Deck 11: Banking Disagreements and Secured Transactions

Question 1

Max Shell borrows money from a bank to finance his clothing business. He signs a demand loan. After 10 year of operating his business and making regular payments on his line of credit, he begins to experience financial difficulty. The bank gets nervous and calls in the loan. Max meets with the bank manager and asks for time to raise the money. The manager says, "Sorry, Max, business is business." Max leaves the bank, returns to the store, and finds a bank-appointed receiver in charge. Is there anything Max can do?

A)No. A demand loan means that the bank can demand repayment at any time.
B)No. Max would have been better off signing a term loan rather than a demand loan, since he would then have had to the end of the term to come up with the money.
C)Yes. The bank did not act in good faith and the courts will apply principles of equity.
D)Yes. Even though this was a demand loan, the bank was obliged to give Max a reasonable amount of time to meet the demand.
E)Both A and B

Answer 1

D

Question 2

A clause that states that a bank can make a major change to the terms of a guarantee as it may see fit and the bank does not have to give notice or get the consent of the guarantor is

A)illegal
B)is legal if the bank gives the guarantor notice of the change but their consent is not needed
C)is legal only if the bank gets the guarantor's consent
D)unenforceable if guarantor has repaid most of the debt already
E)a material variation clause

Answer 2

E

Question 3

Which of the following is a defence to an action on a guarantee?

A)Misrepresentation
B)Non est fatum
C)Lack of independent legal advice
D)Both A and B
E)All of the above

Answer 3

E

Question 4

Pierre Dupuis was the sole shareholder of Sports Trophies Inc. and the business borrowed $500,000 from the TD Bank. Pierre personally guaranteed the loan to the business. The business did well and Peter then sold the business to Jim Hall. Sports Trophies several years later ran into financial difficulties and couldn't make the loan payments to the TD bank. The TD now can

A)hold Pierre personally liable for the Sports Trophies debt
B)hold only Jim personally liable for the debts of Sports Trophies
C)hold both Pierre and Jim personally liable for the debts of Sports Trophies
D)not require neither Pierre nor Jim to repay Sports Trophies debts
E)can only hold Pierre liable for the amount Sports Trophies owed at the time he sold the business

Question 5

You are the account manager of a bank. Your customer, Hank Arbuthnot, applies for an increase in the line of credit for his business. He offers a mortgage on his cottage as security. You know that Hank is married. Which of the following is FALSE?

A)You should obtain a personal guarantee from Hank
B)You should obtain a personal guarantee from Hank's wife.
C)If the cottage is registered only in Hank's name, you needn't worry about getting a consent to the mortgage from Hank's wife
D)If you insist on a guarantee from Hank's wife, you should ensure that she receives independent legal advice.
E)If the cottage is registered in both Hank's and his wife's name, you must obtain her consent to the mortgage.

Question 6

What does a continuing guarantee clause in a standard form bank guarantee form means?

A)The guarantor will be liable for any future money lent by the bank to the principal debtor.
B)The guarantor will not be liable for repayment if she gives notice to that effect to the bank.
C)The common law rules respecting guarantees do not apply
D)Both A and C
E)Both B and C

Question 7

Juanita Salazar signs a standard from bank guarantee form containing a continuing guarantee clause for her husband Carlos. Which of the following is TRUE?

A)Juanita is called a guarantor.
B)Juanita is called the indemnifier
C)Carlos is called the principal debtor
D)Both A and C
E)Both B and C

Question 8

Which of the following is a negotiable instrument?

A)Guarantee
B)Cheque
C)Promissory Note
D)B and C
E)A and C

Question 9

Grace Pack has a personal account at the CIBC Bank. She receives monthly statements with supporting cancelled cheques, and notices one is forged. A note on her statement says that all errors must be reported in 30 days after receipt of the statement or the bank is not responsible. She leaves on vacation and reports the error 45 days later on her return. Does the bank have to reimburse her?

A)No, because banks are not liable for forged cheques.
B)No, because the limitation clause is binding
C)Yes, because the limitation clause is not effective in a consumer transaction
D)Yes, because the limitation period was suspended while Grace was out of the country
E)Both A and B

Question 10

The difference between a guarantee and an indemnity is that

A)the guarantor has unlimited liability for any debts of the prinicipal debtor
B)the person who signs the indemnity can be called on before the principal debtor to repay the debt
C)the person who signs the indemnity has unlimited liability for any debts of the principal debtor
D)the person who signs the guarantee can be called on before the principal debtor to repay the debt
E)there is no difference between a guarantee and an indemnity

Question 11

Carol Crowe and Sheryl Stowe signed a standard form bank guarantee for Joseph Fine and limited their liability to $48,000. Fine is now in default, owing $60,000 to the Bank. Which of the following is TRUE? (Ignore interest and other chargers)

A)Carol's liability is limited to $24,000
B)Carol's liability is limited to $30,000
C)Carol's liability is limited to $48,000
D)If it so chooses, the Bank can proceed against Carol only
E)Both C and D

Question 12

Which of the following statements is FALSE? Pay day loan companies

A)specialize in small unsecured loans to individuals
B)can be regulated by provincial legislation
C)can charge greater than the criminal annual rate of interest
D)have become major lenders for home mortgages
E)have become a large industry in Canada

Question 13

Lamar Carler writes a cheque for $10,000 to Leonard Wilkens for renovation work. Lamar endorses the reverse side of the cheque "not negotiable." Leonard endorses the cheque to the bank as payment for his loan. The renovation work is defective and costs $5,000 to repair. The bank had no notice of the defective work. Lamar refuses to pay the bank on the cheque. Which of the following is TRUE?

A)The bank was a holder in due course and can seek payment in full from Lamar.
B)The bank was not entitled to cash the cheque because there was a restriction on its negotiability
C)The bank was a holder in due course without notice
D)Lamar and Leonard are jointly liable as both signed on the cheque
E)Lamar cannot set off the costs of repair against the bank

Question 14

If you sign a standard bank guarantee form, for which of the following would you be liable?

A)All debts and liabilities at any time owing by the principal debtor to the Bank.
B)Loans made by the Bank to the principal debtor now or in the future, which remain unpaid
C)Interest and legal costs
D)No more than the loan advanced at the time you signed the guarantee
E)A, B, and C

Question 15

On a cheque, the bank is the:

A)Payor
B)Drawee
C)Drawer
D)Payee
E)Creditor

Question 16

You have $240,000. You deposit half in a branch of the Royal Bank and half in a branch of TD Canada Trust. There is a great depression, and both the Royal Bank and TD Canada Trust are unable to pay their depositors. Fortunately, the Canada Deposit Insurance Company still has sufficient funds to pay its insured. Which of the following is TRUE?

A)The $120,000 you deposited in each institution is insured and CDIC will pay you $240,000
B)CDIC will only pay you for money if it was deposited in a savings accounts at both banks but not money that was in chequing accounts
C)CDIC will pay you $100,000 for the deposit in the Royal Bank
D)CDIC will pay you $100,000 for the deposit in TD Canada Trust
E)Both C and D

Question 17

Roger Ho signs a guarantee form for a bank loan for Melissa Ryan for $10,000. The bank's standard form contains a continuing guarantee clause. Melissa pays down the loan $5,000, then borrows another $7,000 - making the loan $12,000 - and then she defaults. Which of the following amounts does Ho have to pay?

A)$5,000
B)$7,000
C)$10,000
D)$12,000
E)None of the above

Question 18

Ray Huang signs a cheque on his account at the TD Bank to Maria Razen. Which of the following is true?

A)The TD Bank is the drawer
B)Ray Huang is the drawer
C)The TD Bank is the drawee
D)Both A and B
E)Both B and C

Question 19

A financial arrangement in which a third party is liable if the main debtor defaults on the loan is called:

A)a collateral agreement
B)a third party accommodation
C)a guarantee
D)an assignment
E)a third party loan

Question 20

Mark Perez signs a standard form guarantee for a $60,000 loan his brother Fred gets from a bank. Fred later incurs a credit card debt to the Bank for a further $4,500. Fred also later guarantees a loan of $5,000 from the bank to his wife, who goes bankrupt. Fred pays back $30,000 on his loan and then goes bankrupt. For what principal amount is Mark liable as a result of the guarantee?

A)$30,000
B)$34,500
C)$35,000
D)$39,500
E)$48,000

Question 21

A document in which the bank guarantees to pay a specific amount of money when a particular even takes place is called

A)a guarantee
B)an indemnity
C)a letter of credit
D)promissory note
E)negotiable instrument

Question 22

Which of the following contract offenses are available for the drawer of a cheque against a holder in due course?

A)Misrepresentation
B)Mistake
C)Undue Influence
D)Duress
E)None of the above

Question 23

Gage advised his bank to stop payment on a cheque that he had written in favour of Dennis Waters. Gage identified the cheque as written to Dennis Waters for $43, 250. The cheque was in fact written for $43, 025 and because of this the bank's computer system missed the cheque and the money was paid out to Dennis. Which of the following statements is TRUE?

A)Gage can obtain punitive damages against the bank
B)the bank is liable to reimburse Gage for the money paid out on the cheque.
C)the bank is not liable as the bank's forms indicated it was not liable if the stop payment request was not completed accurately
D)the bank is liable and must reimburse Gage for the money paid out on the cheque only if Dennis committed fraud in cashing it.
E)The bank and Gage are each 50% liable for the error

Question 24

What is the term given to a specification that a cheque can only be deposited to a particular account in the name of the payee:

A)Specified limitation
B)Restrictive endorsement
C)Executory direction
D)Key endorsement
E)Key direction

Question 25

Ellen Bernstein wrote a cheque to Franz Dopier for $500,000 and was nervous that the cheque might get stolen and someone else may try to cash the cheque. Ellen should

A)have post-dated the cheque
B)have written "for deposit only" on the cheque
C)have given a promissory note instead
D)have given a bank draft instead
E)have restricted the time frame in which the cheque could be deposited

Question 26

Tracy had a bank card and used the year she was born in as her PIN number (1990). Tracy lost her wallet including her bank card and the person who found it used her bank card to withdraw $3,000 from her account before she realized it was missing. The bank

A)will have to reimburse Tracy for $3,000
B)will have to reimburse Tracy for $2,950
C)will have to reimburse Tracy for $2,900
D)will have to reimburse Tracy for $1,500
E)will not have to reimburse Tracy for anything as her PIN number was too obvious

Question 27

Which of the following does not belong in the group?

A)A cheque
B)A promissory note
C)A letter of credit
D)An IOU
E)Both C and D

Question 28

Which of the following statements is FALSE?

A)most banks will refuse to honour a cheque four months after its date
B)an endorsement occurs when a payee signs a cheque over to another party
C)it is very difficult to get a bank to stop payment on a certified cheque
D)a bank can be liable if it refuses to honour a certified cheque
E)a cheque can be signed and dated for payment in the future

Question 29

Who has the responsibility for marking "consumer note" on a promissory note used in a consumer transaction?

A)The vendor
B)The bank
C)The holder in due course
D)third party receiving the note
E)The purchaser

Question 30

Po Hung gives a cheque for $10,000 to Connected Construction Inc. as a down payment on a renovation project to his building. Connected Construction signs the cheque over to its bank to pay a bank loan of $10,000. Connected Construction only does $5,000 worth of the work and disappears. The bank has cashed the cheque and the full $10,000 has been taken out of Po Hung's account. Which of the following is true?

A)Po Hung can recover $10,000 from the bank.
B)Po Hung can recover $5,000 from the bank
C)Po Hung can recover nothing from the bank
D)The bank and Po Hung must split the loss of $5,000 equally
E)Po Hung cannot successfully sue Connected Construction Inc. for any money

Question 31

Jerrold Williams buy a car for personal use on credit from Junk Yard Dog Auto Sales. Jerrold gives JYD Auto Sales a promissory note for the value of the car. The note is marked "customer note". JYD assigns the note to Sure Finance. The car is defective and Jerrold refuses to pay Sure Finance. It sues him on the note. Which of the following is TRUE?

A)As a promissory note is a negotiable instrument, Jerrold cannot set off the cost of the car repair against a claim on the note.
B)Because the promissory note is marked as part of a consumer transaction, Jerrold can set up the cost of repairing the defects against the amount owing on the note.
C)Because Sure Finance is a holder in due course, the cost of repair cannot be set up against its claim on the note.
D)Because this was a consumer transaction and Jerrold did not receive independent legal advice, Sure Finance cannot sue him on the note.
E)Both A and C

Question 32

Ray Patel, a local DJ, bought sound equipment from Backstage Equipment Inc. and paid by three post-dated cheques of $10,000 each. Backstage took out a loan for $30,000 and endorsed the cheques to its bank as security for the loan. The equipment totally failed and Patel wants to stop payment against the bank. Will he be successful?

A)Yes, because the equipment did not work.
B)Yes, if he put a stop payment before the due dates on the cheques
C)No, because the bank is a holder in due course.
D)No, because the bank actually lent $30,000 to Backstage.
E)No, because the bank has a loan agreement with Backstage.

Question 33

Anthony Calate writes a cheque on his bank account at the Royal Bank to Geri-Anne Ellis. Geri-Anne signs the back of the cheque "pay to Mark Tjan" and gives it to him.

A)Geri-Anne Ellis is the Payee
B)Mark Tjan is the holder in due course
C)Mark Tjan is the drawee
D)Both A and B
E)All of the above

Question 34

Which of the following is TRUE?

A)A holder in due course takes a negotiable instrument subject to the defences that could be raised between the primary parties to the instrument.
B)A third party receiving a promissory note cannot become a holder in due course.
C)A holder in due course may acquire a greater right in a negotiable instrument than the original parties.
D)Marking a cheque in a consumer transaction with the words "consumer note" eliminates the defences that could be raised by the original parties to the cheque.
E)A bill of exchange is negotiable but not necessarily transferable.

Question 35

Ami writes a cheque on his account at the Bank of Credit and Commerce to Karma Architects, Inc. for plans for a new house. Karma endorses the back of the cheque, "payable to the RBS bank" and hands it over to the bank. Which of the following statements is TRUE?

A)Ami is the endorser
B)Karma Architects, Inc. is the drawer
C)The RBS Bank is a holder in due course
D)Karma Architects, Inc. is the first holder in due course
E)The Bank of Credit and Commerce is the payee

Question 36

In accordance with the Bills of Exchange Act, in which of the following transactions will a consumer note be created:

A)Jennifer a housewife, signs a a promissory note in favour of her neighbour Dan in exchange for a loan from him.
B)Jasper buys a car and gives the car dealership 10 post dated cheques to cover the payments over a 10 month period.
C)Mary buys a new sofa from a retail store and writes a cheque as payment.
D)B and C
E)All of the above

Question 37

Which of the following need NOT be immediately paid by a bank?

A)A cheque dated more than 2 months prior to the date it is presented for payment.
B)A post dated cheque presented early
C)A bill of exchange marked "payable at sight"
D)Both A and B
E)Both B and C

Question 38

Luigi Tartini attends at his bank with a cheque and signs the back in front of the teller. This drawer of the cheque was Anothony Blair. Blair had endorsed the cheque, "for deposit only to the account of Michel Jones". Which of the following is TRUE?

A)Luigi has acknowledged receiving the amount of the cheque from the teller.
B)The bank will not pay this cheque to Luigi
C)Luigi is entitled to be paid the amount of the cheque as he is the bearer of it
D)Both A and B
E)Both A and C

Question 39

Which of the following is an example of embezzlement?

A)A customer takes $10 of the bank's money which the teller has carelessly left on her desk.
B)A person threatens a teller with a gun and forces the teller to hand over $100
C)A customer takes $100,000 of the bank's money which the teller has carelessly left on her desk.
D)The teller steals $100 of the bank's money out of her drawer
E)Both A and C

Question 40

Jeff had VISA card with a chip in it stolen from his wallet. The pin number on the card was 9471 which was the last four digits of his grandmother's phone number. The thief made $2,000 worth of fraudulent transactions on the card before the theft was discovered and the card was cancelled. The agreement Jeff had signed when he got the VISA card was the standard banking agreement. Which of the following statement is TRUE?

A)Jeff would only be liable for $50
B)Jeff would be liable for $100
C)Jeff would be liable for $500
D)Jeff would be liable for $1,000
E)Jeff would be liable for $2,000

Question 41

Goldhar & Nemoy, a law firm, leases a fax machine from QED Business Machines. The principal is $5,000 and the interest over the five-year term of the lease is $1,000, so that G & M's monthly payment are $100 for 60 months. The lease provides that if any payment is missed, the entire balance of the lease becomes due, and QED may repossess the machine. G & M makes the first 12 payments, then defaults. QED repossesses the machine and immediately re-leases it to another company on the same terms. It sues G&M for $4,800. Which of the following statements is TRUE?

A)This lease contains an acceleration clause which permits QED to sue for the full balance owing after a default?
B)G&M may be able to defend on the basis that the acceleration clause is a penalty.
C)If the acceleration clause is struck down, QED's damages will be limited to the expenses of repossessing and re-leasing the machine.
D)All of the above are true.
E)None of the above are true.

Question 42

What is the name given to a security arrangement in which all the personal property of the business are pledged as collateral?

A)general security agreement
B)mortgage
C)chattel mortgage
D)personal property security arrangement
E)conditional sale

Question 43

Tommy Thompson has a small mail order business. He wants to borrow $10,000 from his friend Ziggy Harris. Tommy says that he will give Ziggy the right to collect on accounts customers owe him. What is the arrangement called?

A)a chattel mortgage
B)a debenture
C)an assignment of accounts receivable
D)a general security agreement
E)a floating charge

Question 44

Which of the following is an example of a conditional sale?

A)Black's Autos sells a car to Andy Delmore, with a term that ownership doesn't transfer until the last payment.
B)Black's Autos sells a car to Andy Delmore and Delmore gives Black's a lien on the car until the last payment is made.
C)Black's Auto leases a car to Andy Delmore who has the right to buy the car at the end of the lease.
D)Black's Autos sells a car to Andy Delmore with a term that Black's has a floating charge on the car.
E)Black's Autos sells a car to Andy Delmore and assigns the debt to a finance company.

Question 45

Collateral is:

A)any property of a debtor
B)property pledged as security for a loan
C)a loan given to a debtor
D)a deposit given on the purchase of a motor vehicle
E)property acquired by a debtor

Question 46

Tina Sommers borrows $10,000 from Freddy Gomez and gives him a chattel mortgage on her car and a chattel mortgage on her boat as security. Freddy registers the chattel mortgage on the car, but forgets to register the one on the boat. Tina sells the car and the boat to Betty Stover who knows nothing of either chattel mortgage. Which, if any, of the chattel mortgages is enforceable?

A)The one on the car
B)The one on the boat
C)Both A and B
D)Neither A nor B
E)Freddy will have to negotiate with Betty to determine if any of the chattel mortgages is valid

Question 47

Which of the following statement(s)is/are TRUE?

A)Collateral is security provided to a lender.
B)Intangible property has no physical presence
C)Because collateral is provided as security, it is not subject to the laws affecting property.
D)Both A and B
E)All of the above

Question 48

Which of the following options may be available to a lessee against whom an acceleration clause in a lease has been triggered?

A)The validity of the clause may be challenged in court on the basis of non est factum
B)The validity of the clause may be challenged on the basis that it is inequitable
C)The validity of the clause may be challenged on the basis that it is a penalty
D)The validity of the clause may be challenged in court on the basis of mistake
E)The validity of the clause cannot be challenged.

Question 49

What must a creditor, who has taken security from a debtor, do to ensure being repaid before (have priority over)any other creditors?

A)It must have notified unsecured creditors
B)The debtor must not be engaged in bankruptcy proceedings.
C)The security must have been registered
D)The security must be in relation to tangible property
E)The court will decide who gets repaid first based on who is owed the most money

Question 50

Which of the following is NOT an example of intangible property?

A)a computer
B)accounts receivable
C)trade secret
D)copyright
E)patent

Question 51

Delores Del Rio bought a packing machine for her business from Ace Machines and paid cash on delivery. Ace had previously given a chattel mortgage on the machine to the bank, which had registered it under the Personal Property Security Act. A bailiff tried to repossess the machine on behalf of the bank. Which of the following is TRUE?

A)The chattel mortgage is not effective because Delores paid for the machine in full.
B)The chattel mortgage is not effective because Delores did not know of it when she purchased the machine.
C)The chattel mortgage is effective
D)You cannot register a chattel mortgage under the PPSA
E)Both A and B

Question 52

On February 1, Futuristic Electronics sells and delivers $10,000 worth of computer parts to Martin Business Systems to be paid for on March 1. On February 2, Martin's ceiling leaks requiring immediate repair worth $10,000. Lewis Kuhn, the contractor, refuses to do this work without security, so Martin gives Kuhn a chattel mortgage on the computer parts to get the work done. Unfortunately, Martin goes bankrupt and does not pay Futuristic. Futuristic wants to take the computer parts back, while Kuhn wants to seize them under his chattel mortgage. Which of the following is TRUE?

A)The chattel mortgage is not enforceable because Martin has not paid for the parts and therefore Futuristic still owns them.
B)The chattel mortgage is enforceable because ownership (title)passed on delivery of the computer parts to Martin's premises.
C)The chattel mortgage is not enforceable as it is the wrong security instrument - a general security agreement should have been used.
D)The chattel mortgage is not enforceable because it was taken subsequent to Futuristic's security interest in the property - i.e. the earlier security takes priority.
E)The chattel mortgage is not enforceable because Futuristic has an automatic purchase money security interest in the equipment.

Question 53

A business arrangement in which the seller retains legal title to property pending payment of the purchase price but delivers possession of it to the purchaser is called:

A)a chattel mortgage
B)a licence
C)a conditional sale
D)an assignment
E)a mortgage

Question 54

Rodney, a bailiff, has been authorized to repossess farm machinery from John. When Rodney arrives at John's house, he discovers that John and his family are all on vacation and that the machinery is locked in a storage shed. What can Rodney do?

A)He can get a locksmith to come and open the door
B)He can alternatively seize other equipment which is lying about the property
C)He can seize John's car until John returns and surrenders the equipment.
D)He must get a court order authorizing him to enter the shed
E)He can force open the garage door and remove the car

Question 55

Which of the following types of security agreements can be utilized by a bank that wishes to take a security interest in both the manufacturing equipment and accounts receivable of a borrower?

A)conditional sale
B)assignment of accounts receivable
C)general security agreement
D)chattel mortgage
E)guarantee

Question 56

Why is it important to effect timely registration of a security interest?

A)It avoids the need to complete and file a disclosure statement
B)It is a pre-requisite to a creditor being able to enforce the debt against the debtor
C)It affects the creditor's tax liability
D)The order of registration determines the order of priority of creditors
E)All of the above

Question 57

What is another name for collateral?

A)unregistered lien
B)guarantee
C)security
D)debt
E)indemnity

Question 58

A chattel mortgage is:

A)a pledge of real property
B)security on inventory
C)a general security agreement
D)a lien on personal property pledged as security for a loan
E)an assignment of intellectual property

Question 59

Sam Levenson lent $50,000 to Mort's Auto Sales Limited, a used car retailer. Sam took a chattel mortgage on each of the 10 vehicles on Mort's lot and registered them under the PPSA. Mort's Auto Sales sold the cars to 10 different customers and said nothing about the chattel mortgages to those customers. Mort paid other creditors. Sam received no payment and wants to enforce the chattel mortgage. Which of the following is TRUE?

A)The chattel mortgages are not enforceable against the customers because of the retail sales exemption.
B)The chattel mortgages are enforceable because they were all properly registered under the PPSA.
C)The chattel mortgages are enforceable even though the customers did not know of them.
D)The chattel mortgages are not enforceable against the customers because they did not have notice of them.
E)Both B and C

Question 60

A receiver is:

A)a name of one position on the board of directors.
B)an officer of a corporation who reports to the CEO
C)a person elected by shareholders at a special meeting
D)a person appointed at the instance of a creditor to take over the assets of the corporation.
E)none of the above

Question 61

A guarantor can limit the amount owing as of a specific date by giving written notice to the bank.

Question 62

A bank must pay monies due under a letter of credit even when its customer disputes
whether the specified event giving rise to payment has occurred.

Question 63

Carol's mother died and Carol inherited a lot of large valuable antique furniture. Carol does not have any room in her apartment for this furniture so she wants to sell it. She goes to Elite Antiques, a well-known antique store and they agree that Carol can put the furniture in their store and Elite will try to sell the furniture. If the furniture sells Elite will get 40% of the sale price and Carol will get 60%. This is an example of

A)a financing lease
B)a consignment
C)an assignment
D)a conditional sales contract
E)a receivership

Question 64

A holder in due course may acquire greater rights to a negotiable instrument than the
immediate parties.

Question 65

If a supplier wants to be able to repossess goods if they are not paid for them they should

A)register a floating charge
B)register a conditional sales contract
C)register a PMSI
D)have the purchaser sign a personal guarantee
E)have the purchaser do an assignment of goods

Question 66

A guarantor does not have to pay on the guarantee if they did not get part of the loan.

Question 67

Which of the following statements is FALSE? A receiver

A)has the power to run the business
B)can take control of a company's assets and sell them off
C)does not have to be appointed by a court
D)that sells assets must try to get a reasonable commercial value for them
E)can get its power under the terms of a general security agreement

Question 68

Personal property includes both tangible and intangible property.

Question 69

The most convenient document for a bank to use to get a security interest in a wide range of assets of a business when the bank makes a large business loan is a(n)

A)mortgage
B)assignment of book debts
C)general security agreement
D)financing lease
E)consignment

Question 70

Cheques can be paid only to the party named on the face of the instrument.

Question 71

Which of the following statements is FALSE? A debenture

A)is a corporate bond
B)provides security over a corporation's personal property
C)provides security over a corporation's real property
D)is a form of equity financing
E)has a floating charge that can attach to assets if the corporation defaults on its payments

Question 72

The holder in due course is not entitled to payment on a consumer note when the drawer can establish a good defence against the payee.

Question 73

A person who signs a guarantee agreement, undertakes to be equally liable for the loan owed by the main debtor.

Question 74

A holder in due course is anyone who comes into possession of a negotiable instrument by any means.

Question 75

If a manger steps into a company under the terms of a security agreement what can the manager NOT do?

A)take over the function of the board of directors
B)can fire all the employees with one day's notice and no compensation
C)run the company as an ongoing business
D)negotiate the sale of the business
E)the manager can do all of the above actions

Question 76

A person who signs an indemnity agreement may have to pay the debt even before the primary debtor is asked to repay the debt.

Question 77

A creditor can have their security interest perfected by

A)having the debtor sign a general security agreement
B)registering a financing statement under the PPSA
C)registering a lien with a receiver
D)giving the debtor notice they will be seizing the assets in which they have a security interest
E)selling the assets in which they have a security interest
TRUE/FALSE QUESTIONS

Question 78

Which of the following laws has a registry where any creditor can register their claims on a debtor's asset?

A)Consumer Protection Act
B)Personal Property Security Act
C)Canada Business Corporations Act
D)Sale of Goods Act
E)Bank Act

Question 79

Which of the following would NOT be registered under the PPSA?

A)a conditional sales contract
B)a PMSI
C)a chattel mortgage
D)a guarantee
E)an assignment of accounts receivable

Question 80

A borrower of money repayable on demand, must repay the loan immediately after a demand has been made.