Law 332 Final

Fern has six nieces, ages five to sixteen. She writes an instrument for $50 that states, "Pay to the order of my niece." The instrument is A. nonnegotiable, because the amount of money is less than $500. B. nonnegotiable, because there is no specific person identified. C. nonnegotiable, because it is illegal to write an order instrument payable to a relative. D. negotiable.

B. nonnegotiable, because there is no specific person identified

A holder can impair the value of collateral given to secure payment of an instrument without affecting the liability of parties who would benefit from the collateral in the event of nonpayment. True or False

False

A holder who takes a negotiable instrument from a thief cannot become an HDC even if the item was acquired in good faith and there was no reason to be suspicious of the transaction. True or False

False

A promissory note is both a debt and evidence of the debt True or False

False

A secured party perfects a claim by filing a financing statement with the debtor. True or False

False

A security interest can cover only property in which the debtor has present rights. True or False

False

A security interest cannot become perfected without the filing of a security agreement. True or False

False

Bankruptcy relief is provided under state, not federal, law. True or False

False

Because a mortgage involves a transfer of real property, it need not be in writing. True or False

False

Because a writ of attachment is a prejudgment remedy, a debtor does not need to be given notice and an opportunity to be heard before the property is seized. True or False

False

Businesses must be technically insolvent to file for bankruptcy relief. True or False

False

Equitable redemption allows a lender to gain title and regain possession of a property. True or False

False

For a negotiable instrument to operate practically as a substitute for cash, it must be easily transferable and uncollectible. True or False

False

If a check is made "payable to the order of Marcus or Nathan," both parties' indorsements are necessary for negotiation. True or False

False

Most creditors require a borrower to purchase mortgage insurance if the borrower makes a down payment of at least 20 percent of the purchase price. True or False

False

Once a bankruptcy petition is properly filed, creditors can commence or continue most legal actions against the debtor to recover claims. True or False

False

Providing only a debtor's trade name in a financing statement is sufficient for perfection even if the trade name is not the legal name of the business. True or False

False

The UCC's classification or definition of collateral does not affect where or how to perfect a security interest. True or False

False

The death of a customer automatically revokes a bank's authority to accept, pay, or collect an item drawn by the customer on an account with the bank.

False

The instrument normally filed to give public notice to third parties of a secured party's security interest is collateral. True or False

False

The shelter principle permits a holder with notice of a claim or defense to attain HDC status by reacquiring the instrument from a later HDC. True or False

False

Under Chapter 13, all debts are dischargeable. True or False

False

Voluntary petitions may be filed to initiate Chapter 7 or Chapter 11, but not Chapter 13, bankruptcies. True or False

False

When a customer makes a deposit into a checking account, the customer becomes a debtor, and the bank a creditor, for the amount deposited. True or False

False

A person who takes a demand instrument knowing that demand has been made has notice that the instrument is overdue. True or False

True

Every party who signs a negotiable instrument is potentially liable for payment of that instrument when it comes due. True or False

True

For most collateral, possession by a secured party is impractical because it denies the debtor the right to use or derive income from the property to pay the debt. True or False

True

If a bank's payment over a stop-payment order causes subsequent checks written on the drawer's account to be returned for insufficient funds, the bank will be liable for the drawer's resulting costs. True or False

True

If the numerical and written amounts on a check differ, the check is payable in the written amount. True or False

True

Improper filing of a financing statement can render a security interest unperfected. True or False

True

In a Chapter 13 proceeding, the debtor retains possession of his or her assets. True or False

True

In a Chapter 7 proceeding, the bankruptcy trustee collects the debtor's estate and reduces it to cash, preserving the interests of the debtor and creditors. True or False

True

It is not a material alteration to change the figures on a check so that they agree with the written amount, and thus, any holder is entitled to enforce the check.

True

The borrower is typically required to pay all property taxes, assessments, and other claims against the property. True or False

True

The destruction or mutilation of an instrument is considered cancellation, and thus discharges the liability of all parties, only if it is done with the intention of eliminating obligation on the instrument. True or False

True

To avoid liability for negligence, a customer must examine monthly bank statements and canceled checks promptly and with reasonable care, and report any forged signatures to the bank. True or False

True

To avoid the risk of loss from theft, a holder can convert a blank indorsement to a special indorsement by writing, above the signature of the indorser, the name of the indorsee. True or False

True

To be negotiable, if an instrument is not payable on demand, it must be payable at a definite time. True or False

True

Usually, an indorsement is unqualified, which means that the indorser is guaranteeing payment on an instrument, in addition to transferring title to it. True or False

True

When a bank certifies a check, the bank is agreeing in advance to accept the check when it is presented for payment and to make payment with funds reserved for the purpose. True or False

True

When a bank wrongfully dishonors a check, it is liable to the customer for any resulting damages. True or False

True

To create an enforceable security interest for a loan, in terms of the collateral, the debtor must have a. title to it. b. possession of it. c. proof of its value. d. rights in it.

d. rights in it.

Under any chapter of the Bankruptcy Code, failing to file the necessary documents with the debtor's petition for relief can result in a. an automatic stay. b. the distribution of the debtor's assets to his or her creditors. c. the discharge of the debtor's obligations. d. the dismissal of the petition.

d. the dismissal of the petition.

Franco buys a sofa from Grey at a garage sale. Franco writes Grey a check for $50 to pay for the couch. Grey is a. the drawee. b. none of the choices. c. the drawer. d. the payee.

d. the payee

Because a mortgage involves the transfer of real property, to comply with the Statute of Frauds, it must be a. in good faith. b. recorded. c. witnessed by a disinterested third party. d. written.

d. written

To operate practically as a substitute for cash or a credit device, a negotiable instrument must be A. transferable without the danger of being uncollectable. B. transferable without the danger of being uncollectable.b. conditional without the risk of being collectable. C. qualified with a promise to set aside the qualification. D. payable without recourse.

A. transferable without danger of being uncollectable.

A debtor must have title to collateral to give a secured party a security interest in the property. True or False

False

A difference between the handwriting in the body of a check and in the signature affects the validity of the item and will bar a holder from HDC status. True or False

False

A fixed-rate mortgage is a standard mortgage with an adjustable rate of interest. True or False

False

A bank is not obligated to pay an uncertified check presented for payment more than six months from its date. True or False

True

A mortgage gives a creditor a lien on a debtor's real property as security for payment of a debt. True or False

True

A person who transfers an instrument for consideration warrants to all subsequent transferees and holders who take the instrument in good faith that all signatures on the item are authentic and authorized. True or False

True

An instrument that orders the drawee to pay a certain sum of money, usually to a third-party payee, is a draft. True or False

True

Any debtor who is eligible for bankruptcy relief under Chapter 7 is eligible under Chapter 11. True or False

True

Attachment ensures that a security interest between a debtor and a secured party is effective. True or False

True

Because liability for payment on a negotiable instrument is immediate when the instrument is signed or issued, no action by the holder is required. True or False

True

Brie, Cam, and Dei are co-sureties of Edie's debt to Finance LLC. Brie pays the entire debt. Her right of contribution entitles her to recover any amount paid above the surety's obligation from a. Cam and Dei. b. Finance LLC. c. Edie. d. none of the parties.

a. Cam and Dei.

To buy a truck under warranty from Detour Motors, Eli, a consumer, signs a note payable to the dealer. The note includes the notice required by FTC Rule 433. The dealer sells the note to Finance Company, which takes it in good faith, for value, and unaware of any defenses against payment. Eli discovers that the truck is defective and returns it to Detour Motors. The consumer can assert the breach of warranty to avoid payment on the note against a. Detour Motors and Finance Company. b. Detour Motors only. c. Finance Company only. d. no one.

a. Detour motors and Finance company

Yang files a petition in bankruptcy under Chapter 7. Zhen takes control over her property and reduces it to money for distribution. Zhen is a. a bankruptcy trustee. b. a secured creditor. c. a debtor who filed jointly for bankruptcy under a single petition. d. a bankruptcy court judge.

a. a bankruptcy trustee.

To buy a home, Lois pays part of the purchase price up front in cash and borrows the rest of the funds from Members Credit Union. The part of the purchase price paid up front is a. a down payment. b. a mortgage. c. a prepayment penalty. d. a short sale.

a. a down payment.

Special requirements for the form and content of negotiable instruments are imposed by a. the Uniform Commercial Code. b. the Lex Mercatoria as codified in England. c. rules developed by merchants in the medieval world. d. none of the choices.

a. the Uniform Commercial Code

Capital Inc. holds a security interest in Discount Store's inventory. The parties agree that the interest will continue in the collateral even if it is sold, exchanged, or disposed of in some other way. This is a. a floating lien. b. a continuation statement. c. a purchase-money security interest. d. the right of redemption

a. a floating lien.

Construction Company has a claim against Diners Café to satisfy a debt that takes priority over other claims against the same property. This is a. a lien. b. a guaranty. c. a garnishment. d. a fraud.

a. a lien.

Business Inc.'s debt to Cartage Company is past due. Cartage brings a legal action against Business to collect. To ensure that a judgment in the creditor's favor will be collectible, Cartage asks the court to order the seizure of the debtor's property. This is a request for a. a writ of attachment. b. a writ of execution. c. a mechanic's lien. d. an artisan's lien.

a. a writ of attachment.

To buy a townhouse, Becky obtains a mortgage loan from Countywide Bank. The lender should record the mortgage to a. be officially on record as holding an interest in the property. b. preserve a copy of the loan in a separate location. c. obtain reimbursement for a portion of the loan if the debtor defaults. d. secure itself in the position of an unsecured creditor.

a. be officially on record as holding an interest in the property.

Dana draws a check on Equity Bank, and asks the bank to agree in advance to accept the check by setting aside sufficient funds to cover the amount. If Equity agrees, the check will be considered a. certified. b. provisionally credited. c. cashed. d. deposited.

a. certified

Housewares Inc. warrants its goods to be free of defects. Ivy issues an instrument to Housewares for the purchase of an appliance that proves to be defective. With respect to payment on the instrument, Ivy a. has a personal defense. b. cannot avoid it. c. has a universal defense. d. is liable only to a subsequent holder of the instrument.

a. has a personal defense

Chapter 7 of the Bankruptcy Code provides for a. liquidation proceedings. b. the reorganization of the obligations of the debtor. c. the adjustment of debts of businesses—not individuals. d. the adjustment of debts of individuals—not businesses.

a. liquidation proceedings.

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

a. negotiable

Bravo co-signs a $15,000 note payable to College Loan Company enabling Dios to obtain a student loan. The terms of the note stated that Bravo signed "on behalf of" Dios. If Dios stops making payments on the debt, Bravo is a. primarily liable. b. discharged from any obligation. c. secondarily liable. d. not liable because Bravo signed "on behalf of" Dios.

a. primarily liable

With respect to debtors, the main goal of bankruptcy law is to a. provide a new start without creditors' claims. b. encourage the continued use of credit. c. shield assets from creditors' claims. d. ensure that third parties will continue to guarantee loans.

a. provide a new start without creditors' claims.

The UCC does not define the term default. This encourages the parties to a secured transaction to a. stipulate the conditions that will constitute a default. b. include standards that align with the concept of unconscionability. c. provide the creditor with the maximum protection possible. d. run counter to the UCC's provision regarding good faith.

a. stipulate the conditions that will constitute a default.

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

a. the bank will have to recredit Greta's account

To create an enforceable security interest between Finance Corporation and Global Trade Inc. in a written security agreement, the agreement must contain a description of a. the collateral. b. all of the choices. c. the creditor. d. the debtor.

a. the collateral.

Under Chapter 13, a repayment plan must provide for a. the same treatment of each claim within a particular class of claim. b. the turnover of the debtor's future income to the creditors. c. full payment of all claims, without exception. d. all of the choices.

a. the same treatment of each claim within a particular class of claim.

Baer writes a check for $500 "payable to Cary" drawn on Baer's account at Debit Bank. Cary indorses and sells the check to Esau, who deposits the check in his account at Fidelity Bank. Fidelity dishonors the check. Baer or Cary may be liable for payment of the check if a. timely notice of dishonor is given. b. the check was not properly presented for payment. c. the drawer of the check does not repudiate the dishonor. d. more than thirty days have elapsed since the check was written.

a. timely notice of dishonor is given

Transfer of a note "payable to the order of Credit Company" by delivery to Debit Associates, with the payee's indorsement, for consideration, extends warranty liability a. to any subsequent holder who takes the instrument in good faith. b. only to Debit. c. none of the choices . d. only to Debit and its immediate transferee.

a. to any subsequent holder who takes the instrument in good faith.

Colin signs a note "payable to the order of Debit Bank." The bank indorses the note in blank and negotiates it to Equity Funds, which sells it to Financial Investments. The transfer of the note from Equity to Financial gives rise to a. warranty liability. b. none of the choices. c. signature liability. d. contractual liability.

a. warranty liability

Elmer pays Fidelity Bank $1,000 plus a service fee to draw a check on itself made payable to Go Delivery Service. This is a. a stale check. b. a cashier's check. c. an overdraft. d. a stop-payment order.

b. a cashier's check

Construction Inc. wants to agree with its creditors on a plan under which it pays a portion of its debt and is discharged of the rest. To accomplish this goal, the corporation should file a petition in bankruptcy under Chapter 11 for relief through a. an adjustment plan. b. a reorganization. c. a repayment plan. d. a liquidation.

b. a reorganization.

To purchase a house, Elma obtains a mortgage loan from Fidelity Bank. Later, Elma is unable to make payments on the loan. Meanwhile, the market value of the house has declined. Fidelity agrees to a sale of the property for less than the amount due on the loan. This is a. forbearance. b. a short sale. c. a foreclosure. d. a workout agreement.

b. a short sale.

Dag signs a check "pay to the order of Eton" drawn on Dag's account at First Bank and dates the check "May 1." Eton presents the check to the bank for payment on December 15. This is a. a cashier's check. b. a stale check. c. an overdraft. d. a certified check.

b. a stale check

To make a sale to Gourmet Inc., Hill Valley Commodities asks Gourmet's outside accountant Ingre to co-sign a credit application. According to the terms, if Gourmet defaults, Hill Valley can look to Ingre for payment without first pursuing legal remedies against Gourmet. Ingre is a. a guarantor. b. a surety. c. a creditor. d. a lienor.

b. a surety.

Bern signs a check "pay to the order of College Bookstore" drawn on his account at Debit Bank to buy textbooks. Bern is a. none of the choices. b. the drawer. c. the drawee. d. the payee.

b. the drawer

In good faith and for value, Joya gets from Kyle a negotiable bearer instrument. Joya does not know that Kyle stole the instrument. Joya is a. not an HDC, because Kyle transferred the instrument without notice. b. an HDC. c. not an HDC, because Kyle did not acquire the instrument for value. d. not an HDC, because Kyle did not acquire the instrument in good faith.

b. an HDC

Resources Inc. receives a check from Steel Products Company and indorses it with a stamped imprint of its name on the back. This converts the check to a. a special indorsement. b. an order instrument. c. a non-transferable instrument. d. a bearer instrument

b. an order indorsement

An instrument, such as a check, drawn payable to an organization a. must be converted to a bearer instrument to be negotiated further. b. can be negotiated by an authorized representative of the entity. c. must be indorsed with a stamped imprint of the name of the entity. d. is nonnegotiable.

b. can be negotiated by an authorized representative of the entity

A payee or indorsee whose name is misspelled on an instrument a. must indorse with the correct name. b. can indorse with the misspelled name, the correct name, or both. c. must indorse with the misspelled name. d. is prevented from negotiating the instrument further.

b. can indorse with the misspelled name, the correct name, or both

Auto Sales & Finance wants to get paid for its goods and services, so it will not sell goods or lend funds unless payment is guaranteed. To obtain those goods or services, a customer or borrower might pledge a. a composition agreement. b. collateral. c. forbearance. d. allegiance.

b. collateral.

Under Chapter 7, creditors are paid in a certain order of priority. The highest-priority class comprises claims for a. the debtor's equity in his or her residence. b. domestic support. c. student loans. d. debts related to motor vehicles, household goods, and trade tools.

b. domestic support.

At the time of the filing of the petition and the time of the filing of the plan, Chapter 13 imposes on the debtor the requirement of a. sufficient credit. b. good faith c. substantial means. d. goodwill.

b. good faith

Faro is an agent authorized to sign negotiable instruments on behalf of Global Supply Inc. To protect against potential liability on a note signed on the corporation's behalf, Faro should a. sign "Faro, Global Supply Inc.," but not indicate his agency status. b. identify Global Supply and indicate his agency status. c. not identify Global Supply nor indicate his agency status. d. indicate his agency status, but not identify Global Supply.

b. identify Global Supply and indicate his agency status

An involuntary bankruptcy occurs when a debtor a. files forms designated for the purpose. b. is forced into bankruptcy proceedings by his or her creditors. c. is unable to pay his or her debts as they come due. d. has debts that exceed the fair market value of his or her assets.

b. is forced into bankruptcy proceedings by his or her creditors.

Ruth takes her car to Service Center, which repairs the car and bills her for $500. She writes out a check drawn on Tempo Bank, but later, believing that Service Center did not fix the car properly, issues a stop-payment order. If Tempo pays the check, the bank a. is liable to Service Center for the time and trouble to return the payment. b. is liable for Ruth's loss due to the wrongful payment. c. can sue Service Center for breach of contract. d. can sue Ruth for a wrongful stop-payment order.

b. is liable for Ruth's loss due to the wrongful payment

Lon is Mill Corporation's agent and is authorized to write checks on the firm's account in North Bank. Lon writes a check "pay to the order of Ocean Shipping." Lon signs the check "Mill Corporation by Lon, agent." The bank dishonors the check. Liability extends to a. North Bank. b. Mill Corporation. c. Lon. d. Ocean Shipping.

b. mill corporation

Bok buys an espresso machine from Coffee Gadgets, which bills him for $100. He writes out a check drawn on Dios Bank, but later, believing that the machine is defective, issues a stop-payment order. Dios a. is liable to Coffee Gadgets for the amount of the check. b. must stop payment if the bank has a reasonable time to act. c. need not follow Bok's order because it was issued after the check. d. need not follow Bok's order unless the check was certified.

b. must stop payment if the bank has a reasonable time to act

Marin writes on a piece of paper, "I owe you $600," signs it, and gives it to Nye. 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.

b. nonnegotiable, because it does not include an express promise to pay.

To create an enforceable security interest between Mortgage Bank and National Property Company in a written security agreement, the agreement must be signed by a. a disinterested third-party witness. b. the debtor. c. all of the choices. d. the creditor.

b. the debtor.

Mara has a checking account at North Bank. Mara signs a check "payable to Ovid" drawn on Mara's account. North Bank is a. the payee. b. the drawee. c. none of the choices. d. the drawer.

b. the drawee

Lamont and Marcel collaborate to defraud Nina, who is induced to give Marcel a note payable to Marcel's order. Marcel indorses the note for value to Orson, an HDC. Later, Orson sells the note to Lamont. Under the shelter principle, a. Orson's right to repurchase the note from Lamont is limited. b. Lamont attains HDC status by acquiring the note. c. Lamont cannot acquire HDC rights in the note. d. the principal amount of the note is sheltered without recourse.

c. Lamont cannot acquire HDC rights in the note.

Kiosk Jewelers borrows from Lender Inc. and Mortgage Company, using the same collateral. Only Mortgage Company has a perfected security interest. Kiosk defaults on both loans. The party with first rights to the collateral is a. Lender Inc. b. Kiosk Jewelers. c. Mortgage Company. d. none of the choices.

c. Mortgage Company.

United Contractors Inc. holds a lien on Vista Estate's real property. This property can be sold to satisfy the debt if, before the sale, notice is given to a. the state in which the property is located. b. the general public. c. Vista Estate. d. Vista Estate's other creditors.

c. Vista Estate

A certificate of deposit (CD) is issued when Lo-Risk Invest LLC deposits funds with Money Bank on the bank's promise to repay the funds, with interest, on a certain date. Lo-Risk cannot withdraw the funds before the date of maturity because a. the bank is both the issuer of the instrument and the drawee. b. a CD cannot be sold or negotiated to a third party before maturity. c. a CD is a time deposit. d. a CD is not a three-party instrument

c. a CD is a time deposit

Coki receives a payroll check from Data Solutions Inc. and indorses it by signing her name on the back of the check. This is a. a qualified indorsement. b. a restrictive indorsement. c. a blank indorsement. d. a special indorsement

c. a blank endorsement

In addition to financial statements, each voluntary petition in bankruptcy must include a. a plan outlining how debt payments will be made. b. a statement of preference for one creditor over another. c. a certificate proving the receipt of credit counseling. d. a creditors' agreement allowing the debtor to continue in business.

c. a certificate proving the receipt of credit counseling.

A voluntary petition in bankruptcy must include a. all of the choices. b. a statement indicating that the debtor understands basic economics. c. a list of the debtor's creditors and the amount of the debt owed to each. d. proof of each creditor's claim.

c. a list of the debtor's creditors and the amount of the debt owed to each.

Rico agrees to buy a bicycle from Salvatore for $250. Salvatore agrees to deliver the bike on September 1. Rico writes a draft for $250 payable to Salvatore on September 1. This is a. a sight draft. b. a promissory note. c. a time draft. d. none of the choices.

c. a time draft

Motor Sales Inc. signs an instrument that promises to pay National Parts Company a certain price, with interest, for a shipment of auto parts. It is necessary to know when the instrument is due in order to a. determine the value of the instrument. b. calculate when a statute of limitations may apply. c. all of the choices. d. know when the interest will accrue.

c. all of the choices

Personal property that is most often exempt from satisfaction of a creditor's judgment debt on a debtor's default, up to a specified amount, includes a. equipment used in a business or trade, such as tools. b. a vehicle for transportation. c. all of the choices. d. certain classified animals, usually including livestock.

c. all of the choices.

To buy a condo, Mary obtains a thirty-year mortgage with an interest rate that is fixed for three years and then adjusts annually. Mary's mortgage is a. a fixed-rate mortgage. b. a workout agreement. c. an adjustable-rate mortgage. d. a short sale.

c. an adjustable-rate mortgage.

Quint signs a check "pay to the order of Rona" drawn on Quint's account at Suburban Bank. Quint has $400 in his account but the amount of the check is $500, which the bank pays. This is a. a stale check. b. a dishonored check. c. an overdraft. d. a certified check.

c. an overdraft

Eligible for relief on a petition in bankruptcy under Chapter 11 is a. any party who is not eligible under a different chapter of the Code. b. an individual, not a partnership or a corporation, with regular income and debts of less than a certain amount. c. any debtor who is eligible under Chapter 7, and railroads. d. any "person" except railroads and certain financial institutions.

c. any debtor who is eligible under Chapter 7, and railroads.

Under Chapter 7, once the proceeds of the bankruptcy estate have been distributed, the debtor's remaining debts a. subject to legal actions to recover any unpaid amounts. b. renewed without legal action as obligations of the debtor. c. are discharged. d. paid by the court.

c. are discharged.

Rico borrows funds from Suburban Bank secured by Rico's house. Rico defaults on the debt. The bank's options include a. retaining the security interest and pursuing a judicial remedy. b. destroying the collateral and collecting the unpaid debt from Reg. c. disposing of the collateral in any commercially reasonable manner. d. repossessing the collateral and disavowing the security interest.

c. disposing of the collateral in any commercially reasonable manner.

Bauxite Mine borrows $60,000 from Commerce Bank, with the loan secured by the borrower's property. The debtor defaults on the loan. Commerce relinquishes its security interest to seek a judicial remedy. To obtain funds to satisfy the debt by a seizure and sale of the borrower's nonexempt property, after a writ is issued, the creditor can use the process of a. retention. b. redemption. c. levy. d. execution.

c. levy.

Edna is the payee of a bearer instrument—a promissory note in the amount of $10,000. Flem offers to irrigate Edna's ranch next week in exchange for the note. She agrees and delivers the note to Flem. Flem is a. an HDC, because the transferor was the original payee on the note. b. an HDC, because he promised to perform services at a future date. c. not an HDC, because he did not yet give value for the instrument. d. not an HDC, because he did not acquire the instrument in good faith.

c. not an HDC, because he did not yet give value for the instrument

Noah signs Ola's name to a check without Ola's authorization. Noah can be held personally liable for payment on the check by a. any holder. b. none of the choices. c. only an HDC. d. only an ordinary holder.

c. only an HDC

Bogart presents a sight draft to Commerce Bank for payment. A bank employee writes accepted across the face of the instrument, and adds the date and the bank's signature. The draft is a. accepted and will be payable by the close of the next business day. b. payable ninety days after sight. c. payable immediately or within a stated time after sight. d. acknowledged as received, but not payable without further ver

c. payable immediately or within a stated time after sight

If a voluntary petition in bankruptcy is found to be proper, the court's entry of an order for relief a. dismisses the petition. b. discharges the debtor's obligations. c. puts into place an automatic stay. d. distributes the debtor's assets to his or her creditors.

c. puts into place an automatic stay.

An instrument payable to two or more persons without an "and" or an "or" between the parties' names, such as a check "payable to the order of Gerhard Hans," a. must be converted to a bearer instrument to be negotiated. b. requires the indorsement of both of the parties to be negotiated. c. requires the indorsement of only one the parties to be negotiated. d. is nonnegotiable.

c. requires the indorsement of only one the parties to be negotiated.

Ready Credit Inc. holds a security interest in inventory owned by Soy Products Inc. Ready Credit can protect its claim to the inventory in the event of Soy Products' default by a. redemption. b. retention. c. assignment. d. perfection.

d. perfection

Because he or she was in the best position to prevent wrongdoing with respect to an instrument, transfer and presentment warranties attempt to shift liability to a. the holder of an unauthorized item when the wrongdoing is discovered. b. the party on whose account an unauthorized item is made or drawn. c. the person who dealt face to face with the wrongdoer. d. the drawee or payee on an instrument.

c. the person who dealt face to face with the wrongdoer

Bob's Barber Shop borrows from first Credit Company and then Debit Loans LLC, using the same property as collateral for both loans. Debit Loans perfects its security interest. Credit Company does not. The debtor defaults on both loans. The party with first rights to the collateral is a. Credit Company. b. Credit and Debit in proportion to the outstanding value of their loans. c. Bob's Barber Shop. d. Debit Loans LLC.

d. Debit Loans LLC.

Ranch West owes Silo & Barn Inc. $5,000 on their contract, but refuses to pay. To collect, Silo files a mechanic's lien, under which security for the debt is represented by a. Ranch's personal property. b. property held by a third party. c. the $5,000 owed on the contract. d. Ranch's real estate.

d. Ranch's real estate.

Ciera presents an instrument that states "pay to the order of Duff" to East Bank for payment. As the most common type of negotiable instrument regulated by the Uniform Commercial Code, this is a. a substitute check. b. an electronic fund transfer. c. a payment via a mobile device. d. a check.

d. a check

Because a party's authenticating intent with respect to a note is shown by the name of the party written on the line that calls for the name of that party, a. a signature of the name must be witnessed to effect an assignment. b. proof that an indorsement is legitimate is required to validate the note. c. the name must be handwritten to negotiate the note. d. a stamped imprint of the name can be sufficient to transfer the note.

d. a stamped imprint of the name can be sufficient to transfer the note.

Brew Pub Company's debt to Credit Service is past due. Credit obtains a judgment against Brew, but the firm refuses to pay. Credit asks the court to order the seizure of Brew's property. This is a request for a. an artisan's lien. b. a writ of attachment. c. a mechanic's lien. d. a writ of execution.

d. a writ of execution.

Under Chapter 7 and Chapter 11 a. petitions can be filed voluntarily or involuntarily. b. the same principles govern the entry of the order for relief. c. the automatic stay provision applies. d. all of the choices.

d. all of the choices.

Compared to Chapter 7 and 11 plans, a Chapter 13 plan a. permits creditors to force a debtor into involuntary bankruptcy. b. permits any interested party to file a repayment plan. c. is more expensive and more complicated. d. allows a debtor to retain possession of his or her assets.

d. allows a debtor to retain possession of his or her assets.

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

d. an ordinary holder

Loan Office Inc. has a security interest against Manufacturing Company that is enforceable. In other words, with respect to the collateral, the creditor's rights are said to a. perfect. b. mature. c. process. d. attach.

d. attach

All bankruptcy proceedings are held in a. state bankruptcy courts. b. local small-claims courts. c. special cross-jurisdictional debtors courts. d. federal bankruptcy courts.

d. federal bankruptcy courts.

The payment of Commerce Inc.'s debt to Debt Service LLC is guaranteed by the firm's property. Debt Service is most likely to perfect its interest by a. correcting grammatical errors in the parties' written agreement. b. insuring the property for the full amount of its value. c. calculating the precise amount of the debt. d. filing a financing statement with the appropriate authority.

d. filing a financing statement with the appropriate authority.

Bass signs a note "payable to the order of Credit Bank." Unless Bass has a valid defense against payment, his liability on this note is a. qualified. b. impaired. c. secondary. d. primary.

d. primary

Gillis writes a check to Harley as payment for a game player but soon discovers it is broken. Gillis goes to the drawee bank and orally authorizes Ilene, a bank officer, to stop payment on the check. This order is valid for a. six days. b. six months. c. any stated period of time. d. fourteen days.

d. fourteen days

To make Credit Bank a collecting agent on a check "payable to the order of Duane," Duane should a. refrain from signing the check before delivering it to Credit Bank. b. write, above his signature, "Pay to Credit Bank." c. indorse the check "without recourse." d. indorse the check "for deposit only."

d. indorse the check "for deposit only"

On the back of a check "payable to Huan," Huan signs her name and negotiates the item to Ito. To avoid liability on the item if it is later dishonored, Ito should a. make a copy of the check and place it in a secure location. b. write, above Huan's signature, "Pay to Ito." c. immediately indorse the check in blank. d. indorse the check "without recourse."

d. indorse the check "without recourse."

To buy furniture, Gina, a consumer, signs a purchase agreement with Home Store, the seller, to pay $100 down and $50 per month until the price is paid. Home Store takes a security interest in the furniture. Because it was created as part of purchase agreement with a consumer, the security interest a. can be perfected only by repossession. b. cannot be perfected. c. can be perfected only by filing. d. is automatically perfected.

d. is automatically perfected.

Gary writes a check drawn on Hill Bank for $400 "payable to Ian" on May 1. Gary dies on May 3. Ian presents the check to the bank on May 5. Unaware of Gary's death, the bank a. must consult with Gary's heirs before paying the check. b. can do nothing until Ian claims an interest in the account. c. must certify the check. d. may pay the check.

d. may pay the check