Blaw-510 Exam 2

Front 1

The specific moment in time when a newly created security becomes enforceable against the debtor:

Back 1

Attachment

Front 2

What types of transactions are excluded from Article 9?

Back 2

-Real estate
-Interests in timber which are not to be severed
-Minerals that have not been extracted from the land

Front 3

Attachment occurs when:
1)
2)
3)

Back 3

1) Security agreement
2) Value received by the debtor
3) Debtor has rights in the collateral

Front 4

When do timber and minerals become goods under Article 9?

Back 4

Minerals: when they are extracted

Timber: when it is cut or is under contract to be cut

Front 5

Perfection occurs in what 3 ways?

Back 5

1) FILING – filing a valid financial statement
2) POSSESSION – creditor takes possession of the collateral
3) AUTOMATIC – automatically by law

Front 6

Where is perfection filed?

Back 6

The debtor’s location, rather than the collateral’s location since collateral can move

Front 7

What is the most common method of perfection?

Back 7

Filing

Front 8

What collateral MUST be perfected by filing?

Back 8

Security interest in pure intangibles (i.e. accounts and general intangibles)
-goodwill
-literary rights
-patents

Front 9

What are the 4 required elements of a financing statement?

Back 9

1) Debtor’s name and mailing address

2) Creditor’s name and mailing address

3) Collateral description
a. Unerring (absolute) accuracy of identification is not required.
b. If collateral is related to real estate, then the legal description of the land or address of the building is required.

4) Debtor’s signature

Front 10

Once a financing statement is filed (perfected), it remains in force for _____ from the date of filing.

Back 10

5 years

Front 11

Creditor who has acquired a lien on the property involved by attachment, levy, or the like:

Back 11

Lien creditor

Front 12

Money that is received upon the sale, exchange, collection, or other disposition of collateral or proceeds:

Back 12

Proceeds

Front 13

A consensual lien created by a real estate mortgage, trust deed on real estate, or other like contract:

Back 13

Mortgage

Front 14

A lender-seller or other person in whose favor there is a security interest:

Back 14

Secured party

Front 15

Personal property that has no separate physical existence; rather, it is only a right to receive property:

Back 15

Pure intangibles

Front 16

An interest in personal property or fixtures which secures a payment or the performance of an obligation:

Back 16

Security interest

Front 17

A _____ is created when the debtor and creditor enter into an agreement giving the creditor rights in the debtor’s property as collateral for the debt.

Back 17

Security interest

Front 18

A _____ is not enforceable against the debtor until it attaches.

Back 18

Security interest

Front 19

When is a security interest created?

Back 19

When the debtor and creditor enter into an agreement giving the creditor rights in the debtor’s property as collateral for the debt

Front 20

A security interest is not enforceable against the debtor until it _____.

Back 20

Attaches

Front 21

Any right to payment:

Back 21

Claim

Front 22

A claim against community property:

Back 22

Community claim

Front 23

A collective term referring to all of the debtor’s legal and equitable interests in property at the time bankruptcy is commenced:

Back 23

Estate

Front 24

A person, estate, trust, or governmental unit:

Back 24

Entity

Front 25

How long does a purchase money secured creditor (PMSI) have to file the financing statement?

Back 25

20 days

Front 26

An entity that has a claim against the debtor that arose before the filing of bankruptcy or is treated by the Bankruptcy Code as arising before such filing, or an entity that has a community claim:

Back 26

Creditor

Front 27

Property that, under either federal or state exemption laws, is exempt from seizure and sale for the payment of the debtor’s debts:

Back 27

Exempt property

Front 28

In the context of secured transactions, _____ gives the creditor an enforceable security interest in the collateral.

Back 28

Attachment

Front 29

Collateral is generally divided into what classifications?

Back 29

Tangible and intangible collateral

Front 30

_____ protects the secured party against the claims of third parties who want their debts satisfied out of the same collateral.

Back 30

Perfection

Front 31

What collateral MUST be perfected by possession?

Back 31

-instruments
-nonnegotiable documents of title
-money

Front 32

The person or municipality that is the subject of a bankruptcy:

Back 32

Debtor

Front 33

A person includes an individual, partnership, or a corporation, but NOT a _____, _____, or _____.

Back 33

Governmental unit, a decedent’s estate, or a trust

Front 34

An individual, partnership, or a corporation:

Back 34

Person

Front 35

What collateral MAY be perfected by possession?

Back 35

-goods
-chattel paper
-letters and advices of credit
-negotiable documents of title

Front 36

A political subdivision, public agency, or instrumentality of a state (does not include the District of Columbia or U.S. territories):

Back 36

Municipality

Front 37

What is the only only method of perfection for negotiable instruments?

Back 37

Possession

Front 38

For perfection by possession, no _____ is necessary.

Back 38

Security agreement

Front 39

For perfection by _____, no security agreement is necessary.

Back 39

Possession

Front 40

When is a creditor automatically perfected?

Back 40

PMSI in CONSUMER GOODS

Front 41

Generally, a perfected Article 9 creditor defeats a(n) _____.

Back 41

Unperfected Article 9 creditor

Front 42

What happens if both Article 9 creditors are unperfected or perfected?

Back 42

The earliest date has priority ("first in time wins")

Front 43

Automatic perfection occurs upon _____.

Back 43

Attachment

Front 44

No filing or possession is required for _____, since the automatic perfection occurs upon attachment.

Back 44

PMSI in consumer goods

Front 45

For an artisan's lien to be superior, the lien holder must _____.

Back 45

Be in possession of the collateral

Front 46

In a few specialized situations, perfection by filing or possession is preceded or entirely replaced by _____.

Back 46

Temporary or permanent automatic perfection by law

Front 47

If state law so allows, a common law artisan’s mechanic’s materialman’s, or laborer’s lien is _____.

Back 47

Superior to a perfected Article 9 creditor

Front 48

TRUE/FALSE

A secured party cannot take possession of collateral without a standard judicial process.

Back 48

FALSE

Secured party may proceed w/out judicial process only if it can be done w/out a breach of the peace. Otherwise, the party must proceed pursuant to judicial process.

Front 49

What happens to a creditor who acquires a PMSI in consumer goods?

Back 49

Creditor automatically has such interest permanently perfected

Front 50

Unless otherwise agreed, a secured party has the right to _____.

Back 50

Take possession of the collateral

Front 51

Who has priority if neither party perfected by filing?

Back 51

The party who completed perfection first

Front 52

Who has priority if both parties perfected by filing?

Back 52

The one who filed first--even if perfection was not complete upon filing

Front 53

Who has priority if one party perfected by filing and the other party perfected by some other method (e.g., taking possession)?

Back 53

The party who filed will have priority only if he filed before the other party perfected

Front 54

On March 1, Joe went to Easy Cars to buy a car. Joe spoke to a salesperson and agreed to buy a car that from the showroom. On March 5, Joe made a $500 down payment and signed a security agreement to secure the payment of the balance of the purchase price. On March 10, Joe picked up the car. On March 15, Easy filed the security agreement. On what date did Easy’s security interest attach?

Back 54

March 10

1) Joe picked up the car
2) The car had been identified to the contract (Joe had a right in the property)
3) Joe signed a security agreement

Front 55

Which of the following statements is/are correct regarding the filing of a financing statement?

I. A financing statement must be filed before attachment of the security interest can occur.
II. Once filed, a financing statement is effected for an indefinite period of time provided continuation statements are timely filed.

Back 55

II only

Front 56

Grey Corp. sells computers to the public. Grey sold and delivered a computer to West on credit. West executed and delivered to Grey a promissory note for the purchase price and a security agreement covering the computer. West purchased the computer for personal use. Grey did not file a financing statement. Is Grey’s security interest perfected?

Back 56

Yes, b/c it was perfected at the time of attachment (Automatic perfection occurs when a purchase money security interest PMSI is in consumer goods and the requirements of attachment have been met)

Front 57

ABC Co., which is in the business of selling furniture, borrowed $60,000 from Pine Bank. ABC executed a promissory note for that amount and used all of its A/R as collateral for the loan. ABC executed a security agreement that described the collateral. ABC did not file a financing statement. When did attachment of the security interest occur?

Back 57

When the loan was made and ABC Co. executed the security agreement

Front 58

Mars, Inc. manufactures and sells VCRs on credit directly to wholesalers, retailers, and consumers. Mars can perfect its security interest in the VCRs it sells w/out having to file a financing statement or take possession of the VCRs if the sale is made to _____.

Back 58

Consumers (A purchase money security interest in consumer goods is perfected automatically; a filing is necessary whenever goods are sold to wholesalers and other retailers)

Front 59

Perfection of a security interest by a creditor provides added protection against other parties in the event the debtor does not pay its debts. Which of the following parties is NOT affected by perfection of a security interest?

a) Other prospective creditors of the debtor.
b) The trustee in a bankruptcy case.
c) A buyer in the ordinary course of business.
d) A subsequent personal injury judgment creditor.

Back 59

c) A buyer in the ordinary course of business.

Front 60

On June 15, Harper purchased equipment for $100,000 from Imperial Corp. for use in its manufacturing process. Harper paid for the equipment w/funds borrowed from Eastern Bank. Harper gave Eastern a security agreement and financing statement covering Harper’s existing and after-acquired equipment. On June 21, Harper was petitioned involuntarily into bankruptcy under Chapter 7 of the Federal Bankruptcy Code. A bankruptcy trustee was appointed. On June 23, Eastern filed the financing statement. Which of the parties will have a superior security interest in the equipment?

Back 60

Eastern, b/c it perfected its security interest w/in the permissible time limits (20 day period)

Front 61

What would best perfect a security interest in a negotiable instrument against any other party?

Back 61

Taking possession of the instrument

Front 62

W purchased a computer using the proceeds of a loan from MJC Finance Company. W gave MJC a security interest in the computer. W executed a security agreement and financing statement, which was filed by MJC. W used the computer to monitor W’s personal investments. Later, W sold the computer to Joe, for Joe’s family use. Joe was unaware of MJC’s security interest. W now is in default under the MJC loan. May MJC repossess the computer from Joe?

Back 62

Yes, b/c MJC’s security interest was perfected before Joe’s purchase

Front 63

What would be the order of priority for the following security interests in consumer goods?

I. Financing agreement filed on April 1
II. Possession of the collateral by a creditor on April 10
III. Financing agreement perfected on April 15

Back 63

I, II, III

Front 64

Permission or power delegated to another:

Back 64

Authority

Front 65

Type of agent that has broad authority to act for the principal in a variety of transactions:

Back 65

General agent

Front 66

Type of agent w/authority that is limited to a single transaction or series of related transactions (e.g. attorneys, auctioneers, brokers, etc.):

Back 66

Special agent

Front 67

Type of agent appointed by another agent who has not been given the authority by the principal to appoint other agents; he or she is an agent for the appointing agent:

Back 67

Agent of an Agent

Front 68

Type of agent appointed by another agent who is authorized to appoint sub-agents in connection with his or her performance of the principal’s business:

Back 68

Sub-Agent

Front 69

One who agrees to act as agent w/out compensation; the agent is not bound to perform, but if the agent begins to perform he or she must not act negligently (e.g. Mom/Dad):

Back 69

Gratuitous Agent

Front 70

An agent hired by another agent to act as an ancillary agent for the principal.

Back 70

Co-Agent

Front 71

One may NOT appoint an agent to perform what 3 duties?

Back 71

1) Those that the principal is bound to perform personally (nondelegable duties)

2) Those precluded by statute (the execution of a will)

3) Those that the principal cannot perform (a minor cannot appoint an agent to convey real estate since he can void the conveyance)

Front 72

A fully undisclosed principal CAN/CANNOT ratify.

Back 72

CANNOT

Front 73

Doctrine that states that the principal is liable (regardless of whether he or she is at fault) for the torts of an employee agent if they are committed w/in the scope of the agent’s employment:

Back 73

Respondeat Superior

Front 74

On what 4 occurrences may an agency terminate by operation of law?

Back 74

1. Death or insanity of either party
2. Bankruptcy or insolvency of the principal
3. Bankruptcy of the agent if it affects the agency relationship
4. Illegality or impossibility

Front 75

Debtor Responsibilities

The debtor must:
-
-
-
-
-

Back 75

-file
-cooperate
-surrender
-attend
-notify

Front 76

In bankruptcy, exempt property DOES/DOES NOT become part of the bankrupt’s estate.

Back 76

DOES NOT

Front 77

A fundamental debtor protection that stops all collection efforts, all harassment, and all foreclosure or other legal proceedings:

Back 77

Automatic Stay

Front 78

The bankruptcy petition filing does NOT operate as a stay for what 2 things?

Back 78

1) The commencement or continuation of a criminal proceeding against the debtor.
2) The collection of alimony, maintenance, or support payments.

Front 79

Anyone who has the ability to carry out instructions may become a(n) _____.

Back 79

Agent

Front 80

A trustee is required in Chapter _____ and Chapter _____ proceedings, but not in Chapter _____ and Chapter _____ proceedings.

Back 80

REQUIRED: 7, 13

NO REQUIRED: 9, 11

Front 81

A(n) _____ need not possess the legal capacity to contract.

Back 81

Agent

Front 82

If income minus allowable living expenses exceeds certain levels, a Chapter _____ filing will be dismissed, or, with the debtor’s permission, converted to a Chapter _____ filing.

Back 82

Chapter 7, Chapter 13

Front 83

Person appointed or elected to be the representative of the bankruptcy estate:

Back 83

Trustee

Front 84

A party who employees another person to act on his or he behalf is called the _____________ .

Back 84

Principal

Front 85

Type of principal that binds the AGENT ONLY:

Back 85

Undisclosed

Front 86

A party who agrees to act on behalf of another is a/n _______.

Back 86

Agent

Front 87

Type of principal that binds BOTH THE AGENT AND THE PRINCIPAL:

Back 87

Partially Disclosed

Front 88

Type of principal that binds the PRINCIPAL ONLY:

Back 88

Disclosed

Front 89

What are the 3 methods of agency termination?

Back 89

1) Agreement
2) Renunciation
3) Operation of law

Front 90

If the third party dealing w/the agent knows of the existence of the agency and the identity of the principal:

Back 90

Disclosed

Front 91

If the third party dealing w/the agent knows of the existence of the agency but not the identity of the principal:

Back 91

Partially Disclosed

Front 92

One action may be both a _____ and a _____, but NOT all _____ involve _____.

Back 92

Crime, Tort........Torts, Crimes

Front 93

If the third party dealing w/the agent has no knowledge of either the existence of the agency or the identity of the principal:

Back 93

Undisclosed

Front 94

Acts performed by one who is not an agent, or unauthorized acts performed by an agent:

Back 94

Ratification

Front 95

If the conduct of the principal leads a third party to believe that an agent has authority beyond that which the principal actually consented, the agent is said to have _____ authority.

Back 95

Apparent or Ostensible

Front 96

Authority that is taken from the principal’s conduct; includes the authority to do acts reasonably necessary to accomplish an authorized act:

Back 96

Implied

Front 97

An agent’s _____ authority is that power consented to by the principal that affects the principal’s legal relations.

Back 97

Actual

Front 98

In what 3 occurrences may an agency be CREATED by operation of law?

Back 98

1) Estoppel
2) Representation, Appearance, or Apparent Authority
3) Necessity

Front 99

The agent ALWAYS has the power to _____ the agency.

Back 99

Renounce

Front 100

An agency relationship is a _____ relationship.

Back 100

Fiduciary

Front 101

A principal IS/IS NOT held liable for harm caused to a third party by an agent who commits a tort while acting in the scope of his or her employment.

Back 101

IS (Respondeat superior)

Front 102

Who ALWAYS has the power to renounce the agency?

Back 102

The agent

Front 103

The principal IS/IS NOT held liable if the agent departs from the performance of his or her duties and acts on his or her own.

Back 103

IS NOT

Front 104

Agent’s Duties to Principal

Agent CANNOT:
a.
b.
c.
d.

Back 104

Agent CANNOT:

a. Act for two principals with conflicting interests.
b. Deal for her/his own interest (i.e. make a profit at the principal’s expense).
c. Compete with his/her principal.
d. Disclose any confidential information learned during the agency relationship.

Front 105

Ratification requires what 3 things?

Back 105

1. An act capable of ratification that is performed by principal.

2. A principal who:
-Has capacity to appoint the agent
-Has knowledge of the material facts of the transaction
-Was in existence at the time of act
-Was either a fully or partially disclosed principal

3. Any formalities that would be required for an appointment

Front 106

The bankruptcy law is _____.

Back 106

Federal

Front 107

Creditors who unreasonably refuse to negotiate a prebankruptcy debt repayment plan w/a debtor may be penalized; such a creditor’s allowable claim may be reduced by _____.

Back 107

20 percent

Front 108

What are the 5 surety PERSONAL defenses?

Back 108

(FLUC V)

1. Fraud or duress
2. Legal remedies render contract unenforceable
3. Unenforceable contract
4. Creditor failure to disclose facts
5. Void suretyship contract

Front 109

An action by the surety against the debtor that seeks to force the debtor to pay his or her creditor:

Back 109

Exoneration

Front 110

What is the most common type of surety?

Back 110

Judicial bonds

Front 111

An agreement b/t a debtor and its creditors in which the participating creditors take full payment of their claims, but extended over a period of time beyond the original due date:

Back 111

Extension

Front 112

What are the 5 surety defenses derived from the DEBTOR?

Back 112

1. Fraud or duress
2. Consideration
3. Property tender of performance
4. Impossibility or illegality
5. Performance

Front 113

Indemnity contracts ARE/ARE NOT w/in the Statute of Frauds.

Back 113

ARE NOT

Front 114

A direct, original, two-party contract in which the indemnitor agrees to keep another harmless from a specific consequence:

Back 114

Indemnification contract

Front 115

Act that prohibits geographic discrimination (“redlining”):

Back 115

Home Mortgage Disclosure Act (HMDA)

Front 116

Suretyship and guaranty contracts ARE/ARE NOT w/in the Statute of Frauds.

Back 116

ARE

Front 117

TRUE/FALSE

If the debtor fully pays, the collateral must be returned.

Back 117

TRUE

Front 118

An agreement b/t a debtor and its creditors in which the participating creditors agree to accept an immediate or early payment of a lesser sum in full satisfaction of the debt due them:

Back 118

Composition agreement

Front 119

Federal bankruptcy code exemptions include what 2 items?

Back 119

1. Up to $20,000 of real or personal property
2. Up to $1,350 in jewelry

Front 120

What 9 debts can NEVER be discharged under 7, 11, and 13?

Back 120

(CUT DEAL PF)

1. Taxes
2. Unscheduled debts
3. Child support and alimony
4. Fines
5. Educational loan
6. Previous surviving debts
7. Luxury goods
8. Advances
9. DUI liability

Front 121

What property is NOT exempt and may be seized during or after a debtor’s bankruptcy case?

Back 121

1) Debt for taxes
2) Debt for alimony, maintenance, or child support
3) Valid liens

Front 122

Act that requires credit reporting agencies to follow reasonable procedures to assure maximum possible accuracy in reporting consumer credit histories and prohibits the agencies from including inaccurate information in consumer reports:

Back 122

Fair Credit Reporting Act

Front 123

Most information generally is considered obsolete after _____; bankruptcy information is considered obsolete after _____.

Back 123

7 years, 10 years

Front 124

The transfer of an interest of the debtor that was made w/actual intent to hinder, delay, or defraud a creditor or whereby the debtor received less than a reasonably equivalent value in exchange for the transfer:

Back 124

Fraudulent transfer

Front 125

What Act applies only to debt collectors and not to creditors?

Back 125

Fair Debt Collection Practices Act

Front 126

WHO HAS PRIORITY?

Creditor A gives value on March 1, and debtor obtains rights in collateral on same day. Creditor B gives value on same collateral to same debtor on March 3, and Creditor A perfects by filing on March 4.

Back 126

Creditor B

Front 127

WHO HAS PRIORITY?

Creditor C gives value to debtor and takes a security interest in negotiable documents of the title on April 1. C attempts to perfect by filing on April 1, but the filing is made in the wrong location. Creditor D also gives value on the same collateral and, after failing to locate Creditor C’s financing statement in any of the proper filing locations, perfects his interest by taking possession of the collateral on April 2.

Back 127

Creditor D (when neither of the secured creditors perfect by filing, the first to perfect wins)

Front 128

WHEN IS/WAS ATTACHMENT?

Debtor orders inventory from a seller on February 1. On February 2, the debtor borrows the purchase price from the bank giving a written and signed security agreement.

Back 128

February 2 (the earliest time of occurrence of all three elements of attachment)

Front 129

The rationale behind the United States bankruptcy laws is to:

a. Protect creditors' real property and encourage creditors to continue extending credit to borrowers.
b. Make loans more available to those who have fallen on hard times and ensure that third parties will guarantee loans.
c. Give debtors a fresh start and provide equitable treatment to creditors competing for debtor assets.
d. Hide debtor's assets to the greatest extent possible and relieve debtors of all debts owed to banks.

Back 129

c. Give debtors a fresh start and provide equitable treatment to creditors competing for debtor assets.

Front 130

What is the most common bankruptcy petition?

Back 130

Chapter 7

Front 131

Unless the creditor has possession of the collateral, there must be a _____.

Back 131

Written security agreement

Front 132

The type of bankruptcy that concerns business reorganization is Chapter:

Back 132

11

Front 133

In a Chapter 7 bankruptcy, the highest priority claim is:

Back 133

Secured creditors

Front 134

What are the 2 types of petitions that can be filed in bankruptcy court?

Back 134

Involuntary and voluntary

Front 135

TRUE/FALSE

Exempt property is property that a debtor may retain.

Back 135

TRUE

Front 136

A rehabilitation form of bankruptcy that permits the courts to supervise the debtor's plan for the payment of unpaid debts by installments:

Back 136

Chapter 13

Front 137

In a/n __________ arrangement, a third party agrees to become liable on the debt.

Back 137

Surety

Front 138

Property taken as security interest for a loan:

Back 138

Collateral

Front 139

If two or more secured parties claim an interest in the same collateral but neither has a perfected claim, who has priority?

Back 139

The first to attach

Front 140

A debtor is entitled to only one Chapter 7 discharge from bankruptcy during an _____-year period running from a prior petition in which debtor was discharged.

Back 140

8

Front 141

The power of the trustee to extinguish claims and liens and to set aside transfers to increase the bankruptcy estate (property available to creditors):

Back 141

Avoidance power

Front 142

What article of the UCC governs secured transactions in personal property?

Back 142

Article 9

Front 143

The filing of a bankruptcy petition operates as a stay, applicable to all entities of the following:

Back 143

- All judicial proceedings against debtor.
- The enforcement, against the debtor or estate property, of an existing judgment.
- Any act to obtain possession of property of the estate.
- Any act to create, perfect, or enforce any lien against property of the estate.
- Any act to collect, assess, or recover a claim against the debtor.
- The setoff of any prebankruptcy debt owing to the debtor.

Front 144

TRUE/FALSE

In lieu of other exemption systems, the debtor may choose the federal bankruptcy code exemptions.

Back 144

TRUE, but only if these are allowed by the law of the debtor’s state

Front 145

A debtor has a credit card with a department store. The store allows the debtor to buy on credit and does not require any collateral. That store is a _____ of the debtor.

Back 145

General unsecured creditor

Front 146

ATTACHMENT?
PRIORITY?

Bank finances debtor’s purchase of an air conditioner. Bank has a PMSI to the extent that the debtor used the loan to purchase the air conditioner.

Back 146

ATTACHMENT: when the debtor purchased the air conditioner

PRIORITY: Bank

Front 147

Upon notice to interested parties, and a hearing if there are any objections, the trustee may _____, _____, or _____ property of the estate.

Back 147

Use, sell, lease

Front 148

Bank X gives value to retailer taking back a security interest. Bank X perfects by filing. Although not a PMSI, Bank X’s security agreement covers present and after-acquired inventory. Later, Bank Y gives value to retailer to enable retailer to purchase inventory. Bank Y has a negotiable warehouse receipt for the inventory which it has perfected by possession.

DOES BANK Y HAVE PRIORITY?

Back 148

ONLY IF BANK Y:

(1) perfects its PMSI at the time retailer takes possession of the inventory.
(2) gives written notification to Bank X of Bank Y’s PMSI before Bank Y’s 20-day perfection period.


**Bank Y will take priority over identifiable cash proceeds received by retailer on the sale of the inventory to the extent that the proceeds are received by the retailer before the inventory is delivered to the buyer.

Front 149

Absent an objection by a party in interest, the property claimed as exempt is _____. If there is an objection, then _____.

Back 149

Exempt; the court will rule on the exemption

Front 150

Kelly promises Mountain State Bank that she will be responsible for a loan taken out by her niece Dallas such that at the moment the debt is due, Mountain State may demand repayment from Kelly. This is known as a:

Back 150

Suretyship

Front 151

Which of the following actions will release a surety from his or her obligations?

a. The failure of the debtor to pay.
b. A change in the name of the creditor.
c. The death of the debtor.
d. A material modification of the terms of the original contract without the surety's consent.

Back 151

d. A material modification of the terms of the original contract without the surety's consent.

Front 152

An agreement between a debtor and a creditor in which the debtor promises to pay a debt dischargeable in bankruptcy:

Back 152

Reaffirmation

Front 153

James goes out shopping and, using his wife Maria's credit card, he buys $221 worth of groceries. Is Maria liable for the purchase?

a. Yes, based on the doctrine of respondeat superior.
b. Yes, based on the creation of an agency by operation of law.
c. Yes, based on the duty of performance.
d. No, based on the James's lack of a power of attorney.

Back 153

b. Yes, based on the creation of an agency by operation of law.

Front 154

Which of the following remedies may an agent seek when the principal breaches a duty owed to the agent?

a. Withholding further performance and demanding an accounting.
b. Avoidance of the principal.
c. Creation of a deconstructive trust.
d. Indemnification of the principal.

Back 154

a. Withholding further performance and demanding an accounting.

Front 155

An employee traveling to and from work is usually considered to be acting:

a. outside the scope of employment.
b. within the scope of employment.
c. within the scope of employment if the agent is on a frolic.
d. as a borrowed servant.

Back 155

a. outside the scope of employment.

Front 156

TRUE/FALSE

BR is a motorcycle dealership. First Bank loaned BR $1 million taking a security interest in all of BR's equipment now owned and here after-acquired. The security agreement is void because the security interest purports to attach to equipment that BR does not yet possess.

Back 156

FALSE - the parties may agree that the security interest attaches to after-acquired property

Front 157

TRUE/FALSE

First Bank loaned $100,000 to Tom's Trucking, taking a security interest in one of its flat bed trailers. Tom's Trucking defaulted on the loan. The trailer was sold in a commercially reasonable manner. There was a $5,000 deficiency. Tom's Trucking is liable for the deficiency.

Back 157

TRUE - First Bank can sue Tom's Trucking for the remaining $5,000 owed

Front 158

Wes needed a new lawn mower to cut the lawn at his home. Wes purchased a riding lawn mower from Mills Lawn and Garden Center on credit. In extending the credit, Mills took a security interest in the mower. To perfect the security interest, Mills:

a. must take possession of the mower.
b. must file a financing statement.
c. must secure a court order.
d. need not do anything because this interest perfects automatically.

Back 158

d. need not do anything because a PMSI perfects automatically

Front 159

On February 15, BR used his boat inventory as well as any future inventory as collateral for a loan from First Bank. First Bank perfected by filing a financing statement the same day. On May 10, BR bought 50 wave runners from Sun, Inc. under a PMSI. Sun, Inc. notified First Bank of the PMSI and perfected the PMSI by filling a financing statement before delivering the wave runners to BR. BR filed for bankruptcy. As between First Bank and Sun, Inc., who has the priority to the wave runners bought on May 10?

Back 159

Sun, Inc. (the PMSI in inventory takes priority over a conflicting perfected security interest)

Front 160

On September 5, Gwen agreed to buy a car from Auto Mall signing a promissory note and security agreement giving Auto Mall a security interest in the car. On September 15, Gwen took delivery of the car. On October 1, Auto Mall filed a financing statement. On what date did Auto Mall's security interest attach?

Back 160

September 15 (this was the date of delivery, so it was the day that the debtor had rights in the collateral)

Front 161

On November 7, EZ Delivery purchased a van from Auto Mall signing a promissory note and security agreement giving Auto Mall a security interest in the van. On November 10, EZ Delivery took delivery of the van. On November 15, Auto Mall filed a financing statement in the appropriate state office. On what date did Auto Mall have a perfected security interest in the van purchased by EZ Delivery?

Back 161

November 15, the filing date

Front 162

Authority that holds the principal liable for the acts of the agent:

Back 162

Apparent authority

Front 163

AJ was Director of Purchasing for Enterprise, Inc. As a thank you for Enterprise's business over the last five years, a vendor offered AJ an all expense paid trip to Greece. Can AJ take the trip?

Back 163

Yes, but only if he discloses the gift to Enterprise and Enterprise consents to his taking the trip

Front 164

Sue was a financial planner with Star Financial. Sue decided to do some financial planning on the side in the evenings. Star Financial is unaware of Sue's after-hours work. Which statement is correct?

a. Sue has not breached a fiduciary duty to Star Financial since her consulting is done after her work for Star Financial.
b. Sue has not breached a fiduciary duty to Star Financial since her behavior does not reflect badly on the finance firm.
c. Sue has not breached a fiduciary duty to Star Financial since she has a contractual relationship with her clients, not her employer.
d. Sue has breached a fiduciary duty to Star Financial since she is competing with Star Financial.

Back 164

d. Sue has breached a fiduciary duty to Star Financial since she is competing with Star Financial.

Front 165

Kristina hired Travis to be her real estate agent. Travis filed for bankruptcy. Travis' bankruptcy will:

a. Automatically terminate the agency relationship.
b. Only terminate the agency if the bankruptcy affects Travis' ability to carry out his tasks as an agent.
c. Only terminate the agency if the parties have a written agreement stating that certain events, including bankruptcy, will terminate the relationship.
d. Serve as a legal basis for the agent to rescind the agency agreement.

Back 165

b. Only terminate the agency if the bankruptcy affects Travis' ability to carry out his tasks as an agent.

Front 166

Suppose that Clarissa has a security interest in a Renaissance painting that Paolo owns. Clarissa takes the painting and stores it in her garage. In this situation:

Back 166

By taking possession of the painting, Clarissa HAS properly perfected her security interest