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Exam 3 Business Law

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Dale defaults on a car loan secured by his car and guaranteed by both Sam and Dave. Subrogation would allow Sam, who paid Dale's full obligation, to:

All of these.

If the principal debtor defaults, the surety has rights against the principal debtor, third parties, and cosureties. These rights would include:

All of these.

Property law in the United States has developed from:

English common law from centuries ago

A mechanic's lien is also called an artisan's lien.

FALSE

A mechanic's lien is the most common lien on personal property.

FALSE

A negotiable instrument is a promise by one party to pay a undefined sum of money to another party. There are two parties: the maker and the payee. While the amount to be paid may vary, the date of payment must be set at a specific time in the future.

FALSE

A note involves two parties, the maker and the payee. Payment must be on demand.

FALSE

A surety agreement must always be in writing to be effective.

FALSE

According to the Statutes of Fraud, mortgages may be either oral or in writing.

FALSE

Negotiable instruments payable "to bearer" are considered the safest form.

FALSE

Promises to pay include drafts and checks.

FALSE

The only property that is typically exempt from attachment is personal property worth over $1,000.

FALSE

To be ordinary holder of a negotiable instrument, the holder must give value for it, take it without knowledge that it is overdue or defective, and must take it in good faith.

FALSE

To meet the UCC's requirements for negotiability, an instrument must be payable to a specific party.

FALSE

When real estate is used to back up a note, it is called a collateral note.

FALSE

When the maker of a note promises to repay the note in specific installments over time, it is a balloon note.

FALSE

The ____ requires that governments must pay compensation when taking private land without the landowner's consent.

Fifth Amendment of the Constitution

Alice loans George $500 and Sue acts as surety under the loan agreement. When George defaults, Alice comes to Sue to collect the $500. Sue reaches a settlement to pay $400 to Alice in complete satisfaction of the loan. What recourse does Sue have against George?

She can require reimbursement of $400.

In Moran v. Sims, where the house Sims built was surrounded by land owned by Moran, and Sims sued for an easement for access to his house, the courts held that:

Sims did not have an easement, but Moran could not block Sims from driving to get to his property, so he had an equitable right to access his property

A cashier's check is a form of check in which the bank is both the drawer and the drawee.

TRUE

A check is a draft drawn on a bank and payable on demand.

TRUE

A conditional guarantor of collection differs from an absolute surety in that the surety is bound with the principal debtor as a primary obligor.

TRUE

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.

TRUE

A negotiable instrument may be transferred in two basic ways. If the instrument is made "to the order" of the payee, the payee must (1) endorse the instrument and (2) deliver the instrument to a third party. If the instrument is made "to bearer," the party in possession of the instrument is required only to deliver it to transfer it.

TRUE

An artisan's (possessory) lien attaches to personal property.

TRUE

If a commercial instrument is nonnegotiable, it falls under the common law, not the UCC.

TRUE

If a principal debtor defaults on a loan, an absolute surety will have to pay upon demand of the creditor.

TRUE

In a suretyship, the creditor's rights against the principal debtor are determined primarily by the contract between them.

TRUE

Laura is considering the possibility of becoming a surety to Carl on a debt by David, but she would like more information on the relationship between Carl and David concerning the transaction. If Laura requests such information from Carl, he must disclose it, because his failure to disclose material facts will constitute fraud.

TRUE

Orders to pay include drafts and checks.

TRUE

Real estate is typically financed by borrowing money and securing the loan with a mortgage.

TRUE

Rodrigo lends money to Isaac on Linda's promise to act as a surety. Rodrigo's extension of credit is the consideration to support Isaac's promise to repay the loan and Linda's suretyship undertaking.

TRUE

Sureties have a right of exoneration against their cosureties.

TRUE

The drawee owes money to the drawer in a negotiable instrument.

TRUE

The mortgagee is the creditor who makes a mortgage.

TRUE

The party to receive a payment from a negotiable instrument is called the payee.

TRUE

The party who agrees to make a payment to another party, based on a document presented to it, such as a bank, is called the drawee.

TRUE

The party who issues or creates a document that requests payment, probably from a bank, is called the drawer.

TRUE

To meet the UCC's requirements for negotiability, an instrument must be in writing.

TRUE

To protect the rights of the mortgagee, a mortgage should be recorded with a state official.

TRUE

When the payee is concerned about the quality of a draft, it may be submitted to the drawee for confirmation. That is called an acceptance or bankers' acceptance.

TRUE

Which of the following would not help a surety defend himself from payment of a debt?

The creditor knew the loan was risky and did not dissolve it.

Which of the following is a servitude:

a covenant

The most common way in which to transfer ownership interests in property is through:

a deed

A warranty deed is:

a deed that promises that a good, clear title to the property is being conveyed by the grantor

A mortgage will typically contain:

a description of the property and the amount of debt involved

The most common form of real property ownership that gives exclusive possession to a particular piece of land for an indefinite time is:

a fee simple

If you rent an apartment, the apartment is known as:

a leasehold

An easement is:

a right to enter land owned by another and make certain use of it

A covenant may be described as:

all of the other choices

Zoning laws are typically used to:

all of the other choices

Which of the following is not real property:

all of the other choices are real property

In general, leases should include which of the following:

all of the other specific choices are correct

Traditionally, personal property was referred to as:

chattel

A(n) ____ is a legally binding written order to pay a fixed sum of money that involves three parties.

draft

A(n) ____ is "an interest in land which (a) is or may become possessory and (b) is ownership measured in terms of duration."

estate

Governments must pay just compensation when exercising the right of eminent domain. Just compensation is usually the:

fair market value

The most common form of real property ownership is:

fee simple

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

fidelity

A negative easement is one under which the estate owner:

gives up a right he would normally have

In General Electric Business Financial Services v. Silverman, where Silverman failed to repay a loan from GE Financial after his company went bankrupt, despite having signed a guarantee to repay the loan even if the company went bankrupt, the district court:

granted the plaintiff's movement for summary judgment because the Illinois Credit Agreement Act bars affirmative defenses that rely on oral promises that contradict the written terms of the agreement

Once an easement is granted:

it may not be interfered with by the property owner unless the easement holder agrees

A creditor who obtains an interest in the property of a debtor without the debtor's express agreement may obtain:

none of the other choices

In Thayer v. Hollinger, Hollinger owned land next to lakeshore lots that he developed. He shared a common road with the lakeshore lot owners who used trails on his property that were accessed from the road. Hollinger claimed he could block use of the trails. The lot owners claimed an easement to use the trails. The courts held that:

none of the other choices

Linda buys a house in Grover Square. Her deed contains the following: "no homeowner in Grover Square shall erect a fence of any sort (with the exception of buried electronic fences) around his or her property." This clause is:

none of the other choices

The law concerning liens is primarily:

none of the other choices

The right of utility companies to run power lines over land and put water lines under private property is based on:

none of the other choices

When a local government regulates the way in which homeowners may use their land, this is an exercise of the government's:

none of the other choices

When a note is to be paid in regular payments but also includes a final payment more than double the regular payments, the note is called:

none of the other choices

A binding obligation that goes with property when it is transferred to a new owner, who must abide by the obligation, is called a(n):