Exam 37: Secured Transactions and Suretyship

Generally, if the creditor releases the principal debtor, then the surety is also discharged.

A purchase money security interest in equipment takes priority over a conflicting security interest if the purchase money interest is perfected within thirty days of the debtor's receipt of the goods.

First Bank repossessed Bob's television after he missed his last two $50 payments on it.He came to the bank with the $100 plus service charges and expenses of repossession.The bank will have to give him the television as long as they have not disposed of the television or have not made a contract to sell it.

Automatic perfection would occur in which situation (assuming a written security agreement)?

If two parties have unperfected security interests in the same collateral, the first to attach has priority.

The surety, as defense to payment, may assert a principal debtor's defense of minority.

Dr.Wells purchased a refrigerator for use in his home.The refrigerator will be classified as:

Dr.Wells purchased a refrigerator to use for storing medications at his office.The refrigerator will be classified as:

A conditional guarantor of collection differs from an absolute surety in that the surety is bound with the principal debtor as a primary obligor.

The same item may be classified as either equipment or consumer goods, depending on how it is used by the debtor.

Glenn decided to borrow from Jones Bank since it promised that his loan interest rate would be systematically reduced every year when the board met.The loan rate was never reduced, but actually increased monthly.Glenn refused to pay the interest demanded and sued for rescission of the contract; thereupon, the bank attempted to collect from Lewis, a surety under the loan.Does Lewis have to pay?

First Bank loaned $100,000 to Marlin's Store to purchase computers for its inventory.Marlin signed a financing agreement, which First Bank duly filed in the appropriate public office.Caroline came into Marlin's Store and purchased a computer that was subject to the security interest held by First Bank.Assuming that Caroline is a buyer in the ordinary course of business, whose interest in the computer has priority?

If the creditor refuses to accept tender of payment by the principal debtor, the surety remains liable until the creditor wants payment.

A surety agreement must always be in writing to be effective.

Which of the following contractual defenses are not available to those parties involved in surety relationships?

Indispensable paper includes:

If a minor principal disaffirms a contract and returns the consideration, the surety is discharged.

Kay borrowed $200,000 for her business.First Bank loaned the money but required a surety and collateral.Kay put up her boat, valued at $110,000, and Anson agreed to guarantee the entire loan.After Kay had paid $50,000 of the loan, she asked First Bank to release the collateral since she wanted to sell it to her brother.The bank looked at her perfect payment record and agreed.Two weeks later, she sold the business, took the boat to Brazil, and never was heard from again.Can First Bank collect from Anson?

"Perfection" is required in order for the secured party to enforce rights against the debtor.

An undertaking by a surety to protect an employer against the dishonesty of an employee is a(n) bond.