company that needs to borrow money to meet its payroll. Carl, president and owner of Beta, asks First National Bank to loan Beta the funds.Refer to Fact Pattern 28-1. Carl is the only salaried employee of Beta. Generally, for a guaranty contract between First National and Carl to be enforceable, it
a. must be filed with the appropriate state office.
b. must be in writing.
c. must be "published."
d. need not be filed with a state office, be in writing, or be "published."
Q:
Fact Pattern 28-1
Beta Software Corporation is a new company that needs to borrow money to meet its payroll. Carl, president and owner of Beta, asks First National Bank to loan Beta the funds.Refer to Fact Pattern 28-1. If First National insists that Carl sign the loan application, making himself personally liable for payment whether or not Beta defaults, Carl will be
a. a guarantor only.
b. a surety only.
c. a guarantor and a surety.
d. none of the above.
Q:
Mike owes $12,000 to Nora, $6,000 to Owen, and $6,000 to Pat. The three creditors enter into an agreement with Mike to discharge the debts on payment of a sum of $12,000 to them, to be divided proportionately. This is
a. a composition agreement.
b. a guaranty agreement.
c. a judicial lien.
d. a suretyship agreement.
Q:
Don, an employee of E-Web Service, owes Full Credit Company $7,000. The extent to which his wages may be garnished to pay the debt is restricted by
a. federal law and state law.
b. federal law only.
c. neither federal nor state law.
d. state law only.
Q:
Eve borrows $1,000 from Friendly Credit Company. Eve defaults on the debt. Friendly Credit obtains a garnishment order from a court. To satisfy the judgment, the order will likely be served on
a. Eve.
b. Eve's employer.
c. Friendly Credit.
d. the sheriff or other public officer.
Q:
Ace Credit Company wants to collect Brigit's debt by garnishing the funds in her City Bank account. Garnishment is
a. a postjudgment remedy and a prejudgment remedy.
b. a postjudgment remedy only.
c. a prejudgment remedy only.
d. neither a postjudgment remedy nor a prejudgment remedy.
Q:
Delta Finance Company obtains a judgment against Evan for a debt and wishes the sheriff to seize and sell Evan's property. Delta must return to the court that issued the judgment and obtain a writ of
a. attachment.
b. contribution.
c. execution.
d. redemption.
Q:
Owen borrows money from Pat. Owen defaults. To use attachment as a remedy, Pat must first
a. file a suit against Owen.
b. lose a suit against Owen.
c. succeed in a suit against Owen.
d. take possession of Owen's property.
Q:
Bob owes $5,000 to Consumer Lender Corporation (CLC). As a prejudgment remedy to collect the debt, CLC could use
a. attachment.
b. contribution.
c. execution.
d. redemption.
Q:
Vehicles for transportation are usually included in state exemption statutes.
Q:
Federal law limits the use of state homestead exemptions for debtors in bankruptcy.
Q:
If a surety pays the debt owed to a creditor, then the surety acquires any rights that the creditor had against the debtor.
Q:
A creditor's extension of time to a debtor for making payment, without the consent of the surety, will not discharge the surety.
Q:
A surety can use any defenses available to a debtor to avoid liability on the obligation to the creditor.
Q:
A guarantor becomes primarily liable only when a debtor cannot pay a debt.
Q:
A guarantor is secondarily liable on an obligation.
Q:
Before a surety can be required to answer for the debt of a debtor, the debtor must have defaulted on the underlying obligation.
Q:
A mortgagee can obtain a deficiency judgment against a defaulting debtor only in a state in which there is no equity of redemption.
Q:
A creditor's composition agreement may be entirely enforceable.
Q:
The usual method of foreclosure on a debtor's default under a mortgage is a judicial sale of the property.
Q:
An employer can dismiss an employee due to garnishment for one debt.
Q:
In some states, the judgment creditor must obtain a separate order of garnishment to cover each of the debtor's pay periods.
Q:
A writ of execution is a court order to seize a debtor's property after the entry of a final judgment in a creditor's lawsuit against the debtor.
Q:
To use attachment as a remedy, a creditor must have an enforceable right to payment of the debt.
Q:
A writ of attachment is a court order to seize a debtor's property before the entry of a final judgment in a creditor's lawsuit against the debtor.
Q:
An innkeeper's lien may be secured by its possession of the baggage of guests who have failed to pay their bills.
Q:
A creditor with an artisan's lien on property can sell the property to satisfy the debt.
Q:
A contractor who makes improvements to real property, but who is not paid for the work, may place a mechanic's lien on the property.
Q:
State law governs mechanic's liens.
Q:
Earl obtains a mortgage on his home from First National Bank. Earl defaults on his mortgage payments, and First National brings a foreclosure action against him. Before the house is sold, can Earl prevent the sale and reclaim his home?
Q:
A pipe in Gert's house springs a leak. Gert contracts with Holly's Plumbing & Construction Company to repair the pipe and fix the damage to Gert's house. Gert pays 10 percent of the price in advance. Holly's does the work, but Gert refuses to pay the rest of the price. What can Holly's do, and how is it done?
Q:
Mona owes Nick $100,000. A court awards Nick a judgment in the amount of the debt. To satisfy the judgment, Mona's home is sold at public auction for $75,000. The state homestead exemption is $25,000. Nick gets
a. $0.
b. $25,000.
c. $50,000.
d. $75,000.
Q:
Fact Pattern 28-3
Mary's home is in a state that has a $30,000 homestead exemption. Mary defaults on a $60,000 debt that she owes to Nina. Mary's home is sold at auction for $80,000.
Refer to Fact Pattern 28-3. Other property Mary may own that may be exempt from satisfaction of judgment debts includes
a. any property that Mary wishes to exempt.
b. investments that Mary has made in her family's businesses.
c. recreational vehicles that Mary uses on weekends.
d. tools that Mary uses in her trade.
Q:
Fact Pattern 28-3
Mary's home is in a state that has a $30,000 homestead exemption. Mary defaults on a $60,000 debt that she owes to Nina. Mary's home is sold at auction for $80,000.
Refer to Fact Pattern 28-3. If Nina recovers less than she is owed, she can realize the difference from
a. any property that Mary owns.
b. only exempt property that Mary owns.
c. only nonexempt property that Mary owns.
d. property that any other member of Mary's family owns.
Q:
Fact Pattern 28-3
Mary's home is in a state that has a $30,000 homestead exemption. Mary defaults on a $60,000 debt that she owes to Nina. Mary's home is sold at auction for $80,000.
Refer to Fact Pattern 28-3. Mary will receive
a. $0.
b. $30,000.
c. $50,000.
d. $60,000.
Q:
Fact Pattern 28-3
Mary's home is in a state that has a $30,000 homestead exemption. Mary defaults on a $60,000 debt that she owes to Nina. Mary's home is sold at auction for $80,000.
Refer to Fact Pattern 28-3. Nina may recover
a. $0.
b. $30,000.
c. $50,000.
d. $60,000.
Q:
AAA Software Company borrows $10,000 from Best Term Loans, Inc., but cannot repay the loan when it comes due. Best Term refuses to extend the time for repayment unless AAA can provide an acceptable surety. Commercial Investments Corporation agrees to act as a surety for the loan after AAA offers the firm a discount on software and shows Commercial Investments financial statements, compiled with Best Term's assistance, that misrepresent AAA's financial situation. Later, after Commercial Investments uses the discount to buy software, AAA again defaults on repayment of the loan, and Best Term files a suit against Commercial Investments to collect the amount of the debt. Is Commercial Investments liable? Why or why not?
Q:
Alan owes Best Credit Company $5,000 but refuses to pay. Best Credit obtains a garnishment order and serves it on Alan's employer, Commercial Delivery Services (CDS). If CDS complies with the order and Alan stays on the job, is one order enough to garnish all of Alan's wages for each pay period until the debt is paid?
Q:
Britney defaults on a loan owed to City Bank. As a creditor, City Bank may attempt to place liens on all of Britney's property except
a. motor vehicles that Britney uses to commute to work.
b. personal property that consists of stock in various corporations.
c. property that Britney elects to exempt.
d. real property on which Britney plans to open a retail store.
Q:
Dora, Ed, and Fran are co-sureties of Glen's debt to Hi-Credit Company. Dora pays Glen's entire debt. Dora's right to seek proportionate payments from Ed and Fran is the right of
a. contribution.
b. redemption.
c. reimbursement.
d. subrogation.
Q:
Rita is a surety for Sue's loan from Total Finance Company. Rita's right to "step into the shoes" of Total Finance, after paying Sue's debt, and exercise any of the Total Finance's rights against Sue is the right of
a. contribution.
b. redemption.
c. reimbursement.
d. subrogation.
Q:
Ross and Sally agree to guarantee Tim's debt. Ross's maximum liability is $30,000, and Sally's is $20,000. Tim owes $20,000 and is in default. Ross pays the creditor the entire amount. In the absence of an agreement to the contrary, Ross can recover from Sally
a. $8,000.
b. $10,000.
c. $20,000.
d. nothing.
Q:
Fact Pattern 28-3
Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from Finest Quality Motors.
Refer to Fact Pattern 28-3. If, after the loan agreement is signed, Dina agrees to a higher rate of interest without telling Edie, then Edie is
a. discharged from the agreement.
b. liable at the higher rate of interest.
c. liable at the lower rate of interest.
d. liable for the principal only.
Q:
Fact Pattern 28-3
Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from Finest Quality Motors.
Refer to Fact Pattern 28-3. If Edie is a guarantor, then the guaranty is required to be in writing because of
a. the debtor's right of redemption.
b. the co-signer's right of contribution.
c. the creditor's transfer of possession.
d. the Statute of Frauds.
Q:
Fact Pattern 28-3
Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from Finest Quality Motors.
Refer to Fact Pattern 28-3. If Edie signs the application only after language is included that requires Finest to exhaust its legal remedies against Dina before looking to her, then Edie is
a. a guarantor and a surety.
b. a guarantor only.
c. a surety only.
d. neither a guarantor nor a surety.
Q:
Fact Pattern 28-3
Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from Finest Quality Motors.
Refer to Fact Pattern 28-3. If Edie signs the application but fails to condition her signature on Finest's agreement to pursue its legal remedies against Dina before looking to her, then Edie is
a. a guarantor and a surety.
b. a guarantor only.
c. a surety only.
d. neither a guarantor nor a surety.
Q:
AAA Delivery Company buys a truck from Best Vehicles, Inc., under a guaranty signed by Carol, AAA's president, who writes "President" after her signature. When AAA does not pay for the truck, Best sues Carol., who claims that she did not intend to be bound by the guaranty. The court would most likely rule in favor of
a. Best, because Carol's guaranty is unambiguous.
b. Best, because Carol works for AAA.
c. Carol, because she did not intend to be bound by the guaranty.
d. Carol, because she signed only as a corporate officer.
Q:
First State Bank holds a mortgage on Gigi's property. Gigi defaults on the debt. The bank forecloses. If the proceeds of the foreclosure sale are insufficient to pay the costs of the sale and the debt, the bank can
a. obtain a deficiency judgment against Gigi.
b. prorate the costs to its other debtors.
c. reclaim the property as a voidable transfer.
d. use the equity of redemption to redeem the property.
Q:
Frank's farm is to be sold at a foreclosure sale. For Frank to keep the farm by paying the full amount of the debt, plus any interest and costs that have accrued, is
a. the equity of redemption.
b. the exercise of exemption.
c. the right of contribution.
d. the right of subrogation.
Q:
Fact Pattern 28-2
Sal is a waitperson at Tasty Café. More than half of Sal's income consists of her tips. Universal Credit Corporation (UCC) obtains a judgment against Sal for an unpaid debt. UCC obtains a garnishment order against Tasty to recover part of Sal's "wages" in satisfaction of the judgment.
Refer to Fact Pattern 28-2. The reason for the result, under the reasoning of the court in Case 28.1, Shanks v. Lowe, would most likely be that
a. federal law does not exclude tips from the term "wages."
b. federal law expressly includes tips in the term "wages."
c. state law does not exclude tips from the term "wages."
d. state law expressly includes tips in the term "wages."
Q:
Fact Pattern 28-2
Sal is a waitperson at Tasty Café. More than half of Sal's income consists of her tips. Universal Credit Corporation (UCC) obtains a judgment against Sal for an unpaid debt. UCC obtains a garnishment order against Tasty to recover part of Sal's "wages" in satisfaction of the judgment.
Refer to Fact Pattern 28-2. Under the decision of the court in Case 1, Shanks v. Lowe, it is most likely that Sal's "wages" will be held to include
a. all of Sal's tips.
b. as much of Sal's tips as Sal is willing to contribute.
c. as much of Sal's tips as Tasty is willing to collect for UCC.
d. none of Sal's tips.
Q:
Dan owes Sally $10,000. With a writ of attachment or execution, Sally can satisfy the debt from Dan's
a. exempt property only.
b. nonexempt property only.
c. exempt or nonexempt property.
d. none of the above.