Question 1

_____ implies that the creditor has no right to a deficiency and the debtor has no right to any surplus.

Accepted Answer

A) Foreclosure 
B) Mortgage 
C) Strict foreclosure 
D) Possessory lien 
A) Foreclosure 
B) Mortgage 
C) Strict foreclosure 
D) Possessory lien C

Question 2

Andy bought a bicycle on credit from a dealer.Andy being a minor,his father agreed to be a surety for him on the purchase.When Andy failed to repay the debt within the stipulated time,the dealer filed a lawsuit against Andy's father.What defense can Andy's father use to avoid paying the dealer?

Accepted Answer

Though Andy is a minor,Andy's father cannot use his incapacity as a defense because personal defenses of the principal cannot be used by the surety.The only way by which Andy's father can escape paying the dealer is by proving that there has been a lack or failure of consideration,inducement of the contract by fraud or duress,or breach of contract by the dealer.

Question 3

If mortgagors sell the interest in their property without the consent of the mortgagee:

Accepted Answer

A) they have acted illegally. 
B) the sale does not affect the mortgagee's interest in the property. 
C) the mortgagee will lose his/her interest in the property. 
D) the mortgagee will lose all claims against the mortgagor. 
A) they have acted illegally. 
B) the sale does not affect the mortgagee's interest in the property. 
C) the mortgagee will lose his/her interest in the property. 
D) the mortgagee will lose all claims against the mortgagor. B

Question 4

John agreed to act as surety for a loan taken by his son,Frank,from the Third National Bank.The terms of the loan provided that Frank would pay the loan off in 12 monthly installments at 10%.If Frank renegotiates the terms of the loan with the bank 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 Frank does not relieve John of liability as surety because the new terms are more favorable than the original terms. 
B) John must notify the bank in writing that he no longer wishes to act as surety in order to avoid liability under the new terms. 
C) John must notify Frank in writing that he no longer wishes to act as surety in order to avoid liability under the new terms. 
D) John is no longer obligated because his responsibilities as a surety cannot be changed without his consent. 
A) Renegotiation of the note by Frank does not relieve John of liability as surety because the new terms are more favorable than the original terms. 
B) John must notify the bank in writing that he no longer wishes to act as surety in order to avoid liability under the new terms. 
C) John must notify Frank in writing that he no longer wishes to act as surety in order to avoid liability under the new terms. 
D) John is no longer obligated because his responsibilities as a surety cannot be changed without his consent.

Question 5

The rights and liabilities of both sureties and guarantors are substantially equivalent.

Accepted Answer

A) True 
 B)False

Question 6

Under the common law,airlines were entitled to liens to secure the reasonable value of the services they perform because:

Accepted Answer

A) they provided labor to improve personal property that belongs to someone else. 
B) they provided food and lodging to their customers. 
C) they were required by law to provide the service to anyone who seeks it. 
D) they made all their profits only through such liens. 
A) they provided labor to improve personal property that belongs to someone else. 
B) they provided food and lodging to their customers. 
C) they were required by law to provide the service to anyone who seeks it. 
D) they made all their profits only through such liens.

Question 7

What is a possessory lien? Give an example.

Accepted Answer

The common law lien and most of the stat

Question 8

An employee from Dr.Don's Automobile Hospital,Inc.made a house call to Horner's home to repair his car.It was repaired in Horner's garage.When Horner defaulted on the bill,Dr.Don went to his house to take possession of the car,claiming that the corporation had a lien on the car by virtue of the work performed on it.On the basis of these facts,it can be said that:

Accepted Answer

A) the employee is entitled to the possession of the car because he was the one who performed the repairs on the car. 
B) Dr.Don is justified in his actions as the corporation did have a lien on the car by virtue of the work performed on it by its employee. 
C) the corporation has no lien on the car because the employee did not notify Horner at the time of the repairs that a lien would be claimed. 
D) the corporation has no lien on the car,because its employee came to Horner's house to make the repairs and so Horner never gave up possession of his car to Dr.Don's. 
A) the employee is entitled to the possession of the car because he was the one who performed the repairs on the car. 
B) Dr.Don is justified in his actions as the corporation did have a lien on the car by virtue of the work performed on it by its employee. 
C) the corporation has no lien on the car because the employee did not notify Horner at the time of the repairs that a lien would be claimed. 
D) the corporation has no lien on the car,because its employee came to Horner's house to make the repairs and so Horner never gave up possession of his car to Dr.Don's.

Question 9

Which of the following defenses goes to the merits of a primary contract and can be used by a surety?

Accepted Answer

A) Lack of consideration 
B) Lack of capacity 
C) Insanity 
D) Bankruptcy 
A) Lack of consideration 
B) Lack of capacity 
C) Insanity 
D) Bankruptcy

Question 10

Persons who contract to furnish labor or materials to improve real estate are not entitled to claim a lien on the property.

Accepted Answer

A) True 
 B)False

Question 11

A surety is a person who is liable for the payment of another person's debt.

Accepted Answer

A) True 
 B)False

Question 12

Amanda and Janice were cosureties for their friend Haley on a loan contract.When Haley failed to repay the loan within the stipulated time,Janice paid the whole obligation as her surety.Janice is now entitled to collect half the amount of liability from Amanda 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

In a deed of trust transaction,when a trustee sells the property and the proceeds generate a surplus:

Accepted Answer

A) it is paid to the borrower. 
B) it is paid to the lender. 
C) it is paid to the trustee. 
D) it goes to the state. 
A) it is paid to the borrower. 
B) it is paid to the lender. 
C) it is paid to the trustee. 
D) it goes to the state.

Question 14

The provider of materials or labor is not entitled to a lien:

Accepted Answer

A) if the property is a public property. 
B) if materials are not furnished for the improvement of a particular property. 
C) if the materialman is not a general contractor. 
D) if the property is under a land sales contract. 
A) if the property is a public property. 
B) if materials are not furnished for the improvement of a particular property. 
C) if the materialman is not a general contractor. 
D) if the property is under a land sales contract.

Question 15

In a deed of trust transaction:

Accepted Answer

A) the buyer agrees to pay the purchase price over a period of time. 
B) the surplus proceeds from a sale of property goes to the trustee. 
C) the trustee can sell the property at a judicial sale. 
D) the borrower deeds to the trustee the property that is to be put up as security. 
A) the buyer agrees to pay the purchase price over a period of time. 
B) the surplus proceeds from a sale of property goes to the trustee. 
C) the trustee can sell the property at a judicial sale. 
D) the borrower deeds to the trustee the property that is to be put up as security.

Question 16

This is a contract device for securing the balance due the seller on the purchase price of real estate.

Accepted Answer

A) Deed of trust 
B) Land contract 
C) Mortgage 
D) Materialman's lien 
A) Deed of trust 
B) Land contract 
C) Mortgage 
D) Materialman's lien

Question 17

A surety's right to recover his/her costs from the principal once he/she performs or pays the principal's obligations is known as ___.

Accepted Answer

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

Question 18

The owner (mortgagor)of property subject to a mortgage cannot sell the interest in the property without the consent of the mortgagee.

Accepted Answer

A) True 
 B)False

Question 19

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 20

Define strict foreclosure.

Accepted Answer

Foreclosure is the process by which any

Exam 42: Introduction to Security

_____ implies that the creditor has no right to a deficiency and the debtor has no right to any surplus.

Andy bought a bicycle on credit from a dealer.Andy being a minor,his father agreed to be a surety for him on the purchase.When Andy failed to repay the debt within the stipulated time,the dealer filed a lawsuit against Andy's father.What defense can Andy's father use to avoid paying the dealer?

If mortgagors sell the interest in their property without the consent of the mortgagee:

The rights and liabilities of both sureties and guarantors are substantially equivalent.

Under the common law,airlines were entitled to liens to secure the reasonable value of the services they perform because:

What is a possessory lien? Give an example.

Which of the following defenses goes to the merits of a primary contract and can be used by a surety?

Persons who contract to furnish labor or materials to improve real estate are not entitled to claim a lien on the property.

A surety is a person who is liable for the payment of another person's debt.

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

In a deed of trust transaction,when a trustee sells the property and the proceeds generate a surplus:

The provider of materials or labor is not entitled to a lien:

In a deed of trust transaction:

This is a contract device for securing the balance due the seller on the purchase price of real estate.

A surety's right to recover his/her costs from the principal once he/she performs or pays the principal's obligations is known as ___.

The owner (mortgagor)of property subject to a mortgage cannot sell the interest in the property without the consent of the mortgagee.

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

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 Property

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 Remedies

Formation and Terms of Sales Contracts

Warranties and Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

The Agency Relationship-Creation, Duties, and Termination

Liability of Principals and Agents to Third Parties

Employment Laws

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 Accountants

Personal Property and Bailments

Real Property

Landlord and Tenant

Estates and Trusts

Insurance

Negotiable Instruments

Negotiation and Holder in Due Course

Liability of Parties

Checks and Electronic Fund Transfers

Security Interests in Personal Property

Bankruptcy

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