Exam 37: Secured Transactions and Suretyship

A purchaser of a house who buys the property "subject to" the mortgage is not personally liable for the mortgage, nor is he a surety for the mortgage obligation.

The promise of a surety is binding even without consideration.

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:

Article 9 of the UCC is flexible, simple, and it allows a variety of forms of secured financing.

Generally, when may a security interest be perfected in collateral?

What term is used to describe the creation of a security interest that is enforceable against the debtor?

Tony is a surety for Monica on a debt she owes to Francis. If Monica properly tenders full payment and Francis refuses it, both Monica and Tony are discharged from the debt.

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:

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

If the debtor is in default and the secured party wants to repossess the collateral in order to sell it, he must get a court order to do so.

Darlene uses her computer 75 percent of its usage time for her business and 25 percent of its usage time for personal and family purposes. Under Article 9, the computer would be classified as equipment.

A debtor need not sign the financing statement.

Article 9 of the UCC governs financing transactions involving security interests in real property.

If Sharpe Finance Co. has a secured interest in Jeff's car and Jeff is in default, in most states, Sharpe may take the car from in front of Jeff's house without getting a court order.

The principal debtor's lack of capacity due to his status as a minor may be used by the surety to avoid payment of the obligation.

First Finance Company filed its financing statement for a purchase money security interest in Donald's lawn tractor on March 1. Donald purchased the lawn tractor on February 21. If Donald files for bankruptcy on February 28, the trustee will have priority because the bankruptcy petition is filed before the creditor perfects.

Gary 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. Gary refused to pay the interest demanded and sued for rescission of the contract. The bank attempted to collect from Lewis, a surety under the loan. Does Lewis have to pay?

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

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

With the exception of pledges, a security agreement must: