Q&A Hero

Q: City Bank's financing statement in collateral owned by Delta Waters Corporation will expire in less than a year. Filed timely, a continuation statement could extend the effectiveness of the financing statement for a. one year. b. two years. c. five years. d. ten years.

Q: Dru signs a check "pay to the order of Eppie" drawn on Dru's account in Bayside Bank. Greta forges Eppie's indorsement. Bayside pays the check. Most likely a. Dru will be liable for the amount. b. Eppie will have to pay Dru for the amount. c. Bayside will have to recredit Dru's account. d. the Federal Reserve will reimburse all parties for their costs.

Q: Prime Property Investments, Inc., files a financing statement to provide no­tice of its security interest in the property of Qwik Breakfast Restaurant. The initial ef­fec­tive term of a financing statement is a period of a. five days. b. five months. c. five weeks. d. five years.

Q: Everyday Loans, Inc., takes possession of Ferbie's stock in Glade Electronics Corporation to perfect Everyday's security interest in the stock. This is a. after-acquired property. b. a pledge. c. a purchase-money security interest. d. proceeds.

Q: Valley Bank retains the cancelled checks of its customers. Valley must be able to provide customers with legible copies of checks paid for a. one year. b. five years. c. seven years. d. nine years.

Q: Select Furniture Store sells household consumer goods. To create a pur­chase-money security interest, Select Furniture must a. assign, to a collecting agent, a portion of its accounts payable. b. assign, to a collecting agent, a portion of its accounts receivable. c. extend credit for part or all of the purchase price of the goods. d. refer purchasers to a third-party lender.

Q: Simon signs a check "pay to the order of Tilly" drawn on Simon's account in United Bank. Vela forges Tilly's indorsement, First Federal Bank cashes the check, and Vela disappears. United pays First Federal and debits Simon's account. Most likely, the ultimate loss will fall on a. Simon. b. Trudy. c. United Bank. d. First Federal Bank.

Q: Region Bank wants to perfect its security interest in timber owned by Superior Lumber, Inc. Most likely, a financing statement should be filed with a. the local chamber of commerce. b. the county clerk. c. the federal loan officer. d. the secretary of state's office.

Q: Brandy forges Caleb's signature on a check "payable to the order of Brandy" drawn on Caleb's account in Downtown Bank. Caleb's forged signature is a. effective if an innocent third party accepts the check. b. effective to the degree that it matches Caleb's genuine signature. c. effective to the extent that Downtown Bank debits Caleb's account. d. not effective.

Q: County Bank wants to perfect its security interest in collateral owned by Direct Sales Company. Most likely, a financing statement should be filed with a. the local chamber of commerce. b. the county clerk. c. the federal loan officer. d. the secretary of state's office.

Q: Trudy forges Uma's signature on a check "payable to the order of Trudy" drawn on Uma's account in Verity Bank. Most likely, if the bank pays the check a. the Federal Reserve will reimburse all parties for their costs. b. the loss will be apportioned among all of Verity's customers. c. Uma will be liable for the amount. d. Verity will have to recredit Uma's account.

Q: The payment of Yves's debt to Zac is guaranteed by Yves's personal property. Their agreement describes Yves's subject property by serial number. To establish Zac's interest, this is a. irrelevant. b. not sufficient. c. sufficient if it accurately describes the parties' agreement. d. sufficient unless it is too tedious to review.

Q: Mary writes a check drawn on County Bank for $400 "payable to Bill" on May 1. Mary dies on May 3. Bill presents the check to County Bank on May 5. County Bank a. may not pay the check. b. may pay the check. c. must consult with Mary's heirs before paying the check. d. must read Mary's will before paying the check.

Q: Jon writes a check to LocoMotion, Inc., as payment for a golf cart but soon discov­ers the cart is broken. He goes to Fairway Bank, the drawee, and orally author­izes Lolly, a bank officer, to stop payment on the check. This order is valid for a. fourteen days. b. fourteen months. c. fourteen attempts to cash it. d. fourteen subsequent "on-us" items.

Q: Mona lives in New Jersey, but she works in New York. Mona borrows $1,000 from National Bank, using her motorcycle as collateral. To perfect its security in­terest, the bank must file its financing statement in at least a. every state. b. New Jersey. c. New Jersey and New York. d. New York.

Q: Fact Pattern 20-1Excel Vehicles, Inc., makes and sells automobiles to auto dealers, including Fine Auto Sales. Fine sells the cars to consumers and businesses.Refer to Fact Pattern 20-1. Ira, a police officer, buys an Excel from Fine to drive in his off-duty hours. Ira's Excel isa. a consumer good.b. an accession.c. equipment.d. inventory.

Q: Fact Pattern 19-1Echo takes her car to Fix-It, Inc., which repairs the car and bills Echo for $500. Echo writes out a check drawn on Capital Bank, but later, believing that Fix-It did not repair the car properly, issues a stop-payment order.Refer to Fact Pattern 19-1. Capital Banka. is liable to Fix-It for the amount of the check.b. must stop payment if Capital has a reasonable time to act.c. need not stop payment unless Echo had a valid reason to act.d. need not follow Echo's order unless the check was certified.

Q: Fact Pattern 20-1Excel Vehicles, Inc., makes and sells automobiles to auto dealers, including Fine Auto Sales. Fine sells the cars to consumers and businesses.Refer to Fact Pattern 20-1. Holly, a professional driver, buys an Excel from Fine to drive in a Grand Prix race. Holly's Excel isa. a consumer good.b. an accession.c. equipment.d. inventory.

Q: Fact Pattern 19-1Echo takes her car to Fix-It, Inc., which repairs the car and bills Echo for $500. Echo writes out a check drawn on Capital Bank, but later, believing that Fix-It did not repair the car properly, issues a stop-payment order.Refer to Fact Pattern 19-1. Capital Bank pays the check. Capitala. can sue Echo for a wrongful stop-payment order.b. can sue Fix-It for breach of contract.c. can sue no one because it paid a check that was not properly payable.d. is liable for Echo's loss due to the wrongful payment.

Q: Dhani signs a check "pay to the order of Etan" drawn on Dhani's account in First State Bank and dates the check "May 1." Etan presents the check to the bank for payment on December 15. This is a. a cashier's check. b. an overdraft. c. a certified check. d. a stale check.

Q: Fact Pattern 20-1Excel Vehicles, Inc., makes and sells automobiles to auto dealers, including Fine Auto Sales. Fine sells the cars to consumers and businesses.Refer to Fact Pattern 20-1. A car in Fine's possession is probablya. a consumer good.b. an accession.c. equipment.d. inventory.

Q: Jacob writes Phillip an uncertified check for $500 on January 1. Seven months later, Phillip presents the check at the bank. The bank pays the check in good faith without consulting Jacob. The bank a. does not have the right to charge Jacob's account for $500. b. only has the right to charge Jacob's account for $250. c. has the right to charge Jacob's account for $500. d. can be held liable for breach of contract.

Q: The payment of Nero's debt to Olly is guaranteed by Nero's personal property. Nero is located in Pennsylvania. Olly communicates to the appropriate state official a security agreement that uses only Quality Engineering, the trade name of Nero's business. To perfect Olly's interest, this is a. irrelevant. b. not sufficient. c. sufficient if Quality Engineering is a sole proprietorship. d. sufficient if the trade name is spelled correctly or misspelled slightly.

Q: Elton presents an uncertified check for payment more than six months after its date. The check was drawn by Dakota on her account in First Community Bank. The usual banking practice in such a case is to a. cash the check. b. consult the customer. c. refuse to cash the check. d. ask the payee what he or she would prefer.

Q: The payment of John's debt to Kirsten is guaranteed by John's personal property. Kirsten is most likely to perfect her interest by a. attaching a bright label to John's property. b. calculating the precise amount of John's debt. c. correcting grammatical errors in the parties' written agreement. d. filing a financing statement with the appropriate authority.

Q: Shakira issues a check drawn on Thrifty Bank to Ranch & Farm Supply to pay for a rototiller. Later, Shakira discovers a defect in the device and orders Thrifty to stop payment on the check. Shakira does not renew the order, and the bank clears the check eight months later. The bank a. must recredit Shakira's account. b. must obtain funds from Ranch & Farm to cover the check. c. must substitute acceptable goods. d. need not recredit Shakira's account.

Q: Rich Financial, Inc., files a financing statement regarding a transaction with Supreme Business Company. To be valid, the financing statement must contain all of the following except a. a description of the collateral. b. a statement of the purpose for the transaction. c. Rich's name. d. Standard's name.

Q: Daria writes a check for $100 drawn on Village Bank and presents it to Fast Cash, Inc., for payment. If the check is not backed by sufficient funds, Daria may be prosecuted for a. forgery. b. fraud. c. negligence. d. nothing.

Q: Lena borrows from Mac and Nicol, using the same collateral for both loans. Only Nicol has a perfected security interest. Lena defaults on both loans. The party with first rights to the collateral is a. Lena. b. Mac and Nicol, in proportion to Lena's debt to each. c. Mac only. d. Nicol only.

Q: Luc writes a check for $1,000 drawn on Ridgetop Bank and presents it to Bianca. Bianca presents the check for payment to Ridgetop Bank, which dis­hon­ors it for insufficient funds. The party most likely liable to Bianca is a. Luc in a civil suit. b. Luc in a criminal prosecution. c. Ridgetop Bank in an administrative proceeding. d. neither Luc nor Ridgetop Bank.

Q: The payment of Jose's debt to Klint is guaranteed by Jose's personal property. The process by which Klint can protect himself against the claims of third parties to this property is a. attachment. b. communication. c. perfection. d. search and seizure.

Q: Summit Credit Corporation lends funds to Toby, a consumer, to apply to the cost of a sport utility vehicle (SUV), which is the collateral for the loan. An enforceable security interest also requires a. a written agreement and Summit's possession of the SUV. b. a written agreement or Summit's possession of the SUV. c. the vehicle seller's acknowledgement of the loan in writing. d. Toby's possession of the SUV.

Q: Jen signs a check "pay to the order of Key" drawn on Jen's account in Little Bank to buy Key's car. If there are insufficient funds in Jen's account to cover the amount of the check, but the bank pays it, this creates a. a cashier's check. b. an overdraft. c. a stale check. d. a stop-payment order.

Q: Olaf is the creditor in a transaction with Phil. Once certain requirements are met, Olaf's rights will attach, which means that Olaf will have a. an indivisible ownership right to Phil's property. b. an enforceable security interest in Phil's property. c. a notice affixed to Phil's property. d. the permission of a court to seize Phil's property.

Q: Little Local Bank wrongfully fails to honor a check signed by its customer Andrea. Little Local Bank is a. not liable to Andrea for damages resulting from its refusal to pay. b. only liable to Andrea for damages resulting from its refusal to pay if Andrea takes action against the bank within one business day of the failure to honor the check. c. only liable to Andrea for one half of the damages resulting from its refusal to pay. d. liable to Andrea for damages resulting from its refusal to pay.

Q: The payment of Hu's debt to Ian is guaranteed by Hu's personal prop­erty. To give public notice of his interest in Hu's property, Ian is most likely to a. attach a bright label to Hu's property. b. e-mail other potential creditors. c. file a financing statement with the appropriate authority. d. publish a collection notice in local newspapers.

Q: Julia opens a checking account with Washington Bank and deposits funds into the account. Julia and Washington Bank a. do not have a contractual relationship. b. have a creditor-debtor relationship in which Julia is the creditor and Washington Bank is the debtor. c. have a creditor-debtor relationship in which Washington Bank is the creditor and Julia bank is the debtor. d. do not have a creditor-debtor relationship.

Q: Ellen pays State Bank $500 plus a service fee to draw a check on itself payable to Paul's Plumbing. Which of the following parties is responsible for paying the check? a. Only Ellen b. Both Ellen and State Bank c. Only State Bank d. None of the parties

Q: Elmo pays First National Bank $1,000 plus a service fee to draw a check on itself made payable to Go Delivery Service. This is a. a cashier's check. b. an overdraft. c. a stale check. d. a stop-payment order.

Q: Dieter's will provides for a distribution of his assets on his death. Who will "distribute" Dieter's property, and what are the steps involved?

Q: Brendan signs a check "pay to the order of City College Bookstore" drawn on his account in Delta Bank to pay for his current semester's textbooks. The bookstore deposits the check in its account in Eagle Bank. Like most checks, this check is a. a one-party instrument. b. a nonnegotiable instrument. c. a special type of draft. d. not a substitute for cash.

Q: Patty, who is divorced, owns a house. She has no reasonable expectation of benefit from the life of Quinn, her ex-spouse, but she applies for insur­ance on his life anyway. She also obtains a fire insurance policy on the house, which she later sells. Five years later, Quinn dies and the house is destroyed in a fire. Can Patty obtain payment on either the death of Quinn or the loss of the house? Explain.

Q: The payment of Eden's debt to Flem is guaranteed by Eden's personal property. This property is a. a secured party. b. a secured transaction. c. a security interest. d. collateral.

Q: Martha has a checking account with Homeplace Bank. Martha signs a check "payable to Phillipa" drawn on Martha's account. Homeplace Bank is a. the payer. b. the drawee. c. the drawer. d. the payee.

Q: Mason creates a trust to prevent his son, Newt, the beneficiary, from assign­ing his rights to future payments of income from the trust. This is a. a charitable trust. b. a constructive trust. c. a spendthrift trust. d. an illegal trust.

Q: The payment of Frida's debt to Gianini is guaranteed by Frida's personal property. Gianini is a. a debtor. b. a secured party. c. a secured transaction. d. a security interest.

Q: Albert buys a surround sound system from his neighbor George at George's garage sale. Albert writes George a check for $250 for the sound system. George is a. the certifier. b. the drawee. c. the drawer. d. the payee.

Q: Rikki signs a check "pay to the order of Scholar University" drawn on Rikki's account in Town Bank to pay her tuition. Rikki is a. the certifier. b. the drawee. c. the drawer. d. the payee.

Q: Dag is the secured party in a secured transaction with Elmo. In this transaction, Dag a. has a security interest. b. owes payment. c. owes performance. d. owns collateral.

Q: Benny dies without a will, with no surviving spouse or child. Benny's survivors in­clude his granddaughter Callie, his nephew Doug, and his cousin Earl. In most states, his estate would pass to a. Callie. b. Doug. c. Earl. d. the state.

Q: Scott presents an instrument that states "pay to the order of Scott" to Town Bank for payment. This instrument is the most common type of negotiable instrument, which is a. a commercial wire transfer. b. a check. c. a note. d. a substitute check.

Q: The payment of Mo's debt to Neil is guaranteed by Mo's personal property. This is a. governed by Article 2 of the UCC. b. governed by Article 3 of the UCC. c. governed by Article 9 of the UCC. d. not governed by the UCC.

Q: Cliff dies without a will. His survivors include his spouse Dana and his two children, Efrem and Fay. Under applicable laws, Dana will probably receive a. all of Cliff's estate. b. none of Cliff's estate. c. one-half of Cliff's estate. d. one-third of Cliff's estate.

Q: Kris presents an instrument that states "pay to the order of Kris" to Metro Bank for payment. This is a special type of draft drawn on a bank, ordering the bank to pay a fixed amount of money on demand. This is a. a commercial wire transfer. b. a check. c. a debit card transaction receipt. d. a cash transaction

Q: The payment of Brian's debt to Chuck is guaranteed by Brian's personal property. This is a. a reorganization. b. a secured transaction. c. a suretyship agreement. d. a violation of most state laws.

Q: Orin creates a living trust to pass his assets, including stock in Petro Oil Company and other business investments, to his heirs. One advantage of this arrangement is that a. income taxes do not have to be paid on trust earnings. b. the assets are sheltered from the payment of estate taxes. c. the assets can be transferred without going through probate. d. the trust does not come into existence until the grantor's death .

Q: Ian buys a cell phone in Jiffy Mart, using the means that accounts for more retail payments than any other. This means of payment is a. a commercial check. b. a debit card. c. a personal check. d. a cash.

Q: The price that a secured party obtains on a sale of collateral is all that the creditor can recover on the debt.

Q: Dyan executes her will to give "to my nephew Esau my stock in Fargo, Inc." Later, Dyan writes separately, with the same formalities required for a will, to leave the stock to her niece Ginny and cash to Esau. This writing a. does not affect the will's gift of the stock to Esau. b. requires a gift of the stock in equal shares to Esau and Ginny. c. revokes the whole will, which must be redrafted. d. revokes the will's gift of the stock to Esau.

Q: If collateral consists of consumer goods subject to a purchase-money security interest, the secured party must "purchase" the goods on default.

Q: Gaining unauthorized access to an electronic fund transfer system is a felony.

Q: Don executes a will leaving half of his farm to his spouse Elsie and the rest to his sons, Frank and Greg, in equal shares. The will disinherits a third son, Hal. Don and Elsie divorce, but Don dies before changing his will. Under the Uniform Probate Code a. Elsie receives half of the farm, and Frank and Greg share the rest. b. Elsie receives half of the farm, and Frank, Greg, and Hal share the rest. c. Frank and Greg receive the entire estate in equal shares. d. the state inherits the entire estate.

Q: To qualify as a commercially reasonable sale, a secured party's sale of col­lateral, after default and repossession, must be public.

Q: Stored-value cards are a form of digital cash.

Q: Kendall executes a separate written instrument to amend her prior will. This separate document is a. a codicil. b. a constructive will. c. an inter vivos will. d. a nuncupative will.

Q: On default, unless the security agreement states otherwise, the secured party has the right to repossess collateral.

Q: A point-of-sale system is a type of electronic fund transfer system.

Q: Ratzo is asked to be a witness to Sade's will. Before attesting to the will, a. Ratzo does not have to read the will or be informed of its contents. b. Ratzo must read the will and recite its contents. c. Sade must orally tell Ratzo of the will's contents. d. Sade's attorney must read the will aloud to Ratzo.

Q: When a secured debt is paid, the secured party must file a termination statement regardless of the goods' classification.

Q: A customer has sixty days from the date of receipt of a statement of an electronic transfer to notify the financial institution of any er­rors.

Q: Lani is asked to serve as a witness to Mona's will. To qualify, Lani must be a. a collateral heir. b. a lineal descendant. c. eighteen years of age or older. d. mentally competent.

Q: A secured party can release the col­lateral described in a filed fi­nancing statement only if the debtor has paid the debt.

Q: If a customer's debit card is lost or stolen, the customer will not be liable for any unauthorized use of the card.

Q: A check can be retained at its place of deposit and only its image can be presented for payment under an electronic presentment agreement.

Q: Juli types onto a computer what she intends to be "My Will" and prints it out. Juli has capacity. "My Will" is a. invalid. b. valid if Juli signs it. c. valid if Juli signs it and has three witnesses sign it. d. valid if Juli signs it, has three witnesses sign it, and files it in a cer­tain state office.

Q: A bank that encodes information on an item after its issue warrants to any subsequent bank that the information is correct.

Q: Under certain conditions, a purchase-money security interest will take priority over a previous creditor's interest in after-acquired property.

Q: Lost in a canyon near Gila, Arizona, Hester writes her will in crayon, on a paper bag, while Ivan states orally how he wants his estate distributed. Most states do not permit a. an olographic will. b. a nuncupative will. c. a will written on a paper bag. d. a will written in crayon.

Q: Eighty-year-old Clark exhibits confusion, forgetfulness, and disorienta­tion. Dave, Clark's doctor, believes that the symptoms indicate dementia. Elsa, who has significant contact with Clark, believes that he is in a state of men­tal decline. These facts indicate a. an urgency that Clark distribute his assets. b. Clark's lack of capacity. c. Dave's misdiagnosis. d. Elsa's intent to take advantage of Clark.

Q: Today, most checks are processed manually.