Question 1

A guarantor's promise must be made in writing to be enforceable under the statute of frauds.

Accepted Answer

A) True 
 B)False  True

Question 2

The purpose of the deed of trust is to make it easy for the security to be liquidated.

Accepted Answer

A) True 
 B)False  True

Question 3

A surety's right to contribution means that if a surety has to pay a principal's obligation,then the surety acquires all the rights that the creditor had against the principal.

Accepted Answer

A) True 
 B)False  False

Question 4

Under which of the following contract devices does a seller usually retain title on a property until the full price for the property is paid?

Accepted Answer

A)  Mortgage 
B)  Land sales contract 
C)  Deed of trust 
D)  Strict foreclosure 
A)  Mortgage 
B)  Land sales contract 
C)  Deed of trust 
D)  Strict foreclosure

Question 5

In a land sales contract,the seller usually turns over the deed before the property is paid for.

Accepted Answer

A) True 
 B)False

Question 6

_____ of the Uniform Commercial Code sets out a comprehensive scheme for regulating security interests in personal property and fixtures.

Accepted Answer

A)  Article 3 
B)  Article 5 
C)  Article 6 
D)  Article 9 
A)  Article 3 
B)  Article 5 
C)  Article 6 
D)  Article 9

Question 7

Which of the following is true of a land contract?

Accepted Answer

A)  The buyer agrees to pay the purchase price over a period of time. 
B)  The trustee holds legal title to the property put up as security. 
C)  If a buyer defaults, the seller does not have the right to declare forfeiture. 
D)  The lender holds legal title to the property put up as security. 
A)  The buyer agrees to pay the purchase price over a period of time. 
B)  The trustee holds legal title to the property put up as security. 
C)  If a buyer defaults, the seller does not have the right to declare forfeiture. 
D)  The lender holds legal title to the property put up as security.

Question 8

Describe the distinction between a surety and a guarantor.

Accepted Answer

A surety is a person who is liable for t

Question 9

Strict foreclosure is normally limited to situations where the amount of the debt exceeds the value of the property.

Accepted Answer

A) True 
 B)False

Question 10

If a creditor allows a principal an extension of time to perform a contract,compensated sureties are relieved of liability unless they consent to the extension of time.

Accepted Answer

A) True 
 B)False

Question 11

Possessory liens give the lienholder the right to keep possession of the debtor's property:

Accepted Answer

A)  for a reasonable period of time after the debt has been paid. 
B)  until the debtor regains possession by fraud or other illegal act. 
C)  until the reasonable charges for the service have been paid. 
D)  even if possession of the goods has not been entrusted to the lienholder. 
A)  for a reasonable period of time after the debt has been paid. 
B)  until the debtor regains possession by fraud or other illegal act. 
C)  until the reasonable charges for the service have been paid. 
D)  even if possession of the goods has not been entrusted to the lienholder.

Question 12

Sheng and Min were cosureties for their friend Lei on a loan contract.When Lei failed to repay the loan within the stipulated time,Min paid the whole obligation as her surety.Min is now entitled to collect half the amount of liability from Sheng in accordance with her _____.

Accepted Answer

A)  right to contribution 
B)  right of subrogation 
C)  right to reimbursement 
D)  right to compensation 
A)  right to contribution 
B)  right of subrogation 
C)  right to reimbursement 
D)  right to compensation

Question 13

Zahra agreed to act as surety for a loan taken by her son,Rudo,from the Third National Bank.The terms of the loan provided that Rudo would pay the loan off in 12 monthly installments at 10%.If Rudo renegotiates the terms of the loan with the bank without Zahra's knowledge and is now obligated to pay the loan off in 12 monthly installments at 9%,which of the following statements is true?

Accepted Answer

A)  Renegotiation of the note by Rudo does not relieve Zahra of liability as surety because the new terms are more favorable than the original terms. 
B)  Zahra must notify the bank in writing that she no longer wishes to act as surety in order to avoid liability under the new terms. 
C)  Zahra must notify Rudo in writing that she no longer wishes to act as surety in order to avoid liability under the new terms. 
D)  Zahra is no longer obligated because her responsibilities as a surety cannot be changed without her consent. 
A)  Renegotiation of the note by Rudo does not relieve Zahra of liability as surety because the new terms are more favorable than the original terms. 
B)  Zahra must notify the bank in writing that she no longer wishes to act as surety in order to avoid liability under the new terms. 
C)  Zahra must notify Rudo in writing that she no longer wishes to act as surety in order to avoid liability under the new terms. 
D)  Zahra is no longer obligated because her responsibilities as a surety cannot be changed without her consent.

Question 14

Which of the following statements is true for unsecured credit?

Accepted Answer

A)  Only consumers use unsecured credit for their personal transactions. 
B)  The creditor may require the debtor to convey to the creditor a lien on the debtor's property. 
C)  When goods are delivered on unsecured credit, the creditor retains all rights in the goods. 
D)  The unsecured credit transaction involves maximum risk to the creditor. 
A)  Only consumers use unsecured credit for their personal transactions. 
B)  The creditor may require the debtor to convey to the creditor a lien on the debtor's property. 
C)  When goods are delivered on unsecured credit, the creditor retains all rights in the goods. 
D)  The unsecured credit transaction involves maximum risk to the creditor.

Question 15

In a deed of trust transaction,when a trustee sells the property and the proceeds generate a deficiency,the _____.

Accepted Answer

A)  borrower is relieved of all obligations to the lender 
B)  lender may sue the borrower on the debt and recover a judgment 
C)  lender may sue the trustee 
D)  trustee may sue the borrower 
A)  borrower is relieved of all obligations to the lender 
B)  lender may sue the borrower on the debt and recover a judgment 
C)  lender may sue the trustee 
D)  trustee may sue the borrower

Question 16

Which of the following statements is true of accommodation sureties?

Accepted Answer

A)  They are people paid for serving as a surety. 
B)  They are protected by the courts at a higher level than other types of sureties. 
C)  They must show that they will be harmed by an extension of time before they are relieved of responsibility. 
D)  They are professional companies that take payment for acting as a surety. 
A)  They are people paid for serving as a surety. 
B)  They are protected by the courts at a higher level than other types of sureties. 
C)  They must show that they will be harmed by an extension of time before they are relieved of responsibility. 
D)  They are professional companies that take payment for acting as a surety.

Question 17

The common law lien and most of the statutory liens are known as possessory liens.

Accepted Answer

A) True 
 B)False

Question 18

If Jack and Victor were cosureties for John,Jack's right to reimbursement would include:

Accepted Answer

A)  the right to any collateral in the possession of the creditor. 
B)  the right to recover from the principal the costs paid on the principal's obligation. 
C)  the right to share the costs paid with Victor. 
D)  all the rights that the creditor had. 
A)  the right to any collateral in the possession of the creditor. 
B)  the right to recover from the principal the costs paid on the principal's obligation. 
C)  the right to share the costs paid with Victor. 
D)  all the rights that the creditor had.

Question 19

If several people act as cosureties for a principal and one of them had paid the principal's debt,the cosurety who paid the debt has a claim against the other cosureties because of his or her:

Accepted Answer

A)  right of subrogation. 
B)  right to contribution. 
C)  right of strict foreclosure. 
D)  right to reimbursement. 
A)  right of subrogation. 
B)  right to contribution. 
C)  right of strict foreclosure. 
D)  right to reimbursement.

Question 20

Define strict foreclosure.

Accepted Answer

Foreclosure is the process by which any

Exam 42: Introduction to Security

A guarantor's promise must be made in writing to be enforceable under the statute of frauds.

The purpose of the deed of trust is to make it easy for the security to be liquidated.

A surety's right to contribution means that if a surety has to pay a principal's obligation,then the surety acquires all the rights that the creditor had against the principal.

Under which of the following contract devices does a seller usually retain title on a property until the full price for the property is paid?

In a land sales contract,the seller usually turns over the deed before the property is paid for.

_____ of the Uniform Commercial Code sets out a comprehensive scheme for regulating security interests in personal property and fixtures.

Which of the following is true of a land contract?

Describe the distinction between a surety and a guarantor.

Strict foreclosure is normally limited to situations where the amount of the debt exceeds the value of the property.

If a creditor allows a principal an extension of time to perform a contract,compensated sureties are relieved of liability unless they consent to the extension of time.

Possessory liens give the lienholder the right to keep possession of the debtor's property:

Sheng and Min were cosureties for their friend Lei on a loan contract.When Lei failed to repay the loan within the stipulated time,Min paid the whole obligation as her surety.Min is now entitled to collect half the amount of liability from Sheng in accordance with her _____.

Which of the following statements is true for unsecured credit?

In a deed of trust transaction,when a trustee sells the property and the proceeds generate a deficiency,the _____.

Which of the following statements is true of accommodation sureties?

The common law lien and most of the statutory liens are known as possessory liens.

If Jack and Victor were cosureties for John,Jack's right to reimbursement would include:

If several people act as cosureties for a principal and one of them had paid the principal's debt,the cosurety who paid the debt has a claim against the other cosureties because of his or her:

Define strict foreclosure.

Law, Legal Reasoning, and the Legal Profession

Dispute Settlement

Business Ethics and Corporate Social Responsibility

Business and the Constitution

Crimes

Intentional Torts

Negligence and Strict Liability

Licensing and Intellectual Propertypart Two Contracts

The Nature and Origins of Contracts

Creating a Contract: Offers

Creating a Contract: Acceptances

Consideration

Capacity to Contract

Voluntary Consent

Illegality

The Form and Meaning of Contracts

Third Parties Contract Rights

Performance and Remediespart Three Sales

Formation and Terms of Sales Contracts

Warranties and Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contractspart Four Agency and Employment

The Agency Relationship-Creation, duties, and Termination

Liability of Principals and Agents to Third Parties

Employment Laws-Part Five Business Organizations

Which Form of Business Organization

Partnerships

Formation and Termination of Corporations

Management of the Corporate Business

Financing the Corporation and the Role of the Shareholders

Securities Regulation

Legal Liability of Accountantspart Six Property

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance-Part Seven Commercial Paper

Negotiable Instruments

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Fund Transfers-Part Eight Credit Transactions

Security Interests in Personal Property

Bankruptcy-Part Nine Government Regulation

The Antitrust Laws

Consumer Protection Laws

Environmental Regulation

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