Question 1

A common law lien essentially includes:

Accepted Answer

A)  possession by the court. 
B)  a debt to the court created by the failure of a surety to pay a creditor. 
C)  possession by the improver as well as debt created by the improvement. 
D)  an improvement which does not become a part of the property. 
A)  possession by the court. 
B)  a debt to the court created by the failure of a surety to pay a creditor. 
C)  possession by the improver as well as debt created by the improvement. 
D)  an improvement which does not become a part of the property.

Question 2

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 3

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 percent. 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 percent, 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 4

Forbearance is the method by which a court authorizes the sale of personal property subject to a lien so that the creditor can obtain the money to which he is entitled.

Accepted Answer

A) True 
 B)False

Question 5

In a deed of trust transaction, the _____.

Accepted Answer

A)  lender should sue the trustee in case of a deficiency 
B)  surplus proceeds from a sale of property goes to the trustee 
C)  lender sells the property at a judicial sale 
D)  borrower deeds to the trustee the property that is to be put up as security 
A)  lender should sue the trustee in case of a deficiency 
B)  surplus proceeds from a sale of property goes to the trustee 
C)  lender sells the property at a judicial sale 
D)  borrower deeds to the trustee the property that is to be put up as security

Question 6

Rita cosigned a promissory note for $500 at the Federal Credit Union for her friend Sue. Sue defaults on the note, and the credit union collects $500 from Rita on her suretyship obligation. Rita then not only gets the right to collect $500 from her but also gets the Federal Credit Union's rights against Sue.

Accepted Answer

A) True 
 B)False

Question 7

In which of the following cases can a surety avoid liability for a principal's default?

Accepted Answer

A)  If the principal is a minor and therefore lacks the capacity to contract 
B)  If the principal has filed for bankruptcy 
C)  If the principal is induced to contract with the seller-creditor by fraud or duress 
D)  If the principal is insane 
A)  If the principal is a minor and therefore lacks the capacity to contract 
B)  If the principal has filed for bankruptcy 
C)  If the principal is induced to contract with the seller-creditor by fraud or duress 
D)  If the principal is insane

Question 8

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

Accepted Answer

A)  The deed of trust 
B)  Mortgage 
C)  Strict foreclosure 
D)  Possessory lien 
A)  The deed of trust 
B)  Mortgage 
C)  Strict foreclosure 
D)  Possessory lien

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

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 11

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

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is true of a land contract?

Accepted Answer

A)  The seller agrees to convey the title when the full price is paid. 
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 a forfeiture. 
D)  The title to property is conveyed if partial payment has been made. 
A)  The seller agrees to convey the title when the full price is paid. 
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 a forfeiture. 
D)  The title to property is conveyed if partial payment has been made.

Question 13

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 right _____.

Accepted Answer

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

Question 14

Under strict foreclosure, the creditor has the right to a deficiency, and the debtor has the right to a surplus.

Accepted Answer

A) True 
 B)False

Question 15

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

Although Andy is a minor, Andy's father

Question 16

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

Accepted Answer

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

Question 17

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 18

Foreclosure proceedings are regulated by statute in the state in which the property is located.

Accepted Answer

A) True 
 B)False

Question 19

A guarantor is a person who:

Accepted Answer

A)  joins with the person who is primarily liable in promising to make the payment or to perform the duty. 
B)  does not join in making a promise, but makes a separate promise and agrees to be liable on the happening of a certain event. 
C)  is paid for serving as a surety, such as a bonding company. 
D)  acts as a surety without compensation, such as a friend who cosigns a note as a favor. 
A)  joins with the person who is primarily liable in promising to make the payment or to perform the duty. 
B)  does not join in making a promise, but makes a separate promise and agrees to be liable on the happening of a certain event. 
C)  is paid for serving as a surety, such as a bonding company. 
D)  acts as a surety without compensation, such as a friend who cosigns a note as a favor.

Question 20

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.

Exam 42: Introduction to Security

A common law lien essentially includes:

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?

Forbearance is the method by which a court authorizes the sale of personal property subject to a lien so that the creditor can obtain the money to which he is entitled.

In a deed of trust transaction, the _____.

In which of the following cases can a surety avoid liability for a principal's default?

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

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

Which of the following statements is true for unsecured credit?

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

Which of the following is true of a land contract?

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 right _____.

Under strict foreclosure, the creditor has the right to a deficiency, and the debtor has the right to a surplus.

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

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

Foreclosure proceedings are regulated by statute in the state in which the property is located.

A guarantor is a person who:

Which of the following is true of a land contract?

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

The Antitrust Laws

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Environmental Regulation

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