Business Law Final Review

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Brian, The payment of Brian's debt to Chuck is guaranteed by Brian's personal property. This is a. a reorganization. b. a secured transaction. c. a suretyship agreement. d. a violation of most state laws.

Dependable Credit Corporation asks Electric Supply Company to agree to a security agreement that provides for coverage of the proceeds from the sale of after-acquired property. This is a. a first-in, first-out rule. b. a floating lien. c. a funds guaranty. d. a future advance.

Digital Cable Company (On behalf), Ed signs an instrument in which he promises to deliver 1,000 feet of optic fiber cable to First Internet Bank on March 1. This instrument is a. negotiable. b. nonnegotiable, because cable is not a medium of exchange authorized or adopted by a government as currency. c. nonnegotiable, because it does not indicate a specific type of cable. d. nonnegotiable, because it does not recite any consideration.

Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from Finest Quality Motors. A14. Refer to Fact Pattern 28-1A. If Edie signs the application only after language is included that requires Finest to exhaust its legal remedies against Dina before looking to her, then Edie is a. a guarantor and a surety. b. a guarantor only. c. a surety only. d. neither a guarantor nor a surety.

Doctors Medical Clinic, to obtain office supplies, Elmo executes a draft in favor of Flynn. A draft is a. a conditional promise to pay money. b. an unconditional written order to pay money. c. a qualified promise to set aside a sum of money. d. a restricted promise to deliver goods at a future date.

Dora writes a check for $100 drawn on Eastern Bank and presents it to Fast Cash, Inc., for payment. If the check is not backed by sufficient funds, Dora may be prosecuted for a. forgery. b. fraud. c. negligence. d. robbery.

Elias repays his debt, incurred to buy consumer goods, to First City Bank and immediately files a written request for a termination statement. First City a. must comply within one month of receipt of the letter. b. must comply within twenty days of receipt of the letter. c. must refund $500 to Elias. d. need not comply.

Everyday Loans, Inc., takes possession of Frank's stock in Gamma Corporation to perfect Everyday's security interest in the stock. This is a. after-acquired property. b. a pledge. c. a purchase-money security interest. d. proceeds.

Ezra's mortgage debt to Foxy is past due. Foxy brings a legal action against Ezra to collect the debt. Foxy asks the court to order the sale of the mortgaged property and the payment of a portion of the proceeds to Foxy. Before the sale, Ezra seeks to keep the property by paying the full amount of the debt. This is a. a deficiency judgment. b. a right of redemption. c. a right of subrogation. d. not possible.

First-Rate Capital, Inc. (on behalf) , Greg signs an instrument promising to pay $5,000 in gold to Hot Funds, Inc., on May 15. This instrument is a. negotiable. b. nonnegotiable, because gold is not a medium of exchange authorized or adopted by a government as currency. c. nonnegotiable, because it does not recite any consideration. d. nonnegotiable, because it is for an amount of $500 or more.

Flik draws a check payable to "GrocMart" to buy groceries. Flik's check is most likely a. a certificate of deposit. b. a negotiable instrument. c. a promise to pay. d. a promissory note.

Flip's debt to George is past due. George brings a legal action against Flip to collect the debt. George asks the court to order Home Bank, in which Flip has an account, to pay a portion of the funds to George. This is a request for a. an exemption from most states' limits on creditors' actions. b. an order of garnishment. c. an order that would violate most state laws. d. a right of subrogation.

Beta Software Corporation is a new company that needs to borrow money to meet its payroll. Cliff, president and owner of Beta, asks First National Bank to loan Beta the funds. B9. Refer to Fact Pattern 28-1B. If First National insists that Cliff sign the loan application, making himself personally liable for payment whether or not Beta defaults, Cliff will be a. a guarantor and a surety. b. a guarantor only. c. a surety only. d. neither a guarantor nor a surety.

Bill signs a check payable to the order of City Bank, filling in the blanks for the amount with the figures "$100" and "One thousand and 00/100 dollars." This check is payable in the amount of a. $0. b. $100. c. $1,000. d. $1,100.

Blythe, an accountant for Credits & Debits, acquires a negotiable instrument from Eton by promising to pay its face value in thirty days. Blythe acquires the status of an HDC when she a. acquires possession of the negotiable instrument. b. agrees with Eton to buy the negotiable instrument. c. pays the face value due on the instrument. d. transfers the instrument to another party.

Dora receives a check from Eagle Corporation. Dora indorses the check to First National Bank by writing "pay to First Nat'l Bank only" and signing her name. This is

a restrictive endorsement

Gina writes and signs a check payable to "Happy Market." Ira, Happy's manager, indorses the check "For deposit only." This is

a restrictive endorsement

Locke signs a check payable to the order of Metro Bank, filling in the blanks for the amount with the figures "$100" and "One thousand and 00/100 dollars." This check is payable in the amount of

$1000 (One thousand dollars)

Tom draws a check, on his account in State Bank in New York, payable to Digital Computers, Inc., in San Francisco. Digital deposits the check in its ac¬count at First National Bank. First National deposits the check in the Federal Reserve Bank of San Francisco, which transfers it to the Federal Reserve Bank of New York. That Federal Reserve bank sends the check to State Bank. 1) Digital's bank is a. the cashing bank. b. the depositary bank. c. the intermediary bank. d. the payor bank. 2) Tom's bank is a. the cashing bank. b. the depositary bank. c. the intermediary bank. d. the payor bank. 3) When Digital's bank received the check, it was required to pass it on a. before midnight of the next banking day. b. before midnight of the next day, whether or not it was a "banking" day. c. before noon of the next banking day. d. within five business days.

1) B 2) D 3) A

Beta Software Corporation is a new company that needs to borrow money to meet its payroll. Cliff, president and owner of Beta, asks First National Bank to loan Beta the funds. 1) First National insists that Cliff sign the loan application, making himself personally liable for payment whether or not Beta defaults, Cliff will be a. a guarantor and a surety. b. a guarantor only. c. a surety only. d. neither a guarantor nor a surety. 2) National insists that Cliff sign the loan application, making himself personally liable for payment only if Beta de- faults, Cliff will be a. a guarantor and a surety. b. a guarantor only. c. a surety only. d. neither a guarantor nor a surety.

1) C 2) B

Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from Finest Quality Motors. 1) Edie is a guarantor, then the guaranty is required to be in writing because of a. the debtor's right of redemption. b. the co-signer's right of contribution. c. the creditor's transfer of possession. d. the Statute of Frauds. 2) If, after the loan agreement is signed, Dina agrees to a higher rate of interest without telling Edie, then Edie is a. discharged from the agreement. b. liable at the higher rate of interest. c. liable at the lower rate of interest. d. liable for the principal only.

1) D 2) A

Bob owes $5,000 to Consumer Lender Corporation (CLC). As a prejudgment remedy to collect the debt, CLC could use a. attachment. b. contribution. c. execution. d. redemption.

Bob receives a check from Chris. Without Bob's knowledge, Dan indorses it in his own name and deposits it in his account at East Bank. In Bob's subsequent suit against East Bank for the money, the court will most likely rule in favor of a. Bob, because Dan's signature is not authorized. b. Bob, because East Bank is not a holder in due course. c. East Bank, because Dan's signature is not authorized. d. East Bank, because it is a holder in due course.

Bret defaults on a loan owed to City Bank. As a creditor, City Bank may attempt to place liens on all of Bret's property except a. motor vehicles that Bret uses to commute to work. b. personal property that consists of stock in various corporations. c. property that Bret elects to exempt. d. real property on which Bret plans to open a retail store.

Buck, To borrow money to finance the start-up of his business, Buck executes an instrument in favor of City Bank. For the instrument to be negotiable, the signature must be a. anywhere on the instrument. b. anywhere on the lower half of the instrument only. c. in the lower left-hand corner of the instrument only. d. in the lower right-hand corner of the instrument only.

Dag is the secured party in a secured transaction with Elmo. In this transaction, Dag a. has a security interest. b. owes payment. c. owes performance. d. owns collateral.

Dan writes a check to Emma on his account at First State Bank. The bank dishonors the check even though Dan has sufficient funds in his account. The bank is a. liable to Dan only. b. liable to Dan and Emma. c. liable to Emma only. d. not liable to Dan or Emma.

Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from Finest Quality Motors. A13. Refer to Fact Pattern 28-1A. If, after the loan agreement is signed, Dina agrees to a higher rate of interest without telling Edie, then Edie is a. discharged from the agreement. b. liable at the higher rate of interest. c. liable at the lower rate of interest. d. liable for the principal only.

Dino, the chief executive officer of Electrician Services, Inc., signs an instrument by placing his thumbprint on it. This instrument is a. negotiable. b. nonnegotiable, because a thumbprint does not state the signer's name. c. nonnegotiable, because a thumbprint implies a lack of binding intent. d. nonnegotiable, because a thumbprint is not a signature.

Dolf borrows money from Elin. Dolf defaults. To use attachment as a remedy, Elin must first a. file a suit against Dolf. b. lose a suit against Dolf. c. succeed in a suit against Dolf. d. take possession of Dolf's property.

Dora, Ed, and Fran are co-sureties of Glen's debt to Hi-Credit Company. Dora pays Glen's entire debt. Dora's right to seek proportionate payments from Ed and Fran is the right of a. contribution. b. redemption. c. reimbursement. d. subrogation.

Doug signs a check, may 1 that is payable to the order of Excel Credit Corporation and that is dated July 1. This check is a. negotiable immediately. b. negotiable, but only after July 1. c. nonnegotiable, because it is postdated. d. nonnegotiable, because it is signed by Doug.

Elle is a trustee for a federal bankruptcy court. Elle's duties include a. collecting a debtor's property. b. establishing priority for the payment of unsecured creditors. c. operating a debtor's business to obtain maximum profit for creditors. d. submitting to an examination under oath by the creditors.

Elmo files a petition in bankruptcy. If the court concludes that there are grounds for a finding of "substantial abuse," the court will most likely a. dismiss Elmo's petition. b. discharge Elmo's debts. c. distribute Elmo's property to Elmo's creditors. d. issue an automatic stay against any actions by Elmo's creditors.

Eve possesses an instrument that is "payable to bearer." She loses it. Flik finds it. On this instrument, Flik may a. collect payment. b. not collect payment, because he did not give value for it. c. not collect payment, because he found it. d. not collect payment, because he is not the "bearer."

Eve sells her motorcycle to her brother Floyd for $1,000. Twelve days later, Eve files for bankruptcy under Chapter 7. A10. Refer to Fact Pattern 30-1A. Regarding the sale of the cycle, the trustee may a. cancel it as a fraudulent transfer. b. cancel it as a voidable preference. c. not cancel it because it is a sale, not a gift. d. not cancel it, but can sue Floyd's estate for the return of the $1,000.

Excel Vehicles, Inc., makes and sells automobiles to auto dealers, including Fine Auto Sales. Fine sells the cars to consumers and businesses. A10. Refer to Fact Pattern 29-1A. Ira, a police officer, buys an Excel from Fine to drive in his off-duty hours. Ira's Excel is a. a consumer good. b. an accession. c. equipment. d. inventory.

Expert Capital Company and First National Bank are secured parties with security interests in property owned by Grande Corporation. Between these security interests, the first to be filed or perfected has priority over other filed or perfected security interests in a. most circumstances. b. no circumstances. c. states that have not adopted Article 9 of the UCC. d. states that require a security agreement to be signed and dated by the creditor.

Finest Office Company employs General Construction, Inc. (GCI), to renovate an office and signs a note for $10,000 payable to GCI. GCI breaches the contract, but sells the note for $5,000 to Happy Collection Agency, which knows that GCI has not performed. Happy is an HDC of the note in the amount of a. $0. b. $5,000. c. $10,000. d. $15,000.

First State Bank holds a mortgage on Gigi's property. Gigi defaults on the debt. The bank forecloses. If the proceeds of the foreclosure sale are insufficient to pay the costs of the sale and the debt, the bank can a. obtain a deficiency judgment against Gigi. b. prorate the costs to its other debtors. c. reclaim the property as a voidable transfer. d. use the equity of redemption to redeem the property.

Frank's farm is to be sold at a foreclosure sale. For Frank to keep the farm by paying the full amount of the debt, plus any interest and costs that have accrued, is a. the equity of redemption. b. the exercise of exemption. c. the right of contribution. d. the right of subrogation.

Gail owes $5,000 in unpaid taxes. Using the back of an old t-shirt, she exe- cutes an instrument for $5,000 that otherwise meets the requirements for negotiability. This instrument is most likely a. negotiable. b. nonnegotiable, because an instrument must be on paper. c. nonnegotiable, because a t-shirt is not sufficiently permanent. d. nonnegotiable, because the government does not appreciate it.

Gustav files a petition for bankruptcy under Chapter 13. Gustav is granted a discharge. Debts that will not be discharged include claims for a. domestic support, fraudulently incurred debt, and student loans. b. domestic support only. c. fraudulently incurred debt only. d. student loans only.

International Properties, Inc. (IPI), signs an instrument in favor of Financial Investments Corporation that includes the statement "IPI plans to pay this debt from the proceeds of the sale of the IPI Office Building in Montreal." This instrument is a. negotiable. b. nonnegotiable, because banks cannot easily process office buildings. c. nonnegotiable, because it refers to a separate sale. d. nonnegotiable, because Montreal is in Canada, not the United States.

Jen has a claim against Kevin's property that must be satisfied before the property is available to satisfy the claims of other creditors. This is a. a lien. b. a violation of most state laws. c. a writ of attachment. d. a writ of execution.

Jill, in good faith and for value, gets from Kit a check "payable to the order of bearer." Jill does not know that Kit stole the check. Jill is a. an HDC. b. not an HDC, because Kit did not acquire the check for value. c. not an HDC, because Kit did not acquire the check in good faith. d. not an HDC, because the check is a bearer instrument.

John writes a check to Kay as payment for a DVD player but soon discovers the player is broken. He goes to the drawee bank and orally authorizes Larry, a bank officer, to stop payment on the check. This order is valid for a. fourteen days. b. fourteen months. c. six days. d. six months.

Julie signs a check payable to the order of Kwik Mart Stores, Inc., that does not include a date. This check is a. negotiable. b. nonnegotiable, because it does not include a date. c. nonnegotiable, because it is payable to Kwik-Mart. d. nonnegotiable, because it is signed by Julie.

Kip writes a check for $1,000 drawn on Local Bank and presents it to Mira. Mira presents the check for payment to Local Bank, which dishonors it. The party most likely liable to Mira is a. Kip in a civil suit. b. Kip in a criminal prosecution. c. Local Bank in an administrative proceeding. d. neither Kip nor Local Bank.

Kwik Delivery Company buys a truck from Lucky Vehicles, Inc., under a guaranty signed by Mina, Kwik's president, who writes "President" after her signature. When Kwik does not pay for the truck, Lucky sues Mina, who claims that she did not intend to be bound by the guaranty. The court would most likely rule in favor of a. Lucky, because Mina's guaranty is unambiguous. b. Lucky, because Mina works for Kwik. c. Mina, because she did not intend to be bound by the guaranty. d. Mina, because she signed only as a corporate officer.

Larry borrows money from Joan. To use a writ of execution as a remedy, Joan must first a. be unable to collect the amount of a judgment against Larry. b. be unable to redeem Larry's exempt property before a sale will occur. c. notify Larry in writing (in a "writ") of her intent. d. obtain and maintain possession of Larry's property.

Liu and Midge—Nero's creditors—contract with Nero for the discharge of Nero's liquidated debts on payment of a lesser sum. This is a. a composition agreement. b. a subrogation. c. a suretyship agreement. d. in violation of most states' laws.

Mabel files a petition in bankruptcy. The initial proceeding on this petition will be in a. a federal bankruptcy court. b. a state bankruptcy court. c. the highest court in the state in which A is located. d. the United States Supreme Court.

Mac files a petition for a discharge in bankruptcy. Mac's failure to appear at a meeting of the creditors listed in Mac's schedules may result in Mac being a. denied a discharge of bankruptcy. b. fined. c. held in contempt. d. imprisoned.

Maria signs an instrument payable to the order of National Loans, Inc., "on or before" June 15. This instrument is a. negotiable. b. nonnegotiable, because the maker can move up the payment date. c. nonnegotiable, because moving up the payment date is optional. d. nonnegotiable, because the exact payment date cannot be determined from the face of the instrument.

Mia's voluntary petition for bankruptcy is found to be proper. The order for relief is effective as soon as a. Mia files the petition. b. Mia posts a bond to cover the costs of the proceedings. c. Mia's creditors agree to the terms. d. the trustee collects and distributes the property of Mia's estate.

Mike owes $12,000 to Nora, $6,000 to Owen, and $6,000 to Pat. The three creditors enter into an agreement with Mike to discharge the debts on payment of a sum of $12,000 to them, to be divided proportionately. This is a. a composition agreement. b. a guaranty agreement. c. a judicial lien. d. a suretyship agreement.

Mike receives a payroll check from National Computer Systems, Inc., and indorses it by signing his name on the back of the check. This is a. a blank indorsement. b. a qualified indorsement. c. a restrictive indorsement. d. a special indorsement.

Ollie files a petition in bankruptcy. At the moment of filing a. an automatic stay goes into effect. b. Ollie's debts are discharged. c. Ollie's petition is dismissed. d. Ollie's property is distributed to Ollie's creditors.

Opal signs a promissory note payable to the order of Payday Loan Company. The note states that it is payable "with interest at the legal rate." This note is a. negotiable. b. nonnegotiable, because it does not specify a rate of interest. c. nonnegotiable, because it is a promissory note. d. nonnegotiable, because it is payable only with interest.

Owen drops out before he completes his college education and starts his own business. Five years later, Owen files for bankruptcy under Chapter 13. Owen will obtain a discharge of all debts provided for by the Chapter 13 plan if the value of the property distributed under the plan is greater than what would have been available in a liquidation and a. if he fails to make all payments due to events beyond his control. b. if he stays in business for at least five years. c. if he takes out a student loan and returns to school. d. under no circumstances.

Pam signs an instrument payable to the order of Quick Credit, Inc., that allows a holder to demand payment of the entire amount due, with interest, if Pam fails to make a payment. This instrument is a. negotiable. b. nonnegotiable, because a holder can move up the payment date. c. nonnegotiable, because moving up the payment date is conditional. d. nonnegotiable, because the exact payment date cannot be determined from the face of the instrument.

Paula is a debtor. Paula's employer Quality Communications, Inc., her ex-husband Rob, her alma mater StateUniversity, and Timely Credit Company are her creditors. For these parties, a repayment plan under Chapter 13 could be filed by a. Paula only. b. Paula, her employer, or her creditors only. c. Paula or her creditors only. d. Paula's employer only.

Pola files a petition in bankruptcy. Pola's non-dischargeable debts include a. domestic-support obligations. b. student loans if payment would impose undue hardship. c. unpaid loans to finance home repairs. d. unsecured credit-card debt.

Pola wants to transfer a check to Quin. The check is defective if it a. has been previously dishonored. b. has no irregularities on its face. c. is not overdue. d. is so complete that no element of negotiability is lacking.

Rico signs a lease on behalf of Start-Up, Inc., with Town Properties Corporation. As part of the lease, Rico signs a document titled "GUARANTY," which states that it is "an absolute guaranty" of the lease's performance. B13. Refer to Fact Pattern 28-2B. The reason for the result in the previous question is that a. Rico signed a "GUARANTY." b. Rico signed the lease "on Start-Up's behalf." c. Town Properties probably forced Rico to sign the "GUARANTY." d. Town Properties still owns the property and is free to re-lease it.

Ross and Sally agree to guarantee Tim's debt. Ross's maximum liability is $30,000, and Sally's is $20,000. Tim owes $20,000 and is in default. Ross pays the creditor the entire amount. In the absence of an agreement to the contrary, Ross can recover from Sally a. $8,000. b. $10,000. c. $20,000. d. nothing.

Ross signs an instrument using an "R" with a circle around it. With this mark for a signature, the instrument is a. negotiable. b. nonnegotiable, because an initial does not state the signer's name. c. nonnegotiable, because an initial is not a signature. d. nonnegotiable, because a simple initial implies a lack of binding intent.

Tasty Pastries declares bankruptcy, idling Tasty's delivery vehicles. A creditor with a secured interest in the vehicles can compel Tasty to pay a certain amount of money each month to offset the depreciation in the value of the vehicles. This is a. the adequate protection doctrine. b. the avoidance doctrine. c. the creditor preference rule. d. the Tasty Pastries rule.

Tech Support Corporation uses its office equipment as collateral for a loan from United Bank. The bank files a financing statement with the secretary of state in the state in which Tech Support was chartered. One year later, Tech Support changes its name to Vector, Inc. B8. Refer to Fact Pattern 29-1B. United Bank's perfection will remain effective for a. four months after the date of the name change. b. five business days after the date of the name change. c. six years after the date of the original filing. d. no time.

Tina operates a sole proprietorship, a corporation, and a partnership. Tina wants to obtain relief for her individual debts and the debts of her corporation and partnership. Tina may file a petition for each under a. Chapter 7. b. Chapter 9. c. Chapter 11. d. Chapter 13.

Troy transfers a draft by signing it and delivering it to Uma. Troy is a. an indorser. b. an assignee. c. a delegatee d. a promisor.

Tyrone draws a check payable to "Cash" and presents it to United Bank for payment. This instrument is a. a bearer instrument. b. an order instrument. c. valid but nonnegotiable. d. void.

USA Oil Corporation signs an instrument that states it is being executed "in accord with a contract for the purchase of 4,000 barrels of oil dated May 1." This instrument is a. negotiable. b. nonnegotiable, because information about the sale must be obtained from another source. c. nonnegotiable, because it states an express condition to payment. d. nonnegotiable, because the terms of the sale are not clear.

Will signs a check payable to "X" and gives it to Yves. This check is a. negotiable. b. nonnegotiable, because it does not indicate a specific payee. c. nonnegotiable, because obviously it was executed as a joke. d. nonnegotiable, because "Yves" is not "X."

Rollo obtains a check payable to his order from Simone. Rollo signs the back and gives the check to Trey. Trey writes "Pay to Trey" above Rollo's signature. Refer to Fact Pattern 25-A1. When Trey writes "Pay to Trey" above Rollo's signature, Rollo's signature becomes

A special indorsement

Commodity Sales Corporation and Resource Purchasing Company enter a contract for a sale of unprocessed silver. Commodity Sales draws a draft unconditionally ordering Resource Purchasing to pay $50,000 to Commodity Sales's order in sixty days. Resource Purchasing signs and dates the draft. This instrument is:

A trade of acceptance

Velma transfers a note by signing it and delivering it to Woz. Woz is

An indorsee

Tiffany transfers a draft by signing it and delivering it to Uma. Tiffany is

An indorser

Quincy draws a check payable to "Replay Stadium" to buy two season tickets to the next year's State College football games. This instrument is

An order instrument

Flik drawas a check payable to DeliMart to buy groceries Fliks check is most likely

An order to pay

Beck draws a check payable to "County Farm Supply" to buy a quantity of fertilizer to deposit in Beck's field. This check is a. a certificate of deposit. b. a draft. c. a promise to pay. d. a promissory note.

Best Credit Corporation lends funds to Cody, a consumer, to apply to the cost of a sport utility vehicle (SUV), which is the collateral for the loan. An enforceable security interest requires a. a written agreement and Best's possession of the SUV. b. a written agreement or Best's possession of the SUV. c. a written agreement only. d. Best's possession of the SUV only.

Beta Software Corporation is a new company that needs to borrow money to meet its payroll. Cliff, president and owner of Beta, asks First National Bank to loan Beta the funds. B10. Refer to Fact Pattern 28-1B. Generally, for a contract between First National and Cliff with respect to liability for Beta's loan to be enforceable, it must be in writing if Cliff is a. a guarantor and a surety. b. a guarantor only. c. a surety only. d. neither a guarantor nor a surety.

Beta Software Corporation is a new company that needs to borrow money to meet its payroll. Cliff, president and owner of Beta, asks First National Bank to loan Beta the funds. B11. Refer to Fact Pattern 28-1B. If First National insists that Cliff sign the loan application, making himself personally liable for payment only if Beta defaults, Cliff will be a. a guarantor and a surety. b. a guarantor only. c. a surety only. d. neither a guarantor nor a surety.

Bill and Cody agree to guarantee Dave's debt. Bill's maximum liability is $60,000, and Cody's is $40,000. Dave owes $40,000 and is in default. Bill pays the creditor the entire amount. In the absence of an agreement to the contrary, Bill can recover from Cody a. $0. b. $16,000. c. $20,000. d. $40,000.

Frida, Thirty-one days before filing a petition in bankruptcy, Frida transfers property and makes payments that favor one creditor over another. These are a. affirmation agreements. b. preferences. c. secured interests. d. unsecured debts.

Gem Jewelers files a voluntary petition for bankruptcy. In listing its assets, Gem intentionally omits certain valuable stones. After Gem is granted a discharge, Hasty Catering, one of Gem's unsecured creditors whose claims were discharged, learns of the fraud. Hasty can a. do nothing. b. enforce its claim against Gem. c. file an involuntary petition for bankruptcy against Gem. d. take possession of the stones with or without a breach of the peace.

Gianini, The payment of Frida's debt to Gianini is guaranteed by Frida's personal property. Gianini is a. a debtor. b. a secured party. c. a secured transaction. d. a security interest.

Green Landscape Company buys a backhoe on credit from Heavy Equipment Corporation, but does not make a payment on the loan for several months. Heavy repossesses the backhoe by towing it from a public street. Green sues Heavy for breach of the peace. Green will probably a. not prevail, because Heavy did not use judicial process. b. not prevail, because the repossession was not a breach of the peace. c. prevail, because Green did not default on the loan. d. prevail, because the repossession was a breach of the peace.

Ian's mortgage debt to Jeff is past due. Jeff brings a legal action against Ian to collect the debt. Jeff asks the court to order the sale of the mortgaged property and the payment of a portion of the proceeds to Jeff. This is a request for a. a deficiency judgment. b. a foreclosure. c. a right of reimbursement. d. redemption.

Jen signs a check "pay to the order of Key" drawn on Jen's account in Little Bank to buy Key's car. Jen asks Little Bank to indicate on the face of the check that it will accept it when Key presents it for payment. If the bank agrees, this will be a. a cashier's check. b. a certified check. c. a trade acceptance. d. a traveler's check.

Karen writes on a piece of paper, "I owe you $600," signs it, and gives it to Lou. This instrument is a. negotiable. b. nonnegotiable, because it does not include an express promise to pay. c. nonnegotiable, because it does not recite any consideration. d. nonnegotiable, because it does not state any conditions to payment.

Kelly signs an instrument in favor of Leo that states it is "subject to a certain agreement between Kelly and Mona." This instrument is a. negotiable. b. nonnegotiable, because it is made subject to a separate agreement. c. nonnegotiable, because it refers to a separate agreement. d. nonnegotiable, because Kelly and Mona are not the same persons.

Khali's debt to Lew is past due. Lew obtains a judgment against Khali to collect the debt, but Khali refuses to pay. Lew asks the court to order Khali's employer to pay a portion of Khali's paycheck to Lew. This is a request for a. an exemption from most federal limits on creditors' actions. b. an order of garnishment. c. an order that would violate most state laws. d. a right of contribution.

Kofi files a petition for bankruptcy. Kofi must include with the petition a. a list of creditors and the amount of the debt owed to each only. b. a list of creditors and the amount of the debt owed to each, a list of property, and a statement of financial affairs. c. a list of property only. d a statement of financial affairs only.

Kris transfers a note, on which Liu is the maker, to Mia, who takes it for value and in good faith. Mia knows that Kris breached the contract underlying the note, giving Liu a defense against payment. With respect to this note, Mia is a. a knowledgeable holder in due course. b. an ordinary holder. c. an ordinary holder in due course. d. an ordinary note taker.

Kwik Credit Corporation asks Little Supply Company to agree to a security agreement that provides for coverage of the proceeds from the sale of after-acquired property. This is a. a first-in, first-out rule. b. a floating lien. c. a funds guaranty. d. in violation of secured transactions law.

Mary's home is in a state that has a $30,000 homestead exemption. Mary defaults on a $60,000 debt that she owes to Nina. Mary's home is sold at auction for $80,000. B18. Refer to Fact Pattern 28-3B. Mary will receive a. $0. b. $30,000. c. $50,000. d. $60,000.

Mike loses his National Bank access card. He realizes his loss the next day but waits a week to call National. Meanwhile, Opal finds and uses Mike's card to withdraw $3,000 from Mike's account. When Mike receives his National statement, he demands that the bank investigate the matter and recredit his account. The bank a. has no duty to investigate. b. must investigate and, if the dispute is not resolved within ten days, recredit Mike's account (at least until the dispute is resolved). c. must investigate and immediately recredit Mike's account (at least until the dispute is resolved). d. must investigate but need not recredit Mike's account.

Mona lives in New Jersey, but she works in New York. Mona borrows $1,000 from National Bank, using her motorcycle as collateral. To perfect its security interest, the bank must file its financing statement in at least a. every state. b. New Jersey. c. New Jersey and New York. d. New York.

Commodity, On this Instrument, Commodity Sales is:

The Drawer

Nero (On the back of a check payable to), he writes "Pay to Odell, without recourse" and signs it. This a. does not effect the check's negotiability or any party's liability. b. relieves Nero of liability on the check. c. relieves Odell of liability on the check. d. renders the check nonnegotiable.

Nero, The payment of Nero's debt to Olly is guaranteed by Nero's personal property. Nero is located in Pennsylvania. Olly communicates to the appropriate state official a security agreement that uses only Quality Engineering, the trade name of Nero's business. To perfect Olly's interest, this is a. irrelevant. b. not sufficient. c. sufficient if Quality Engineering is a sole proprietorship. d. sufficient if the trade name is spelled correctly or misspelled slightly.

Olaf is the creditor in a transaction with Phil. Once certain requirements are met, Olaf's rights will attach, which means that Olaf will have a. an indivisible ownership right to Phil's property. b. an enforceable security interest in Phil's property. c. a notice affixed to Phil's property. d. the permission of a court to seize Phil's property.

Ollie negotiates an order instrument to Phil by a. assignment of its rights under a contract. b. delivery with any necessary indorsement. c. making an unconditional promise to pay. d. presenting it in response to a demand by B.

Pat, the manager of Quik Mart, deposits the store's receipts in its account at Regional Bank. As to the receipts, the relationship between Quik Mart and the bank is a. attorney and client. b. creditor and debtor. c. guardian and ward. d. trustee and beneficiary.

Petra signs a check payable to Quincy, who indorses the back, gives it to Regional Credit Union, and receives cash. The transfer of the check from Quincy to the credit union is a. an assignment. b. a negotiation. c. a payment. d. a sale.

Pruit performs a contract with Quint to reshingle the roof on Quint's house, but Quint does not pay. Pruit notifies Quint that Pruit will foreclose on the house and sell it to satisfy the debt. This is a. a judicial lien. b. a mechanic's lien. c. an artisan's lien. d. a violation of most state laws.

Quality Appliance Company allows Reba to take a set of kitchen appliances that she bought from Quality even though she has not paid the full price. Quality's legally sufficient financing statement in the goods need not include a. a description of the collateral. b. a statement of the reason for allowing Reba to take the goods. c. Quality's name. d. Reba's name.

Quantity Sales Corporation and Resources Purchasing Company enter a contract for a sale of processed silver. Quantity Sales draws a draft unconditionally ordering Resources Purchasing to pay $50,000 to Quantity Sales's order in sixty days. Resources Purchasing signs and dates the draft. On this instrument, Quantity Sales is a. the banker. b. the drawer. c. the maker. d. the trader.

Quincy draws a check payable to "Replay Stadium" to buy two season tickets to the next year's State College football games. This instrument is a. a bearer instrument. b. an order instrument. c. valid but nonnegotiable. d. void.

Quotient Financial Corporation is a secured party with a security interest in property owned by Retail Sales Company. Perfection of this security interest may not protect Quotient Financial against the claim of a. a bank. b. a buyer in the ordinary course of business. c. a subsequent lien creditor. d. a trustee in bankruptcy.

Ray signs a promissory note for $10,000 in favor of State University (SU). The note does not specify the date of its payment. Ray defaults. In SU's suit to collect on the note, the court will most likely rule in favor of a. Ray, because SU assumed the risk that the note would not be paid. b. Ray, because the note is not payable at a definite time or on demand. c. SU, because the note is an unconditional promise to pay the holder. d. SU, because there is a uniform "default time" for repayment when a date is not specified.

Region Bank wants to perfect its security interest in timber owned by Superior Lumber, Inc. Most likely, a financing statement should be filed with a. the local chamber of commerce. b. the county clerk. c. the federal loan officer. d. the secretary of state's office.

Rich Financial, Inc., files a financing statement regarding a transaction with Supreme Business Company. To be valid, the financing statement must contain all of the following except a. a description of the collateral. b. a statement of the purpose for the transaction. c. Rich's name. d. Standard's name.

Rico signs a lease on behalf of Start-Up, Inc., with Town Properties Corporation. As part of the lease, Rico signs a document titled "GUARANTY," which states that it is "an absolute guaranty" of the lease's performance. B12. Refer to Fact Pattern 28-2B. If Start-Up stops paying the rent, it is most likely that liability or loss for the unpaid amount will rest with a. no one. b. Rico and Start-Up. c. Start-Up only. d. Town Properties only.

Sid signs a promissory note payable to Tony on which Sid conspicuously notes that it is "not negotiable" and gives the note to Toney. This instru- ment is a. negotiable. b. nonnegotiable, because it includes the notation "not negotiable." c. nonnegotiable, because it is a promissory note. d. nonnegotiable, because it was given to Bob.

Sports, To reorganize debt and continue in business, Sports & Fitness Corporation may file a petition in bankruptcy under the Bankruptcy Code's Chapter a. 7. b. 11. c. 12. d. 13.

Tech Support Corporation uses its office equipment as collateral for a loan from United Bank. The bank files a financing statement with the secretary of state in the state in which Tech Support was chartered. One year later, Tech Support changes its name to Vector, Inc. B9. Refer to Fact Pattern 29-1B. To continue the effectiveness of its perfected interest, United Bank must file a. a continuation statement after the original filing expires. b. an amendment to the financing statement before the period expires. c. a new financing statement immediately. d. a notice of repossession with all interested creditors.

Thelma signs a check "pay to the order of Uri" drawn on Thelma's account in Verity Bank. Thelma has $400 in her account but the amount of the check is $500, which the bank pays. This is a. a dishonored check. b. an overdraft. c. a postdated check. d. a stale check.

Veda believes that she needs to obtain a Chapter 13 discharge in bankruptcy. A Chapter 13 proceeding can be initiated by a filing of a petition by a. a creditor. b. a debtor. c. anyone. d. a trustee.

Velma transfers a note by signing it and delivering it to Woz. Woz is a. a delivery person. b. an indorsee. c. a note passer. d. a promisee.

Vladimir negotiates a bearer instrument to Wendy by a. assignment. b. delivery. c. presenting it in response to a demand by Wendy. d. promising to pay

Yves negotiates an instrument to Zack. Negotiation is the transfer of an instrument a. for valuable consideration under a contract. b. in a form and by a means that makes the transferee a holder. c. pursuant to preliminary contract discussions. d. without the payment of a recognized medium of exchange.

Bagels n' Coffee Café issues an instrument in favor of Eatery Supplies, Inc. For the instrument to be negotiable, it must

Be payable on demand or act at a specific time

Bob receives a check from Chris. Without Bob's knowledge, Dan indorses it in his own name and deposits it in his account at Elm City Bank. In Bob's subsequent suit against the bank for the money, the court will most likely rule in favor of

Bob, because Dan's signature is not authorized

Brendan signs a check "pay to the order of City College Bookstore" drawn on his account in Delta Bank to pay for his current semester's textbooks. The bookstore deposits the check in its account in Eagle Bank. Like most checks, this check is a. a one-party instrument. b. a four-party instrument. c. a three-party instrument. d. a two-party instrument.

Brick's debt to Conry is past due. Conry brings a legal action against Brick to collect the debt. To ensure that a judgment in Conry's favor will be collectible, Conry asks the court to order the seizure of Brick's property. Exempt from such an order in most states is a. all of Brick's personal property. b. as much of Brick's personal property as Brick opts to exempt. c. equipment that Brick uses in a business up to a specified amount. d. none of Brick's personal property.

Carlton files a petition in bankruptcy. One of the goals of bankruptcy law with respect to a debtor is to a. encourage the continued use of credit to borrow funds. b. ensure that third parties will continue to guarantee loans. c. provide a fresh start, free from creditors' claims. d. shield assets from creditors' claims.

City Bank's financing statement in collateral owned by Delta Corporation will expire in less than a year. Filed timely, a continuation statement could extend the effectiveness of the financing statement for a. one year. b. two years. c. five years. d. ten years.

Computer World (CW), after repossessing a multimedia system from Dave, a consumer, decides to keep the system instead of reselling it. CW sends written notice to Dave. CW can now keep the system a. only after attempting an unsuccessful public sale of the system. b. only after notifying any other appropriate secured party. c. unless Dave objects. d. under any circumstances.

Delia refuses to pay Ewing $500 in cash on their contract to repair certain theater sets, which Ewing still possesses. Ewing's lien on the sets will terminate a. if Ewing continues to maintain possession. b. if Ewing does not file a written notice of lien within thirty days. c. if Ewing surrenders possession. d. within thirty days.

Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from Finest Quality Motors. A11. Refer to Fact Pattern 28-1A. If Edie signs the application but fails to condition her signature on Finest's agreement to pursue its legal remedies against Dina before looking to her, then Edie is a. a guarantor and a surety. b. a guarantor only. c. a surety only. d. neither a guarantor nor a surety.

Dona goes through an involuntary bankruptcy proceeding. An involuntary bankruptcy occurs when a. a debtor files forms designated for the purpose in a bankruptcy court. b. a debtor is unable to pay his or her debts as they come due. c. a debtor's creditors force the debtor into bankruptcy proceedings. d. a debtor's debts exceed the fair market value of his or her assets.

Donald's debt to Everett is past due. Everett brings a legal action against Donald to collect the debt. To ensure that a judgment in Everett's favor will be collectible, Everett asks the court to order the seizure of Donald's property. This is a request for a. a guaranty (or suretyship) contract. b. an order that would violate most state laws. c. a writ of attachment. d. a writ of execution.

Dora receives a check from Eagle Corporation. Dora indorses the check to First National Bank by writing "pay to First Nat'l Bank only" and signing her name. This is a. a blank indorsement. b. a qualified indorsement. c. a restrictive indorsement. d. a special indorsement.

Drew and Earl are brothers. They agree to act as guarantors on a loan made by their sister, Flo. Flo defaults on the payments and Drew refuses to pay. Earl pays the debt. Earl can recover from a. Drew and Flo under the right of proportionate liability. b. Drew and Flo under the right of reimbursement. c. Drew under the right of contribution and Flo under the right of subrogation. d. no one, because the parties are brothers and sister.

Dru signs a check "pay to the order of Eppie" drawn on Dru's account in First Federal Bank. Greta forges Eppie's indorsement. First Federal pays the check. Most likely a. Dru will be liable for the amount. b. Eppie will have to pay Dru for the amount. c. First Federal will have to recredit Dru's account. d. the Federal Reserve will reimburse all parties for their costs.

Dru signs a check payable to Excel Services, Inc., and gives it to Excel, leaving the amount blank but authorizing Excel to fill it in for $1,000. Excel fills in $1,500 and negotiates the check to Friendly Credit Corporation, an HDC. Friendly Credit can enforce the check for a. $0. b. $500. c. $1,000. d. $1,500.

EZ Credit Company signs an instrument payable to the order of Flem that states, "The maker of this note at the date of maturity, May 1, 2011, can extend the time of payment, but for no more than a reasonable time." This instrument is a. negotiable. b. nonnegotiable, because it includes an extension clause. c. nonnegotiable, because it is not payable within a definite time. d. nonnegotiable, because it is payable to a specific payee.

Eli agrees to pay a debt to Financial Credit, Inc., which is otherwise dischargeable in bankruptcy. This is a. a justification. b. a novation. c. a reaffirmation. d. a rejection.

Eve sells her motorcycle to her brother Floyd for $1,000. Twelve days later, Eve files for bankruptcy under Chapter 7. A9. Refer to Fact Pattern 30-1A. Floyd dies while riding the cycle. Eve is Floyd's only heir. With respect to the bankruptcy estate, the inheritance is a. exempt property. b. part of the estate if Floyd died more than 180 days after Eve's filing. c. part of the estate if Floyd died within 180 days after Eve's filing. d. part of the estate if the accident was in some way Eve's fault.

Excel Investments, Inc., and First State Bank are secured parties with security interests in property owned by GR8 Manufacturing Corporation. Priority between these security interests is generally determined by a. the amount of the claim. b. the custom in the trade. c. the time of perfection. d. the time the security agreement was signed.

Excel Vehicles, Inc., makes and sells automobiles to auto dealers, including Fine Auto Sales. Fine sells the cars to consumers and businesses. A9. Refer to Fact Pattern 29-1A. Holly, a professional driver, buys an Excel from Fine to drive in a Grand Prix race. Holly's Excel is a. a consumer good. b. an accession. c. equipment. d. inventory.

General Leasing Company (GLC) buys equipment for use as inventory, borrowing $1 million from Helpful Finance Corporation for a security interest in the equipment. The next day, GLC borrows $500,000 from Interstate Bank, also for a security interest in the equipment. GLC defaults on the loans. B15. Refer to Fact Pattern 29-2B. Suppose that Helpful perfects its security interest when GLC takes possession of the equipment. In that circumstance, the party with priority to the collateral on GLC's default would be a. GLC. b. Helpful and Interstate proportionately. c. Helpful only. d. Interstate only.

Gina writes and signs a check payable to "Happy Market." Ira, Happy's manager, indorses the check "For deposit only." This is a. a blank indorsement. b. a qualified indorsement. c. a restrictive indorsement. d. a special indorsement.

Hal's Hardware store defaults on a debt to Intrastate Bank, which takes possession of the collateral securing the debt. Intrastate sells the collateral. The proceeds from the sale are applied first to a. Hal's debt to Intrastate. b. Hal's debts to other creditors. c. Intrastate's fees for the sale. d. payments Hal's made on the debt to Intrastate.

Hu, the payment of Hu's debt to Ian is guaranteed by Hu's personal property. To give public notice of his interest in Hu's property, Ian is most likely to a. attach a bright label to Hu's property. b. e-mail other potential creditors. c. file a financing statement with the appropriate authority. d. publish a collection notice in local newspapers.

Ina signs a check payable to Jan and gives it to her. Jan indorses the back, and transfers the check to Ked. To negotiate the check to Lois, Ked must a. write "Ked" on the back and deliver the check to Lois. b. write "pay to the order of Lois [signed] Ked" on the back and deliver the check to Lois. c. only deliver the check to Lois. d. transfer the check through the drawee bank.

Jay is a surety for Karen's loan from Little Bank. Jay's right to be repaid by Karen after having paid her debt is the right of a. contribution. b. redemption. c. reimbursement. d. subrogation.

Jen makes a gift of a check to Kilroy who takes it in good faith and without notice of any claim, defense, or defect. With respect to this check, Kilroy is a. an extraordinary holder in due course. b. an ordinary check passer. c. an ordinary holder. d. an ordinary holder in due course.

Jill believes that she should file a plan for a Chapter 13 discharge in bankruptcy. A Chapter 13 bankruptcy plan must provide for a. the completion of all payments to all creditors within six years. b. the payment of 100 percent of all obligations in full. c. the surrender of all collateral to the creditors. d. the turnover of the debtor's future income to the trustee.

Jose, The payment of Jose's debt to Klint is guaranteed by Jose's personal property. The process by which Klint can protect himself against the claims of third parties to this property is a. attachment. b. communication. c. perfection. d. search and seizure.

Lauren transfers an instrument to Miguel in a form and by a means that makes Miguel a "holder." This is a. a holding. b. an assignment. c. negotiation. d. presentment

Lena borrows from Mac and Nicol, using the same collateral for both loans. Only Nicol has a perfected security interest.Lena defaults on both loans. The party with first rights to the collateral is a. Lena. b. Mac and Nicol, in proportion to Lena's debt to each. c. Mac only. d. Nicol only.

Loni delivers her Mazda to be repaired at Nile's Body Shop. Loni agrees to pay cash. Nile performs, but Loni does not pay. Nile tells Loni that he will keep the car until she pays. This is a. a judicial lien. b. a mechanic's lien. c. an artisan's lien. d. a violation of most states' laws.

Lulu joins with other creditors to force Mikhail, a debtor, into bankruptcy. One of the goals of bankruptcy law with respect to creditors is to a. ensure that creditors will continue to lend to insolvent debtors. b. protect creditor assets from diminution in value. c. provide equitable treatment in the competition for debtor assets. d. make all debtor property available for creditor claims.

Mary's home is in a state that has a $30,000 homestead exemption. Mary defaults on a $60,000 debt that she owes to Nina. Mary's home is sold at auction for $80,000. B17. Refer to Fact Pattern 28-3B. Nina may recover a. $0. b. $30,000. c. $50,000. d. $60,000.

Micro Corporation's creditors agree to a workout with the firm. This is a. a Chapter 11 bankruptcy proceeding. b. an accountant's summary of a debtor's financial situation. c. a privately negotiated adjustment of creditor-debtor relations. d. a reorganization of corporate debts and debtors.

Flik, With respect to Fliks check, Delimart is:

The Payee

Mo, The payment of Mo's debt to Neil is guaranteed by Mo's personal property. This is a. governed by Article 2 of the UCC. b. governed by Article 3 of the UCC. c. governed by Article 9 of the UCC. d. not governed by the UCC.

Nina recovers less than she is owed, she can realize the difference from a. any property that Mary owns. b. only exempt property that Mary owns. c. only nonexempt property that Mary owns. d. property that any other member of Mary's family owns.

Ralph wants to transfer an instrument to Sigrid that requires Ralph's indorsement, but there is no room on the instrument. Ralph a. can attest in writing that he would sign the instrument if possible. b. cannot transfer the instrument to Sigrid. c. can sign an allonge and affix it to the instrument. d. can sign a separate piece of paper and file it for later reference.

Rely Credit Company loans Standard Manufacturing Company $50,000 and takes a security interest in the equipment that Standard buys with the money and receives on July 1. Standard files for bankruptcy on July 12. A11. Refer to Fact Pattern 30-2A. If Rely does not perfect its security interest before Standard files for bankruptcy, then Rely will be an unsecured creditor and the trustee of Standard's estate can a. invalidate Rely's interest only before Rely perfects it. b. invalidate Rely's interest only if Rely knew of the impending bankruptcy. c. invalidate Rely's interest under any circumstances. d. not invalidate Rely's interest.

Retail Store Corporation (to pay property taxes) signs a check payable to "Tyra, County Tax Collector." Before Tyra negotiates the check, Vince replaces her in office. The check can be negotiated by a. no one. b. Retail Store only. c. Tyra only. d. Tyra, Vince, or whoever holds the office of county tax collector.

Rikki signs a check "pay to the order of Scholar University" drawn on Rikki's account in State Bank to pay her tuition. Rikki is a. the certifier. b. the drawee. c. the drawer. d. the payee.

Rita owes $6,000 in unpaid taxes. In the sand of Seaside Beach, she exe- cutes an instrument for that amount that otherwise meets the require- ments for negotiability. This instrument is likely a. negotiable. b. nonnegotiable, because an instrument must be on paper. c. nonnegotiable, because sand is not sufficiently permanent. d. nonnegotiable, because the government does not appreciate it.

Ron does not make a payment on his car loan for several months. The dealer, Star Auto, repossesses the car by towing it from a public parking lot. Ron sues Star for breach of the peace. Ron will probably a. prevail, because Ron has not formally defaulted on the car loan. b. prevail, because the car was parked in a public lot when it was towed. c. not prevail, because the repossession was not a breach of the peace. d. not prevail, because a creditor can repossess property in which it holds an interest if no threats or force are used against a debtor.

Select Furniture Store sells household consumer goods. To create a purchase-money security interest, Select Furniture must a. assign, to a collecting agent, a portion of its accounts payable. b. assign, to a collecting agent, a portion of its accounts receivable. c. extend credit for part or all of the purchase price of the goods. d. refer purchasers to a third-party lender.

Steve steals one of Tricia's checks and forges her signature. Tricia's bank, Unity Bank, pays the check. Tricia can recover from a. Steve, but not Unity Bank. b. Unity Bank, which cannot recover from Steve. c. Unity Bank, which can recover from Steve. d. no one.

Todd indorses a check, "Pay to Interstate Trucking if they deliver the lumber by May 1, 2010." This is a. a blank indorsement. b. a qualified indorsement. c. a restrictive indorsement. d. a special indorsement.

Tuna, To finance the purchase of a house from Tuna, Uri signs an instrument promising to pay to "Verity Mortgage Service" $160,000 with interest in installments with the final payment due July 10, 2040. To be negotiable, this instrument must include the signature of a. a non-party witness. b. Tuna or Tuna's realtor. c. Uri. d. Verity's chief financial officer.

Valley Ranch cannot provide its creditors with adequate protection during the automatic stay. The bankruptcy court is most likely to a. deny Valley Ranch a discharge. b. place the affected assets in the hands of a neutral third party. c. remove the stay and permit the affected assets to be repossessed. d. sell the affected assets.

Yves, The payment of Yves's debt to Zach is guaranteed by Yves's personal property. Their agreement describes Yves's subject property by serial number. To establish Zach's interest, this is a. irrelevant. b. not sufficient. c. sufficient if it accurately describes the parties' agreement. d. sufficient unless it is too tedious to review.

Bankruptcy, A petition for a discharge in bankruptcy under Chapter 7 may be filed by a. Employees Credit Union, a corporation. b. Federal Savings & Loan Association, a corporation. c. Goodhands Insurance Company, a corporation. d. Huey, an independent financial adviser.

Brandy forges Caleb's signature on a check "payable to the order of Brandy" drawn on Caleb's account in Downtown Bank. Caleb's forged signature is a. effective if an innocent third party accepts the check. b. effective to the degree that it matches Caleb's genuine signature. c. effective to the extent that Downtown Bank debits Caleb's account. d. not effective.

Bruce acquires a series of notes with successive maturity dates that Cody issued on May 15 for a loan from Delta Credit, Inc. At the time of Bruce's acquisition, he learns that Cody defaulted on one of the notes. Bruce is a. an HDC if he reacquires the notes after their negotiation to any un-suspecting third party. b. an HDC only with respect to the notes on which Cody has not defaulted. c. an HDC with respect to all of notes. d. not an HDC.

Clem gets a $100 check as a gift from Daria. Clem crudely increases the amount of the check to $1,000 and transfers it to eReady Computers, Inc., in exchange for a computer. eReady deposits the check in its bank account at First City Bank. HDCs of this check include a. Clem, eReady, and First City. b. Clem only. c. eReady and First City only. d. none of these parties.

County Bank wants to perfect its security interest in collateral owned by Delta Sales Company. Most likely, a financing statement should be filed with a. the local chamber of commerce. b. the county clerk. c. the federal loan officer. d. the secretary of state's office.

Dhani signs a check "pay to the order of Etan" drawn on Dhani's account in First State Bank and dates the check "May 1." Etan presents the check to the bank for payment on December 15. This is a. a dishonored check. b. an overdraft. c. a postdated check. d. a stale check.

Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from Finest Quality Motors. A12. Refer to Fact Pattern 28-1A. If Edie is a guarantor, then the guaranty is required to be in writing because of a. the debtor's right of redemption. b. the co-signer's right of contribution. c. the creditor's transfer of possession. d. the Statute of Frauds.

Diners Restaurant issues an instrument in favor of Eatery Supplies, Inc. For the instrument to be negotiable, it need not a. be an unconditional promise or order to pay. b. be payable on demand or at a specific time. c. be signed by Diner's Restaurant. d. recite the consideration given in exchange for a promise to pay.

Don files a petition for bankruptcy. Don's creditors must file with the court their proof of claims against Don's assets within a. fifteen days of the creditors' meeting. b. thirty days of the creditors' meeting. c. sixty days of the creditors' meeting. d. ninety days of the creditors' meeting.

Eden, The payment of Eden's debt to Flem is guaranteed by Eden's personal property. This property is a. a secured party. b. a secured transaction. c. a security interest. d. collateral.

Edie is the payee of a bearer instrument—a promissory note in the amount of $1,000. Frank offers to irrigate Edie's ranch next week in exchange for the note. Edie agrees and delivers the note to Frank. Frank is a. an HDC, because he promised to perform services at a future date. b. an HDC, because the transferor was the original payee on the note. c. not an HDC, because he did not acquire the instrument in good faith. d. not an HDC, because he did not yet give value for the instrument

Eva signs an instrument unconditionally promising to pay to "First State Bank" $5,000 with interest in installments with the final payment due June 1, 2012. The instrument that Eva signed is most likely a. a certificate of deposit. b. a draft. c. an order to pay. d. a promissory note.

Eva signs an instrument unconditionally promising to pay to "First State Bank" $5,000 with interest in installments with the final payment due June 1, 2012. With respect to this instrument, First States Bank is a. the drawee. b. the drawer. c. the maker. d. the payee.

Excel Vehicles, Inc., makes and sells automobiles to auto dealers, including Fine Auto Sales. Fine sells the cars to consumers and businesses. A8. Refer to Fact Pattern 29-1A. A car in Fine's possession is probably a. a consumer good. b. an accession. c. equipment. d. inventory.

First National Bank receives a check drawn on the account of Get-Rich Industries, Inc., one of the bank's customers, at 3 P.M. Friday. Harry, the pre¬senter of the check, is not one of the bank's customers. The bank uses de¬ferred posting with a 2 P.M. cutoff hour. If it decides to dis¬honor the check, it must do so by midnight a. Saturday. b. Sunday. c. Monday. d. Tuesday.

Fix-It Auto Repair receives a discharge in bankruptcy, even though some creditors hold judgments on overdue debts against it and others filed actions to collect on overdue debts before the bankruptcy. Fix-It's discharge will a. neither stop actions nor void judgments regarding overdue debts. b. only stop actions to collect overdue debts. c. only void uncollected judgments on overdue debts. d. stop actions and void judgments regarding overdue debts.

Flik draws a check payable to "GrocMart" to buy groceries. With respect to Flik's check, GrocMart is a. the drawee. b. the drawer. c. the maker. d. the payee.

General Leasing Company (GLC) buys equipment for use as inventory, borrowing $1 million from Helpful Finance Corporation for a security interest in the equipment. The next day, GLC borrows $500,000 from Interstate Bank, also for a security interest in the equipment. GLC defaults on the loans. B16. Refer to Fact Pattern 29-2B. Suppose that two weeks after GLC takes possession of the equipment, Helpful and Interstate file financing statements, with Interstate filing first. In that circumstance, the party with priority to the equipment is a. GLC. b. Helpful and Interstate proportionately. c. Helpful only. d. Interstate only.

Giant Auto Sales Buc(finance purchase), Hoppy signs an instrument promising to pay to "Ideal Credit Union" $18,000 with interest in installments with the final payment due May 15, 2014. To be negotiable, this instrument must include on its face a. any conditions on the sale of the car. b. any conditions to the disbursement of the funds. c. any conditions to the repayment of the loan. d. no conditions.

Jazz Dance Studio owes Kay, its musical director, $1,800 for current wages, receives $700 as a down payment for dance lessons from Lora, and pays a Music, Inc., a sheet music supplier, $1,500 of $3,000 owed. In February, the studio files for bankruptcy under Chapter 7. B10. Refer to Fact Pattern 30-1B. Based on the size of the studio's estate in bankruptcy, each of Jazz's creditors will get only 10 percent of their claims. Regarding the payment to Music, Inc., the trustee may a. not recover it because Music's claim has priority. b. not recover it unless Music is an insider. c. recover it as a fraudulent transfer. d. recover it as a voidable preference.

John, The payment of John's debt to Kirsten is guaranteed by John's personal property. Kirsten is most likely to perfect her interest by a. attaching a bright label to John's property. b. calculating the precise amount of John's debt. c. correcting grammatical errors in the parties' written agreement. d. filing a financing statement with the appropriate authority.

Khalil holds a security interest in inventory owned by Luc. Khalil assigns his interest in the inventory to Mal. Mal becomes the secured party of record a. automatically. b. if Khalil advises Luc of the assignment. c. if Mal advises Luc of the assignment. d. if Mal files a uniform amendment form.

Kipper files a petition in bankruptcy. Kipper's dischargeable debts include a. domestic-support obligations. b. student loans unless the lender would suffer undue hardship. c. unpaid state and federal taxes. d. unsecured credit-card debt.

Lucy signs a $1,000 note payable, at 6 percent interest, on May 1 to Metro Bank and writes on its face that it is "nonnegotiable." This note is a. negotiable. b. nonnegotiable, because it does not include an acceleration clause. c. nonnegotiable, because it is payable with interest. d. nonnegotiable, because its maker conspicuously wrote this on its face.

Mona wants to negotiate a bearer instrument in her possession to Nat for an order instrument in Nat's possession. Indorsements are required to negotiate a. bearer instruments and order instruments. b. bearer instruments only. c. neither bearer instruments nor order instruments. d. order instruments only.

Natural Resources, Inc. (NRI), files for bankruptcy under Chapter 11 and assumes the role of a debtor in possession. In this role, NRI is similar to a. a creditor at a Chapter 7 creditors' meeting. b. a family farmer after a discharge under Chapter 12. c. a secured creditor in possession of collateral under Chapter 13. d. a trustee in a liquidation proceeding under Chapter 7.

Nero files a petition in bankruptcy. The proceeding is governed by the Bankruptcy Code, which is encompassed by a. Article 3 of the Uniform Commercial Code. b. Chapter 5 of the Federal Register. c. Section 7 of the appropriate state statute. d. Title 11 of the United States Code.

Opie's debt to Pyle is past due. Pyle obtains a judgment against Opie to collect the debt, but Opie refuses to pay. Pyle asks the court to order the seizure and sale of Opie's property. This is a request for a. a guaranty (or suretyship) contract. b. an order that would violate most states' laws. c. a writ of attachment. d. a writ of execution.

Owen is a holder of a promissory note obtained from Purchase Money, Inc. Regarding the defenses against payment of the note to which Purchase Money is subject, Owen, as an ordinary holder, is subject to a. more defenses. b. no defenses. c. some defenses, but not as many. d. the same defenses.

Parkdale Roofing Company receives a check from Quik Mart for fixing its roof, and indorses the check to Repair Supplies, Inc. (RSI). Stef, RSI's owner, gives the check to Tiny as a gift. In this situation, the party who is not an HDC of the check but who acquires HDC rights under the shelter principle is a. no one. b. Parkdale Roofing. c. Stef. d. Tiny.

Property Investments, Inc., files a financing statement to provide notice of its security interest in the property of Qwik's Restaurant. The initial effective term of a financing statement is a period of a. five days. b. five months. c. five weeks. d. five years.

QT, adjust debt and institute a repayment plan, Q.T. Café, a small business, may file a petition in bankruptcy under the Bankruptcy Code's Chapter a. 7. b. 11. c. 12. d. 13.

Quantity Sales Corporation and Resources Purchasing Company enter a contract for a sale of processed silver. Quantity Sales draws a draft unconditionally ordering Resources Purchasing to pay $50,000 to Quantity Sales's order in sixty days. Resources Purchasing signs and dates the draft. This instrument is a. a banker's acceptance. b. a nonnegotiable instrument. c. a promissory note. d. a trade acceptance.

Quiky Delivery Company contracts to provide services to Regal Bakeries, Inc. At Quiky's request, Regal makes checks for the services payable to "Quiky Delivery Co. and Secure Credit Corp." One check, however, is pay-able to "Quiky Delivery Co. Secure Credit Corp." (the "and" is omitted). This check is a. void. b. payable alternatively or jointly, depending on Regal's bank's policy. c. payable to Quiky and Secure only. d. payable to Quiky or Secure.

Rely Credit Company loans Standard Manufacturing Company $50,000 and takes a security interest in the equipment that Standard buys with the money and receives on July 1. Standard files for bankruptcy on July 12. A12. Refer to Fact Pattern 30-2A. If Rely perfects its security interest before Standard files for bankruptcy, then Rely will be a secured creditor and the trustee of Standard's estate can a. invalidate Rely's interest only after Reliable perfects it. b. invalidate Rely's interest only if Rely knew of the impending bankruptcy. c. invalidate Rely's interest under any circumstances. d. not invalidate Rely's interest.

Rhonda's debt to Skyler is past due. Skyler brings a legal action against A to collect the debt. To ensure that a judgment in Skyler's favor will be collectible, Skyler asks the court to order the seizure of Rhonda's property. Exempt from such an order in most states would be a. all of Rhonda's real property. b. as much of Rhonda's real property as Rhonda opts to exempt. c. none of Rhonda's real property. d. Rhonda's family home in its entirety or up to a specified amount.

Rita is a surety for Sue's loan from Total Finance Company. Rita's right to "step into the shoes" of Total Finance, after paying Sue's debt, and exercise any of the Total Finance's rights against Sue is the right of a. contribution. b. redemption. c. reimbursement. d. subrogation.

Rolf, To adjust debt and institute a repayment plan, Rolf, a family farmer, may file a petition in bankruptcy under the Bankruptcy Code's Chapter a. 1. b. 3. c. 5. d. 12.

Smith, To pay for investment advice from financial consultants Smith and Jones, Tony signs a check payable to "Smith or Jones." A proper indorsement of the check is a. not possible. b. "Smith" and "Jones" only. c. "Smith" only, or "Jones" only, but not "Smith" and "Jones." d. "Smith" only, or "Jones" only, or "Smith" and "Jones

Suha performs a contract with Tyler to add a second story addition to Tyler's house, but Tyler does not pay. In most states, Suha can create a lien and place it on Tyler's property by filing a. an order of garnishment. b. a writ of attachment. c. a writ of execution. d. a written notice of lien.

Suki files for bankruptcy under Chapter 13. The value of her property to be distributed under the plan is more than the amount of the creditors' claims. The court can approve the plan a. only if neither an unsecured creditor nor the trustee objects. b. only if no unsecured creditor objects. c. only if the trustee does not object. d. over the objection of either an unsecured creditor or the trustee.

Sven, To adjust debt and institute a repayment plan, Sven—who is not a corporation, a partnership, or a family farmer or fisherman—may file a petition in bankruptcy under the Bankruptcy Code's Chapter a. 7. b. 11. c. 12. d. 13.

Trudy forges Uma's signature on a check "payable to the order of Trudy" drawn on Una's account in Verity Bank. Most likely, if the bank pays the check a. the Federal Reserve will reimburse all parties for their costs. b. the loss will be apportioned among all of Verity's customers. c. Uma will be liable for the amount. d. Verity will have to recredit Uma's account.

Echo takes her car to Fix-It, Inc., which repairs the car and bills Echo for $500. Echo writes out a check drawn on Capital Bank, but later, believing that Fix-It did not repair the car properly, issues a stop-payment order. Refer to Fact Pattern 27-1A. Capital Bank pays the check. Capital a. can sue Echo for a wrongful stop-payment order. b. can sue Fix-It for breach of contract. c. can sue no one because it paid a check that was not properly payable. d. is liable for Echo's loss due to the wrongful payment. Refer to Fact Pattern 27-1A. Capital Bank a. is liable to Fix-It for the amount of the check. b. must stop payment if Capital has a reasonable time to act. c. need not stop payment unless Echo had a valid reason to act. d. need not follow Echo's order unless the check was certified.

D/B

Ivy signs a check payable to Jon and gives it to him. Jon indorses the back, and transfers the check to Ked. To negotiate the check to Luis, Ked must

Deliver the check to Luis

Ollie negotiates an order instrument to Phil by

Delivery with any necessary endorsement

Doug signs a check that is payable to the order of Employees Credit Corporation and that is dated July 1. This check is

Negotiable

Hayley signs an instrument payable to the order of InstaCredit, Inc., that allows a holder to demand payment of the entire amount due, with interest, if Hayley fails to make a payment. This instrument is

Negotiable

Jack signs an instrument that states it is being executed "as per a contract for the sale of three magic beans dated June 1." This instrument is

Negotiable

Ryan signs an instrument using an "R" with a circle around it. With this mark for a signature, the instrument is

Negotiable

Lauren transfers an instrument to Miguel in a form and by a means that makes Miguel a "holder." This is

Negotiation

Petra signs a check payable to Quincy, who indorses the back, gives it to Regional Credit Union, and receives cash. The transfer of the check from Quincy to the credit union is

Negotiation

Giant Auto Sales, Hoppy signs an instrument promising to pay to "Ideal Credit Union" $18,000 with interest in installments with the final payment due May 15, 2014. To be negotiable, this instrument must include on its face

No conditions

Clem gets a $100 check as a gift from Daria. Clem crudely increases the amount of the check to $1,00—the alteration is obvious—and transfers it to eReady Sets, Inc., in exchange for a 3D HD TV. eReady deposits the check in its bank account at First Town Bank. HDCs of this check include

None of these parties

Karen writes on a piece of paper, "I owe you $600," signs it, and gives it to Lou. This instrument is

Nonnegotiable because it does not include an express promise to pay

Shad signs a promissory note payable to Theresa "with interest" on which he conspicuously notes that it is "nonnegotiable." This instrument is

Nonnegotiable because it includes the notation nonnegotiable

Kelly signs an instrument in favor of Leo that states it is "subject to a certain agreement between Kelly and Mona." This instrument is

Nonnegotiable because it is made subject to a separate agreement

Rita owes $6,000 in unpaid taxes. In the sand of Seaside Beach, she executes an instrument for that amount that otherwise meets the requirements for negotiability. This instrument is likely

Nonnegotiable because sand is not a sufficiently permanent

Rainey signs a promissory note for $10,000 in favor of State University (SU). The note is undated but specifies that it is "payable one month after date." This note is

Nonnegotiable because the maturity date cannot be determined from the face of the instrument

Digital Cable Company, Elvin signs an instrument in which he promises to deliver 1,000 feet of optic fiber cable to Financiers eBank on March 1. This instrument is

Nonnegotiable, because cable is not a medium of exchange authorized or adopted by a government as currency

Blythe, an accountant for Credits & Debits, acquires a negotiable instrument from Eton by promising to pay its face value in thirty days. Blythe ac-quires the status of an HDC when she

Pays the face value due on the instrument

Florencia, who is not a GigaBank customer, attempts to cash a check drawn on the bank. The check is considered dishonored if GigaBank

Refuses to pay it

Trey writes "Pay to Trey" above Rollo's signature, further negotiation of the check

Requires Trey's indorsement and delivery

Smith, To pay for investment advice from financial consultants Smith and Jones, Tony signs a check payable to "Smith or Jones." A proper indorsement of the check is

Smith only, or Jones only or Smith and Jones

Tuna, Uri signs an instrument promising to pay to "Verity Mortgage Service" $160,000 with interest in installments with the final payment due July 10, 2042. To be negotiable, this instrument must include the signature of

Uri

Mike receives a payroll check from National Computer Systems, Inc., and indorses it by signing his name on the back of the check. This is

a blank indorsement

Jill, in good faith and for value, gets from Kit a check "payable to the order of bearer." Jill does not know that Kit stole the check. Jill is

an HDC

Trey writes "Pay to Trey" above Rollo's signature, the check becomes

an order instrument

Jen makes a gift of a check to Kilroy who takes it in good faith and without notice of any claim, defense, or defect. With respect to this check, Kilroy is

an ordinary holder

Doctors, To obtain office supplies for Doctors Medical Clinic, Elmo executes a draft in favor of Flynn. A draft is

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