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Business Law
Q:
Larry borrows money from Joan. If Larry defaults, to use a writ of execution as a remedy Joan must first
a. commence a suit against Larry.
b. succeed in a suit against Larry.
c. be unable to collect the amount of a judgment against Larry.
d. all of the above.
Q:
Friendly Credit Corporation (FCC) believes that Gary might dispose of the assets that FCC expects to receive as payment for Gary's debt before FCC can obtain a judgment. FCC may ask a court to issue a writ of
a. attachment.
b. contribution.
c. execution.
d. redemption.
Q:
Aaron, a jeweler, repairs Beth's necklace and returns it to her even though she does not pay for the repairs. To recover payment, Aaron can claim
a. a mechanic's lien.
b. an artisan's lien.
c. an innkeeper's lien.
d. none of the above.
Q:
Ann owes Ben $500 on their contract, but refuses to pay. To collect, Ben files a mechanic's lien, under which security for the debt is represented by
a. Ann's personal property.
b. Ann's real estate.
c. the $500 owed under the contract.
d. the contract.
Q:
Fact Pattern 28-1
Ruth hires Standard Carpenters, Inc., to build a fence around her property. When the fence is finished, Ruth does not pay Standard Carpenters for the work.
Refer to Fact Pattern 28-1. Standard Carpenters is
a. a guarantor.
b. a lien creditor.
c. a mortgagor.
d. a surety.
Q:
Fact Pattern 28-1
Ruth hires Standard Carpenters, Inc., to build a fence around her property. When the fence is finished, Ruth does not pay Standard Carpenters for the work.
Refer to Fact Pattern 28-1. To collect the debt, Standard Carpenters may place on Ruth's property
a. a judicial lien.
b. a mechanic's lien.
c. an artisan's lien.
d. an innkeeper's lien.
Q:
Personal possessions are not usually included in state exemption statutes.
Q:
Homestead exemptions are designed to permit debtors to retain some part or all of the value of their homes, free from the claims of some creditors.
Q:
Certain types of property are exempt from levy of execution or attachment.
Q:
If the debtor offers to pay the debt owed to a creditor but the creditor refuses the tender, the surety remains obligated on the debt.
Q:
A release by the creditor of the principal debtor, without the consent of the surety, will, without more, release the surety.
Q:
Before the guarantor of a debt can be required to answer for the debt of a debtor, the debtor must have defaulted on the underlying obligation.
Q:
Under a guaranty contract, the guarantor is permitted to be responsible for only a single transaction.
Q:
A contract of suretyship must be in writing to be enforceable.
Q:
A surety becomes primarily liable only when a debtor cannot pay a debt.
Q:
A surety is secondarily liable on an obligation.
Q:
To foreclose on real property securing a mortgage, the mortgagee must ask a court for a deficiency judgment.
Q:
A mortgagee has the right to seek a judicial sale of the mortgaged property on the mortgagor's default.
Q:
The law limits the amount of money that can be garnished from a debtor's weekly take-home pay.
Q:
A court may not order an employer, as a result of a garnishment proceeding, to turn over a debtor-employee's property to pay a debt.
Q:
If a debtor will not pay a judgment, a creditor can only resort to "self-help" to collect.
Q:
An attachment is a court-ordered seizure and taking into custody of property prior to the securing of a judgment for a past-due debt.
Q:
An artisan's lien is effective only if a creditor has possession of the property.
Q:
A debt does not have to be past due before a creditor can begin legal action against a debtor.
Q:
A creditor with a mechanic's lien on property can sell the property to satisfy the debt.
Q:
A mechanic's lien can be enforced to obtain payment for work that adds value to personal property.
Q:
Tom authorizes United Bank to make transfers from his account to make payments on his debt to Vic's Auto Dealership, which sold Tom the car that serves as collateral for the debt. After three payments, Vic's repossesses the car and refuses to return it. Tom phones the bank to stop the payments and follows up with a confirming letter. The bank fails to stop the next two payments, and Vic's refuses to refund anything. Can Tom get his money from the bank?
Q:
Joy steals a check from Kyle, forges his signature, and transfers the check to Loco Loans, Inc., for value. Unaware that the signature is not Kyle's, Loco Loans presents the check to Metro Bank, the drawee, which cashes the check. Kyle discovers the forgery and insists that Metro recredit his account. Can Metro refuse? If not, from whom can the bank recover?
Q:
Liquid Cash Company is a brick-and-mortar money service business. Money Online, Inc., is an Internet-based money service. In those states that have adopted the Uniform Money Services Act, a state license is required to be obtained by
a. Liquid Cash only.
b. Liquid Cash and Money Online.
c. Money Online only.
d. neither Liquid Cash nor Money Online.
Q:
AAA Financial Service is a money service business. Unlike a bank, AAA does not
a. accept deposits.
b. cash checks.
c. exchange foreign currency.
d. issue money orders, traveler's checks, and stored-value cards.
Q:
Pete knowingly divulges to Media Exposure magazine information about Randy's e-money payments to City Bank. The payments were in transmission to City Bank when Pete, without the consent of Randy or City Bank, discovered and revealed them. This may be a violation of
a. the Electronic Communications Privacy Act.
b. the Federal Reserve Board's Regulation E.
c. the Right to Financial Privacy Act.
d. the Uniform Electronic Transactions Act.
Q:
Dina's debit card, issued by Eagle Bank, is stolen and used without Dina's permission. Dina tells Eagle Bank within thirty days. Dina may be required to pay no more than
a. $5.
b. $50.
c. $500.
d. $5,000.
Q:
Bob's debit card, issued by City Bank, is stolen and used without Bob's permission. Bob tells City Bank within a day and a half. Bob may be required to pay no more than
a. $5.
b. $50.
c. $500.
d. $5,000.
Q:
First National Bank receives a check drawn on the account of Rich Industries, Inc., one of the bank's customers, at 3 p.m. Friday. Sherry, the presenter of the check, is not one of the bank's customers. The bank uses deferred posting with a 2 p.m. cutoff hour. If it decides to dishonor the check, it must do so by midnight
a. Saturday.
b. Sunday.
c. Monday.
d. Tuesday.
Q:
Fact Pattern 27-1
Tom draws a check, on his account in State Bank in New York, payable to Digital Computers, Inc., in San Francisco. Digital deposits the check in its account at First National Bank. First National deposits the check in the Federal Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New York. That Federal Reserve bank sends the check to State Bank.
Refer to Fact Pattern 27-1. When Digital's bank received the check, it was required to pass it on
a. before midnight of the next banking day.
b. before midnight of the next day, whether or not it was a "banking" day.
c. before noon of the next banking day.
d. within five business days.
Q:
Fact Pattern 27-1
Tom draws a check, on his account in State Bank in New York, payable to Digital Computers, Inc., in San Francisco. Digital deposits the check in its account at First National Bank. First National deposits the check in the Federal Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New York. That Federal Reserve bank sends the check to State Bank.
Refer to Fact Pattern 27-1. Tom's bank is
a. the cashing bank.
b. the depositary bank.
c. the intermediary bank.
d. the payor bank.
Q:
Fact Pattern 27-1
Tom draws a check, on his account in State Bank in New York, payable to Digital Computers, Inc., in San Francisco. Digital deposits the check in its account at First National Bank. First National deposits the check in the Federal Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New York. That Federal Reserve bank sends the check to State Bank.
Refer to Fact Pattern 27-1. Digital's bank is
a. the cashing bank.
b. the depositary bank.
c. the intermediary bank.
d. the payor bank.
Q:
On Monday, Eve deposits in her account at First State Bank a local check for $500. After 5:00 p.m. on Friday, from these funds, Eve can withdraw no more than
a. $100.
b. $400.
c. $500.
d. $600.
Q:
Clyde issues a check payable to Discount Mart. Elle, Discount's cashier, forges the store's indorsement and deposits the check in her bank account. Clyde's bank, First State Bank, pays the check. Clyde can recover from
a. Elle, but not First State Bank.
b. First State Bank, which cannot recover from Elle.
c. First State Bank, which can recover from Elle.
d. no one.
Q:
Steve steals one of Tricia's checks and forges her signature. Tricia's bank, United Bank, pays the check. Tricia can recover from
a. Steve, but not United Bank.
b. United Bank, which cannot recover from Steve.
c. United Bank, which can recover from Steve.
d. no one.
Q:
First State Bank pays a check over the forged signature of the drawer, Greg, who is a First State customer. First State must recredit Greg's account for the entire amount of the check if
a. the amount of the check was less than $1,000.
b. the amount of the check was more than $2,500.
c. the bank failed to exercise ordinary care in paying the check.
d. Greg's negligence substantially contributed to the forgery.
Q:
Earl issues a check drawn on First National Bank to Good Office Supply to pay for six filing cabinets. Later, Earl discovers defects in the goods and orders First National to stop payment on the check. Earl does not renew the order, and the bank clears the check eight months later. The bank
a. must recredit Earl's account and substitute acceptable goods.
b. must recredit Earl's account or substitute acceptable goods.
c. must substitute acceptable goods but not recredit Earl's account.
d. need not recredit Earl's account or substitute acceptable goods.
Q:
On May 1, Ace Personnel, Inc., issues a payroll check to Barb drawn on its account at City Bank. On June 1, Ace receives its bank statement. On June 20, Barb indorses the check and cashes it at Downtown Finance Corporation. On July 1, Downtown transfers the check to EZ Collection Agency. On December 1, EZ presents the check to First National for payment. A stale check is one that is presented for payment
a. six months after issue.
b. six months after the first indorsement.
c. six weeks after issue.
d. six weeks after the last statement.
Q:
Dora writes a check for $100 drawn on Eastern Bank and presents it to Fast Cash, Inc., for payment. If the check is not backed by sufficient funds, Dora may be prosecuted for
a. forgery.
b. fraud.
c. negligence.
d. robbery.
Q:
Dan writes a check to Eve on his account at First State Bank. The bank dishonors the check even though Dan has sufficient funds in his account. The bank is
a. liable to Dan only.
b. liable to Dan and Eve.
c. liable to Eve only.
d. not liable to Dan or Eve.
Q:
Pat, the manager of Quik Mart, deposits the store's receipts in its account at Regional Bank. As to the receipts, the relationship between Quik Mart and the bank is
a. attorney and client.
b. creditor and debtor.
c. guardian and ward.
d. trustee and beneficiary.
Q:
Jay is the holder and payee of a check drawn by Karen on Local Bank. Jay takes the check to the bank to have it certified. After certification
a. Karen is discharged on the check.
b. Karen is primarily liable on the check.
c. Local is discharged on the check.
d. Local is secondarily liable on the check.
Q:
Standard Wholesalers, Inc., asks United Purchasing Company to pay for goods with a certified check. A certified check
a. cannot be forged.
b. does not discharge its drawer from liability.
c. does not discharge prior indorsers from liability.
d. is guaranteed by a bank.
Q:
Currently, it is not clear which, if any, laws apply to the security of e-money payment information.
Q:
Money-service businesses have not been subject to regulation to the same extent as other financial service businesses.
Q:
Deferred posting is the process of dishonoring checks for insufficient funds.
Q:
The bank on which a check is drawn is the collecting bank.
Q:
Generally, a cash deposit is not available for withdrawal until the next business day.
Q:
A customer does not need to examine a bank statement and report his or her forged signature to recover from the bank for the forgery.
Q:
When a bank pays a check on which the drawer's signature is forged, generally the bank suffers the loss.
Q:
A bank is never obligated to recredit a customer's account when it pays a check with the customer's forged signature.
Q:
A bank must always recredit a customer's account when it pays a check with the customer's forged signature.
Q:
A forged signature has no legal effect as the signature of a drawer.
Q:
When a bank pays a check on which the drawer's signature is forged, generally the customer suffers the loss.
Q:
An oral stop payment order is valid for thirty days.
Q:
A bank is obligated to pay an uncertified check presented less than six months from its date.
Q:
Banks are required to constantly verify the life and competence of their drawers.
Q:
A bank has no right to charge a customer's account for the amount of a stale check.
Q:
When a check "bounces," its holder can resubmit the check later, hoping that sufficient funds will be available.
Q:
Generally, a bank has no obligation to pay a customer's overdrafts.
Q:
A bank is subject to a civil suit if its customer writes a bad check.
Q:
Certified checks are instruments that have been accepted for payment by the institutions on which they are drawn.
Q:
UCC Articles 3 and 4 govern checks.
Q:
City Bank mistakenly transfers $1,000 from the account of Donna, its customer, to the account of Earl in First Federal Bank. The transfer is done electronically. When City Bank learns of the mistake, it credits Donna's account and asks First Federal to "return" $1,000. First Federal refuses. City Bank files a suit against First Federal, claiming that it is violation of the Electronic Fund Transfer Act. How might the court rule?
Q:
Fred steals two checks from Eagle Retail Stores, Inc.: a blank check and a check payable to the order of General Supplies Company (GSC), drawn on Eagle's account with First National Bank. Fred forges Eagle's signature on the blank check and makes it payable to himself. Fred forges GSC's indorsement on the back of the check payable to GSC, and adds "Pay to the order of Fred." At Ace Credit, Inc., Fred indorses the back of both checks with his own name and gives them to Ace for cash. Ace does not know about the theft or the forged signatures and presents the checks to First National, which pays them. Eagle, which was not negligent, discovers the forgeries and asks First National to recredit its account. Who suffers the loss on each check?
Q:
E-Bank, an online financial institution, gives financial information about Paula and other customers to a federal agency without the customers' permission. E-Bank may be liable under
a. the Federal Trade Commission Act.
b. the Financial Services Modernization Act.
c. the Right to Financial Privacy Act.
d. the Uniform Electronic Transactions Act.
Q:
First State Bank has fourteen branch offices. First State must establish market areas contiguous to these offices under
a. the Community Reinvestment Act.
b. the Federal Reserve Board's Regulation E.
c. the Federal Trade Commission Act.
d. the Home Mortgage Disclosure Act.
Q:
Fact Pattern 27-3
Mike loses his National Bank access card. He realizes his loss the next day but waits a week to call National. Meanwhile, Opal finds and uses Mike's card to withdraw $3,000 from Mike's account.Refer to Fact Pattern 27-3. When Mike receives his National statement, he demands that the bank investigate the matter and recredit his account. The bank
a. has no duty to investigate.
b. must investigate and, if the dispute is not resolved within ten days, recredit Mike's account (at least until the dispute is resolved).
c. must investigate and immediately recredit Mike's account (at least until the dispute is resolved).
d. must investigate but need not recredit Mike's account.
Q:
Fact Pattern 27-3
Mike loses his National Bank access card. He realizes his loss the next day but waits a week to call National. Meanwhile, Opal finds and uses Mike's card to withdraw $3,000 from Mike's account.Refer to Fact Pattern 27-3. Mike is responsible for
a. $0.
b. $50.
c. $500.
d. $3,000.
Q:
On Monday morning, Bob deposits into his account at County Bank a $500 check from Dina, who also has an account at County Bank. On that same day, this check is considered
a. cashiered.
b. certified.
c. paid.
d. provisionally credited.
Q:
Fact Pattern 27-2
Ruth opens an account with State Bank under an agreement in which the bank reserves the right to charge the account for any item returned due to its unauthorized alteration.
Refer to Fact Pattern 27-2. Tom deposits an altered check in Ruth's account. When Unity Bank, the check's drawee bank, returns the item due to its alteration, State Bank files a suit against Ruth to recover the amount. The court is most likely to rule that
a. Ruth does not have to pay, because she did not indorse the check.
b. State Bank is entitled to recover under its account agreement.
c. Tom is the party from whom State Bank should seek recovery.
d. Unity Bank is the party from whom State Bank should seek recovery.
Q:
Fact Pattern 27-2
Ruth opens an account with State Bank under an agreement in which the bank reserves the right to charge the account for any item returned due to its unauthorized alteration.
Refer to Fact Pattern 27-2. The agreement between Ruth and State Bank
a. cannot change the effect of the UCC.
b. is in accord with the UCC.
c. violates federal banking regulations.
d. violates the UCC.
Q:
Ed can write checks on his account at First City Bank. Gina steals the checks, forges Ed's signature, and cashes the checks at First City. The bank is excused from any liability if, after receipt of the first forged check, Ed fails to report the forgeries within
a. five days.
b. fourteen days.
c. one year.
d. three years.
Q:
Ann orders 100 imprinted pens from Best Ad Art for $1 per pen. She draws a check on County Bank for $100. Ann accepts the first shipment of 10 pens, refuses to accept future shipments, and issues a stop-payment order. County Bank pays the check. Ann can recover from the bank
a. $0.
b. $10.
c. $90.
d. $100.
Q:
CompNet orders fifty CD-ROM hard drives from DigiCom at $250 each. CompNet pays DigiCom $5,000 with a check, against the total $12,500 cost. DigiCom tells CompNet that it cannot deliver the drives. CompNet calls its bank and stops payment on the check, but the next day the bank honors the check. The bank is liable to CompNet for
a. $0.
b. $250.
c. $5,000.
d. $12,500.