Question 1

Gary owns and operates a farm and a farm machinery dealership.Under the Code, a new tractor that Gary has for sale at his dealership is classified as:

Accepted Answer

A) farm products. 
B) equipment. 
C) consumer goods. 
D) inventory. 
A) farm products. 
B) equipment. 
C) consumer goods. 
D) inventory.

Question 2

Fred agreed to loan George $10,000 for his retail store for which George signed a promissory note.Two months later, Fred heard that George's business was in trouble and that he might not be able to repay the loan.As a result of hearing this information, Fred asked Herman to guarantee the loan.Herman gave a glowing oral endorsement of George and of George's business and then orally promised to pay the $10,000 if George did not.Herman has done business with George for 10 years and George buys his entire inventory from Herman's wholesale outlet.Herman adds that George is his major customer.Is Herman's agreement to pay the $10,000 if George does not pay it enforceable?

Accepted Answer

A) No, because the statute of frauds requires that the suretyship agreement be in writing 
B) Yes, because even though the statute of frauds applies, the main purpose rule exception will probably make the agreement enforceable 
C) No, because there is a personal defense available 
D) Yes, because Herman's is a conditional guaranty of collection 
A) No, because the statute of frauds requires that the suretyship agreement be in writing 
B) Yes, because even though the statute of frauds applies, the main purpose rule exception will probably make the agreement enforceable 
C) No, because there is a personal defense available 
D) Yes, because Herman's is a conditional guaranty of collection

Question 3

In which of the following situations would the buyer not qualify as "buyer in the ordinary course of business"?

Accepted Answer

A) Susie buys her classmate Jill's car from her. 
B) Caroline buys a refrigerator from Sears. 
C) James buys eggs from the supermarket. 
D) Todd buys a bicycle at his friend Joe's shop. 
A) Susie buys her classmate Jill's car from her. 
B) Caroline buys a refrigerator from Sears. 
C) James buys eggs from the supermarket. 
D) Todd buys a bicycle at his friend Joe's shop.

Question 4

A security agreement may include only presently owned inventory, accounts, or equipment of the debtor, not property that is subsequently acquired.

Accepted Answer

A) True 
 B)False

Question 5

Bill lends Harvey $500 and the loan is secured by Harvey's furniture.If Bill files a financing statement on January 30, 2010, how long will he keep his security interest?

Accepted Answer

A) Until July 30, 2015 
B) Until January 30, 2013 
C) Until July 30, 2015, unless a continuation statement is filed 
D) Until January 30, 2020, if a continuation statement is filed 
A) Until July 30, 2015 
B) Until January 30, 2013 
C) Until July 30, 2015, unless a continuation statement is filed 
D) Until January 30, 2020, if a continuation statement is filed

Question 6

A bond, which is an evidence of indebtedness, may serve as collateral.

Accepted Answer

A) True 
 B)False

Question 7

A security interest in fixtures, such as furnaces, central air-conditioning units, and plumbing fixtures, may not arise under UCC Article 9 since fixtures have become so related to real property that an interest in them arises under real estate law.

Accepted Answer

A) True 
 B)False

Question 8

Beth recently purchased a stereo system for her apartment and a new sailboat.She financed the purchases with XYX Finance Co.Under the Code, these items are classified as:

Accepted Answer

A) consumer goods. 
B) equipment. 
C) inventory. 
D) real property. 
A) consumer goods. 
B) equipment. 
C) inventory. 
D) real property.

Question 9

Jack and Karin are cosureties on a debt owed by Lyle to Mike.If Lyle's debt becomes due and he and Karin both refuse to pay it, Jack may bring an action in equity against Karin to obtain an order requiring her to pay her share of the debt.

Accepted Answer

A) True 
 B)False

Question 10

As a general rule, for purposes of attachment of a security interest, a debtor is deemed to have rights in collateral that she:

Accepted Answer

A) owns. 
B) has in her possession. 
C) is in the process of acquiring from a seller. 
D) All of these. 
A) owns. 
B) has in her possession. 
C) is in the process of acquiring from a seller. 
D) All of these.

Question 11

If a financing statement in movable property is properly filed and the debtor moves to another state, the security interest remains perfected if the financing statement is filed in the new state within four months of the move.

Accepted Answer

A) True 
 B)False

Question 12

Article 9 applies to secured transactions in both real and personal property.

Accepted Answer

A) True 
 B)False

Question 13

Under most circumstances, a creditor who files a completed financing statement can be assured that the security interest is perfected.

Accepted Answer

A) True 
 B)False

Question 14

A bond which guarantees the performance of the terms of a contract is a(n) bond.

Accepted Answer

A) judicial 
B) official 
C) performance 
D) fidelity 
A) judicial 
B) official 
C) performance 
D) fidelity

Question 15

Which of the following is NOT included in the rules of priority established by Article 9?

Accepted Answer

A) A creditor with a perfected security interest has superior rights in the collateral over a creditor with an unperfected security interest 
B) Conflicting perfected security interests rank according to priority in time of filing or perfection 
C) As long as conflicting security interests are unperfected, the first to attach has priority 
D) Security interests are ranked in order by date of obligation (oldest debts have first priority.) 
A) A creditor with a perfected security interest has superior rights in the collateral over a creditor with an unperfected security interest 
B) Conflicting perfected security interests rank according to priority in time of filing or perfection 
C) As long as conflicting security interests are unperfected, the first to attach has priority 
D) Security interests are ranked in order by date of obligation (oldest debts have first priority.)

Question 16

Mr.Chickilini is a surety for Wayne on a debt owed to Melvin.If Wayne fails to pay, what defenses might Mr.
Chickilini have to avoid payment of the debt?

Accepted Answer

Possible defenses include: (a) that Melv

Question 17

A discharge of the principal debtor's obligation in bankruptcy does not discharge the surety's liability to the creditor
on that obligation.

Accepted Answer

A) True 
 B)False

Question 18

Authentication of a security agreement may occur by the debtor's encrypting a record in part, with the present intent of the authenticating party's accepting the record.

Accepted Answer

A) True 
 B)False

Question 19

Rodrigo lends money to Isaac on Linda's promise to act as a surety.Rodrigo's extension of credit is the consideration to support Isaac's promise to repay the loan and Linda's suretyship undertaking.

Accepted Answer

A) True 
 B)False

Question 20

The delivery of personal property to a creditor as security for the payment of a debt is:

Accepted Answer

A) perfection. 
B) a pledge. 
C) attachment. 
D) a general intangible. 
A) perfection. 
B) a pledge. 
C) attachment. 
D) a general intangible.

Exam 37: Secured Transactions and Suretyship

Gary owns and operates a farm and a farm machinery dealership.Under the Code, a new tractor that Gary has for sale at his dealership is classified as:

In which of the following situations would the buyer not qualify as "buyer in the ordinary course of business"?

A security agreement may include only presently owned inventory, accounts, or equipment of the debtor, not property that is subsequently acquired.

Bill lends Harvey $500 and the loan is secured by Harvey's furniture.If Bill files a financing statement on January 30, 2010, how long will he keep his security interest?

A bond, which is an evidence of indebtedness, may serve as collateral.

A security interest in fixtures, such as furnaces, central air-conditioning units, and plumbing fixtures, may not arise under UCC Article 9 since fixtures have become so related to real property that an interest in them arises under real estate law.

Beth recently purchased a stereo system for her apartment and a new sailboat.She financed the purchases with XYX Finance Co.Under the Code, these items are classified as:

Jack and Karin are cosureties on a debt owed by Lyle to Mike.If Lyle's debt becomes due and he and Karin both refuse to pay it, Jack may bring an action in equity against Karin to obtain an order requiring her to pay her share of the debt.

As a general rule, for purposes of attachment of a security interest, a debtor is deemed to have rights in collateral that she:

If a financing statement in movable property is properly filed and the debtor moves to another state, the security interest remains perfected if the financing statement is filed in the new state within four months of the move.

Article 9 applies to secured transactions in both real and personal property.

Under most circumstances, a creditor who files a completed financing statement can be assured that the security interest is perfected.

A bond which guarantees the performance of the terms of a contract is a(n) bond.

Which of the following is NOT included in the rules of priority established by Article 9?

Mr.Chickilini is a surety for Wayne on a debt owed to Melvin.If Wayne fails to pay, what defenses might Mr. Chickilini have to avoid payment of the debt?

A discharge of the principal debtor's obligation in bankruptcy does not discharge the surety's liability to the creditor on that obligation.

Authentication of a security agreement may occur by the debtor's encrypting a record in part, with the present intent of the authenticating party's accepting the record.

Rodrigo lends money to Isaac on Linda's promise to act as a surety.Rodrigo's extension of credit is the consideration to support Isaac's promise to repay the loan and Linda's suretyship undertaking.

The delivery of personal property to a creditor as security for the payment of a debt is:

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