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:

Under the Code,collateral is classified according to:

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.

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 Code's classifications of collateral according to nature are: (a)goods; (b)tangibles; and (c)dispensable paper.

A security interest in consumer goods is always automatically perfected upon attachment.

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

A buyer in the ordinary course of business takes collateral (other than farm products)free of any security interest created by the buyer's seller,even if the security interest is perfected and the buyer knows of its existence.

Thomas borrowed $100,000 from First Bank,which asked that he both put up collateral and provide a surety.Consequently Thomas provided the bank with a security interest in his antique car collection and asked Victor to act as a surety.Victor agreed to do so and signed a surety agreement with the bank.Thomas made several payments on the loan and then asked First Bank for permission to sell three of his cars.First Bank agreed,but it never notified Victor of the sale of the collateral.Thomas then defaults on the loan.First Bank now wants Victor to pay the remainder of the loan.Must Victor pay?

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.

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.

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?

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

If Regency Services,Inc.wishes to protect itself against the possible dishonesty of Chad,an employee who will be handling corporate funds,Regency may purchase a(n):

The types of indispensable paper include:

The promise of a surety is binding even without consideration.

Steve defaults on a car loan secured by his car and guaranteed by both Sam and Dave.Subrogation would allow Sam,who paid Steve's full obligation to:

Mary financed her 72" high-definition TV with a bank,but is now delinquent on her payments.The bank holds a security interest in the TV.In most states,when Mary is not at home and without her knowledge,bank personnel may enter Mary's home to repossess the TV.

"Attachment" occurs when a secured party gives value,the debtor has acquired rights in the collateral,and:

Upon paying the principal debtor's entire obligation,the surety is __________ the rights of the creditor.