Question 1

Article 9 of the UCC governs financing transactions involving security interests in real property.

Accepted Answer

A) True 
 B)False

Question 2

First Finance Company filed its financing statement for a purchase money security interest in Donald's lawn tractor on March 1.Donald purchased the lawn tractor on February 21.If Donald files for bankruptcy on February 28, the trustee will have priority because the bankruptcy petition is filed before the creditor perfects.

Accepted Answer

A) True 
 B)False

Question 3

A creditor will have to exhaust all the possible legal procedures to try to collect from the principal debtor before he can collect from a conditional guarantor of collection.

Accepted Answer

A) True 
 B)False

Question 4

Under Article 9 of the UCC, "value" may include past consideration such as an antecedent debt.

Accepted Answer

A) True 
 B)False

Question 5

Elmer agreed to act as the conditional guarantor of collection on a debt of $50,000 that Fred owed to Gloria.Fred paid Elmer a premium to serve as surety.If Fred defaults on the debt, what are Gloria's rights against Elmer?

Accepted Answer

The answer of Elmer agreed to act as the conditional...

Question 6

The types of indispensable paper include:

Accepted Answer

A) chattel paper. 
B) instruments. 
C) documents. 
D) All of the above. 
E) None of the above.

Question 7

A bond, which guarantees the performance of the terms of a contract, is a(n):

Accepted Answer

A) judicial bond. 
B) official bond. 
C) performance bond. 
D) fidelity bond.

Question 8

If the main purpose of the promisor (surety) is to obtain an economic benefit that he did not previously enjoy, the promise is not within the statute of frauds.

Accepted Answer

A) True 
 B)False

Question 9

A primary reason for requiring a surety is to reduce the creditor's risk of loss.

Accepted Answer

A) True 
 B)False

Question 10

A pledge used to secure a loan must be signed by all parties to the agreement.

Accepted Answer

A) True 
 B)False

Question 11

A creditor with a perfected security interest has rights in the collateral superior to those of a creditor with an unperfected security interest, but only if the unperfected security interest has not attached.

Accepted Answer

A) True 
 B)False

Question 12

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 for use in his store office.
d.Kevin needs cash for gambling debts.He brings in his CD player to secure a $500 loan.

Accepted Answer

The answer of Assume you are the creditor in each...

Question 13

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:

Accepted Answer

A) farm products. 
B) inventory. 
C) consumer goods. 
D) equipment.

Question 14

Explain how the Revised Act facilitates electronic filing of a financing statement.

Accepted Answer

The answer of Explain how the Revised Act facilitates electronic...

Question 15

An undertaking by a surety to protect an employer against the dishonesty of an employee is a(n):

Accepted Answer

A) performance bond. 
B) fidelity bond. 
C) judicial bond. 
D) official bond.

Question 16

The principal debtor's lack of capacity due to his status as a minor may be used by the surety to avoid payment of the obligation.

Accepted Answer

A) True 
 B)False

Question 17

Automatic perfection means that:

Accepted Answer

A) no financing statement need be filed. 
B) no agreement need be made between the debtor and the secured party. 
C) no value need be advanced. 
D) All of the above.

Question 18

If the surety is a(n) ___________, then the creditor may hold the surety liable as soon as the principal debtor defaults.

Accepted Answer

A) absolute surety 
B) conditional surety 
C) subrogee 
D) mortgagee

Question 19

Bill lends Harvey $1,500 and the loan is secured by Harvey's furniture.If Bill files a financing statement on June 30, 2009 how long will it be effective?

Accepted Answer

A) Until December 30, 2009. 
B) Until June 30, 2014. 
C) Until June 30, 2019, if a continuation statement is filed. 
D) Both (b) and (c).

Question 20

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

Accepted Answer

A) subject to 
B) subrogated to 
C) exonerated by 
D) set off by

Exam 38: Secured Transactions and Suretyship

Article 9 of the UCC governs financing transactions involving security interests in real property.

A creditor will have to exhaust all the possible legal procedures to try to collect from the principal debtor before he can collect from a conditional guarantor of collection.

Under Article 9 of the UCC, "value" may include past consideration such as an antecedent debt.

Elmer agreed to act as the conditional guarantor of collection on a debt of $50,000 that Fred owed to Gloria.Fred paid Elmer a premium to serve as surety.If Fred defaults on the debt, what are Gloria's rights against Elmer?

The types of indispensable paper include:

A bond, which guarantees the performance of the terms of a contract, is a(n) :

If the main purpose of the promisor (surety) is to obtain an economic benefit that he did not previously enjoy, the promise is not within the statute of frauds.

A primary reason for requiring a surety is to reduce the creditor's risk of loss.

A pledge used to secure a loan must be signed by all parties to the agreement.

A creditor with a perfected security interest has rights in the collateral superior to those of a creditor with an unperfected security interest, but only if the unperfected security interest has not attached.

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:

Explain how the Revised Act facilitates electronic filing of a financing statement.

An undertaking by a surety to protect an employer against the dishonesty of an employee is a(n) :

The principal debtor's lack of capacity due to his status as a minor may be used by the surety to avoid payment of the obligation.

Automatic perfection means that:

If the surety is a(n) ___________, then the creditor may hold the surety liable as soon as the principal debtor defaults.

Bill lends Harvey $1,500 and the loan is secured by Harvey's furniture.If Bill files a financing statement on June 30, 2009 how long will it be effective?

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