Question 1

A letter of credit:

Accepted Answer

A) can be issued only by an insurance company. 
B) may be in either oral or written form. 
C) can be issued only by a bank. 
D) must be in writing and signed by the issuer. 
A) can be issued only by an insurance company. 
B) may be in either oral or written form. 
C) can be issued only by a bank. 
D) must be in writing and signed by the issuer.

Question 2

Typically, there are how many parties to a letter of credit?

Accepted Answer

A) two (2) 
B) three (3) 
C) four (4) 
D) five (5) 
A) two (2) 
B) three (3) 
C) four (4) 
D) five (5)

Question 3

When a suretyship or guaranty contract is entered into after and separate from the original transaction, there must be new consideration for the promise of the guarantor.

Accepted Answer

A) True 
 B)False

Question 4

The creditor's failure to give the surety notice of default is not a defense.

Accepted Answer

A) True 
 B)False

Question 5

The creditor first must proceed against the debtor before suing the surety.

Accepted Answer

A) True 
 B)False

Question 6

A surety may be discharged if the creditor substitutes a different debtor.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not a defense to a surety?

Accepted Answer

A) fraud practiced by the debtor of which the creditor was unaware 
B) lack of consideration 
C) lack of capacity on the part of the surety 
D) mistake 
A) fraud practiced by the debtor of which the creditor was unaware 
B) lack of consideration 
C) lack of capacity on the part of the surety 
D) mistake

Question 8

An absolute guaranty creates the same obligation as a suretyship.

Accepted Answer

A) True 
 B)False

Question 9

A guaranty of payment creates a(n):

Accepted Answer

A) contract of surety. 
B) contract of credit. 
C) letter of credit. 
D) absolute guaranty. 
A) contract of surety. 
B) contract of credit. 
C) letter of credit. 
D) absolute guaranty.

Question 10

A letter of credit usually sets a:

Accepted Answer

A) minimum money amount. 
B) maximum money amount. 
C) $500 money amount. 
D) none of the above. 
A) minimum money amount. 
B) maximum money amount. 
C) $500 money amount. 
D) none of the above.

Question 11

A letter of credit cannot extend for a period of more than five (5) years.

Accepted Answer

A) True 
 B)False

Question 12

A letter of credit must be in writing and signed by the issuer.

Accepted Answer

A) True 
 B)False

Question 13

If the creditor does not enforce the suretyship agreement within the time limits provided for such contract enforcement in the surety's jurisdiction, the obligation is forever discharged.

Accepted Answer

A) True 
 B)False

Question 14

The issuer of a letter of credit must verify that the underlying transaction has been performed.

Accepted Answer

A) True 
 B)False

Question 15

Suretyship, guaranty, and indemnity contracts all create a relationship by which one party becomes responsible for the debt or undertaking of another party.

Accepted Answer

A) True 
 B)False

Question 16

A surety that has made payment of a claim for which it was liable as a surety is entitled to which of the following from the principal?

Accepted Answer

A) indemnity 
B) exoneration 
C) assignment 
D) subrogation 
A) indemnity 
B) exoneration 
C) assignment 
D) subrogation

Question 17

If a debtor is about to leave the state, the surety may call on the creditor to take action against the debtor.

Accepted Answer

A) True 
 B)False

Question 18

When a surety pays a claim that it is obligated to pay, it automatically acquires the claim and the rights of the creditor; this is known as subrogation.

Accepted Answer

A) True 
 B)False

Question 19

A letter of credit:

Accepted Answer

A) is an advance arrangement for financing. 
B) is used only in domestic sales. 
C) is used only in international trade. 
D) involves only two parties. 
A) is an advance arrangement for financing. 
B) is used only in domestic sales. 
C) is used only in international trade. 
D) involves only two parties.

Question 20

In most states, the statute of frauds requires that contracts of guaranty be in writing to be enforceable.

Accepted Answer

A) True 
 B)False

Exam 32: Nature of the Debtor-Creditor Relationship

A letter of credit:

Typically, there are how many parties to a letter of credit?

When a suretyship or guaranty contract is entered into after and separate from the original transaction, there must be new consideration for the promise of the guarantor.

The creditor's failure to give the surety notice of default is not a defense.

The creditor first must proceed against the debtor before suing the surety.

A surety may be discharged if the creditor substitutes a different debtor.

Which of the following is not a defense to a surety?

An absolute guaranty creates the same obligation as a suretyship.

A guaranty of payment creates a(n):

A letter of credit usually sets a:

A letter of credit cannot extend for a period of more than five (5) years.

A letter of credit must be in writing and signed by the issuer.

If the creditor does not enforce the suretyship agreement within the time limits provided for such contract enforcement in the surety's jurisdiction, the obligation is forever discharged.

The issuer of a letter of credit must verify that the underlying transaction has been performed.

Suretyship, guaranty, and indemnity contracts all create a relationship by which one party becomes responsible for the debt or undertaking of another party.

A surety that has made payment of a claim for which it was liable as a surety is entitled to which of the following from the principal?

If a debtor is about to leave the state, the surety may call on the creditor to take action against the debtor.

When a surety pays a claim that it is obligated to pay, it automatically acquires the claim and the rights of the creditor; this is known as subrogation.

A letter of credit:

In most states, the statute of frauds requires that contracts of guaranty be in writing to be enforceable.

The Nature and Sources of Law

The Court System and Dispute Resolution

Business Ethics, Social Forces, and the Law

The Constitution As the Foundation of the Legal Environment

Government Regulation of Competition and Prices

Administrative Agencies

The Legal Environment of International Trade

Crimes

Torts

Intellectual Property Rights

Cyberlaw

Nature and Classes of Contracts: Contracting on the Internet

Formation of Contracts: Offer and Acceptance

Capacity and Genuine Assent

Consideration

Legality and Public Policy

Writing, Electronic Forms, and Interpretation of Contracts

Third Persons and Contracts

Discharge of Contracts

Breach of Contract and Remedies

Personal Property and Bailments

Legal Aspects of Supply Chain Management

Nature and Form of Sales

Title and Risk of Loss

Product Liability: Warranties and Torts

Obligations and Performance

Remedies for Breach of Sales Contracts

Kinds of Instruments, Parties, and Negotiability

Transfers of Negotiable Instruments and Warranties of Parties

Liability of the Parties Under Negotiable Instruments

Checks and Funds Transfers

Consumer Protection

Secured Transactions in Personal Property

Bankruptcy

Insurance

Agency

Third Persons in Agency

Regulation of Employment

Equal Employment Opportunity Law

Types of Business Organizations

Partnerships

LPS, LlCS, and LlPS

Corporate Formation

Shareholder Rights in Corporations

Securities Regulation

Accountants Liability and Malpractice

Management of Corporations

Real Property

Environmental Law and Land Use Controls

Leases

Decedents Estates and Trusts

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