Exam 23: Secured Transactions

Taft has entered into a security agreement with Caesar after Caesar gave him a loan.The collateral in the agreement was Taft's car.The agreement outlined that Taft should use the car in accordance with the law and that it should be fully insured during the 3-year security agreement.Furthermore,if Taft does default,he has 10 days to remedy the default before he has to hand over the car.Which of the following is false?

The Canadian Imperial Bank of Commerce has lent $100 000 to Cryo Corp,a corporation manufacturing medical equipment.Cryo carries on business in Ontario.The bank has taken a security interest in Cryo Corp's inventory under s 427 of the Bank Act.Which of the following is TRUE?

Marissa bought some used computers from Jordan Human Resources Services where she worked.She does not have to worry about there being any security interests in the computers because a security interest is only enforceable against a purchaser of collateral if they were aware of the interest at the time they purchased the collateral and Marissa is not aware of any security interests in the computers she bought from Jordan.

Destiny Drilling finances its latest operation with a general security agreement with RBC.They signed a security agreement and received the loan on August 1.RBC filled out the financing statement,but forgot to file.On December 12,Destiny required additional funding for the project,so they entered into a security agreement with CIBC,giving them rights in all their physical capital.CIBC files a one-year financing statement.On December 13 of the following year,Destiny defaults on both loans.Which of the following is true?

Albert carried on a jewellery store business in Edmonton.He borrowed $10 000 from the Bank of Edmonton.As security for the repayment of his loan,Albert had given the bank a security interest in his inventory and equipment.The bank failed to file a financing statement to register its interest.Albert sold all his gem-cutting equipment to Bruce who carried on another jewellery store business because he had decided to get out of this aspect of the business.Bruce is not aware of the bank's security interest.Which of the following statements best describes the interest of the bank in the gem-cutting equipment?

Chester owns and operates a farm.As a result of financial difficulties in Chester's past,a bank currently holds a security interest in all of Chester's after-acquired property.Unfortunately,Chester's situation recently deteriorated even further when his thresher (a type of farm vehicle)developed irreparable defects.He cannot continue on with business unless he acquires a replacement.This appears to be a problem because he has no money for the purchase price.And while he could otherwise simply purchase the new machine on credit,the bank's security interest suggests that any new security interest necessarily would rank second.Which of the following statements is TRUE?

Which of the following is TRUE? A conditional sale is

Joshua had a licence to operate a nursing home in Scarborough.Under the legislation setting up the licensing scheme,the licence was fully transferable at the request of the licensee.Indeed,licences were bought and sold all the time along with the nursing home businesses that they related to.The licence could only be revoked on limited grounds by the responsible agency of the government of Ontario,and there was a right to appeal any decision to revoke the licence.Under the licence,Joshua operated Green Acres Nursing Home.In order to finance the building of an addition to the nursing home,Joshua borrowed $75 000 from the Bank of Ontario.As security for the loan,he gave the bank a security interest in all his personal property.A few months after he received the loan,Joshua defaulted.Can the bank seize the licence along with Joshua's other personal property?

Orange Bank was going to lend Fasgo Inc $1 million.As security for the repayment of the loan,Fasgo was going to give Orange Bank a general security interest in all its present and future assets.The parties have decided that the agreements will be signed and the financing will be completed on Friday.Orange Bank should file a financing statement to register its interest a few days before the completion of the transaction because

The registration systems established under provincial personal property security laws in most provinces are superior to the systems that existed previously.Which of the following best describes why the new systems are better?

Errol contracts with XYZ Construction to build his company,OP Finance,a new high-rise office building.The building will cost $3 million.OP Finance has a very high accounts receivable balance.In order to pay XYZ,Errol arranges a loan from CIBC.Which of the following is the most desirable for CIBC?

Which of the following best describes why personal property security legislation requires that a secured party in possession of collateral act in a commercially reasonable way when disposing of it?

Marlie carries on a business of selling new and used lamps.In 2009,she obtained an operating line of credit from the Bank of Nova Scotia.Marlie gave the Bank a security interest in all her present and future assets.Jordan is a dealer in imported chandeliers.He and Marlie agree that he will give her possession of a dozen chandeliers to sell on his behalf.Marlie is not obliged to pay for the chandeliers unless she keeps them for more than 30 days.Marlie goes into default on her loan.The bank seizes all of her inventory,including the 12 chandeliers.Jordan finds out about the seizure and demands the chandeliers,saying that they are his.Is Jordan entitled to get the chandeliers back?

Kajal wanted to borrow $500 000 from a bank in order to start up a new business.Because the bank was not convinced that the business would succeed,it insisted upon having repayment of the loan guaranteed.Kajal therefore persuaded her father,Ameen to sign as guarantor.As the bank had feared,Kajal's business failed,and as a result,Kajal cannot afford to repay the entire loan.The bank therefore insists that Ameen is liable to pay as guarantor.Which of the following statements is TRUE?

In August,Shazad borrowed $20 000 from the Bank of Nova Scotia in order to finance his pool cleaning business.The bank and Shazad entered into a general security agreement under which the bank took a security interest in all of the present and future assets of Shazad.Jacqueline is a car mechanic who did some repairs in September on a truck that Shazad uses to carry on his business.The truck is still in her shop in Hamilton,Ontario.Shazad has not paid Jacqueline the $2000 bill she gave him in September for repairs to the truck,and he is in default under his loan agreement with the bank.Which of the following is TRUE?

The Bank of Nova Scotia and MMX Corp are discussing setting up a line of credit for MMX.Under the terms of the line of credit,MMX will be able to require the bank to advance it funds at any time up to an aggregate cap of $10 000.MMX will give the bank a security interest in all of its present and future assets.The parties have not yet entered into an agreement and the bank has advanced no money.The bank files a financing statement to register its interest in anticipation of the agreement being entered into.Subsequently,Melanie,the president of MMX,lends the corporation $20 000.MMX gives her a security interest in all its present and future assets.Melanie files a financing statement to register her interest.Which statement best describes the relative priority of the claims of Melanie and the bank?

Banks take collateral to secure the obligations of people who owe them money as a way to reduce the risks associated with non-payment.Having a security interest in collateral will not prevent a debtor from defaulting but will reduce the risk that the bank will be unable to recover what it is owed.

MagicBank has lent $5000 to Horwood.As security for the repayment of the loan,Horwood gave MagicBank a security interest in his car.Horwood has defaulted on his payments.He still owes $4000.MagicBank has taken possession of his car.Horwood estimates that his car is worth $3000.Which of the following is FALSE?