Exam 37: Secured Transactions and Suretyship

Bill owns and operates a farm and a farm machinery dealership. Under the Code, a new tractor that Bill uses on his farm is classified as:

The surety does not have the right of contribution from cosureties.

Elmer agreed to act as the conditional guarantor of collection on a debt of $50,000 that Fred owed to Gloria. Fred paid Elmer a premium to serve as surety. If Fred defaults on the debt, what are Gloria's rights against Elmer?

What party(ies) is/are involved in a suretyship relationship?

Automatic perfection means that:

According to the UCC, a computer purchased by a CPA for use in her office will be classified as inventory.

A debtor need not sign the financing statement.

What contractual defenses are available to those parties involved in surety relationships?

The UCC defines a debtor's rights in collateral in Article 9.

A car buyer in the ordinary course of business will take free and clear of a security interest created by any person who owned the automobile prior to the dealer.

In states which have adopted certificate of title statutes for automobiles, trailers, mobile homes, and boats, perfection of a security interest must include both filing of a financing statement and notation on the certificate of title.

Under Article 9 of the UCC, a pledge is:

If the surety is a(n) ___________, then the creditor may hold the surety liable as soon as the principal debtor defaults.

Mr. Chickilini is a surety for Wayne on a debt owed to Melvin. If Wayne fails to pay, what is Mr. Chickilini's defense to avoid payment of the debt?

Assume you are the creditor in each of the following situations. Identify the kind of security agreement that is involved in each transaction and explain how you would perfect that agreement. a. You are the creditor (Everby Bank), and you lend Brisco Gaines $5,000 for a sound system. b. First Bank loans Doris $10,000 to purchase inventory for her store. c. First Bank loans Brad $5,000 to purchase a computer network for use in his store office. d. Kevin needs cash for gambling debts. He brings in his high-definition TV to secure a $500 loan.

A defense that can only be asserted by the principal debtor is called a:

The right of exoneration allows the surety to require the principal debtor to pay his obligation to the creditor.

Which of the following is a type of collateral involving rights evidenced by indispensable paper?

Jill owns and operates a donut shop. Under the Code, the flour, sugar, and other goods used by Jill to make donuts are classified as:

The most common method of perfecting a security interest under Article 9 is filing a completed financing statement.