Question 1

When the rights of a seller to the collateral are inferior to those of third persons, the seller has a perfected security interest.

Accepted Answer

If the rights of a seller to the collateral are inferior to those of third persons, the seller does not have a perfected security interest. A perfected security interest requires that the seller has priority over all other creditors with claims to the same collateral.

Question 2

Articles purchased with the intention of reselling or leasing them are called consumer goods.

Accepted Answer

Consumer goods are intended for personal use by consumers, while goods purchased for reselling or leasing are considered commercial or business goods.

Question 3

When sellers retain the right to repossess the items sold if the buyers breach the sales contracts, the transactions are unsecured credit sales.

Accepted Answer

When sellers retain the right to repossess items, the transactions are considered secured credit sales because the seller has a security interest in the goods sold.

Question 4

Which of the following is a requirement of a security agreement?
A) It must be an unwritten agreement.
B) It must describe the collateral.
C) It must be signed by a seller.
D) It must contain the specific instrument of payment.

Accepted Answer

A security agreement must describe the collateral in detail, including its type, quantity, quality, and location. It does not have to be signed by a seller, be an unwritten agreement, or contain the specific instrument of payment.

Question 5

A contract of guaranty must be in writing.

Accepted Answer

A contract of guaranty typically needs to be in writing to be enforceable under the Statute of Frauds, which requires certain types of contracts to be documented in writing.

Question 6

A security agreement contains the terms of payment and names of the parties.

Accepted Answer

The answer of A security agreement contains the terms of...

Question 7

A party who undertakes to be responsible for another is a _____.
A) guarantor
B) creditor
C) principal
D) debtor

Accepted Answer

A guarantor is someone who takes responsibility for the debt or obligation of another person or entity. The creditor may seek repayment from the guarantor if the debtor defaults on their obligation. A principal is the main party in a transaction, while a debtor owes a debt to a creditor.

Question 8

Suretyship given for someone who handles another's money is known as _____.
A) credit bond
B) default bond
C) fidelity bond
D) principal bond

Accepted Answer

A fidelity bond is a type of suretyship that protects against losses caused by the fraudulent or dishonest actions of individuals handling another's money.

Question 9

Explain the right of subrogation of a surety.

Accepted Answer

The answer of Explain the right of subrogation of a...

Question 10

Which of the following best describes the right to indemnity?
A) It is the right of a creditor to receive interest on the debt.
B) It is the right of a principal to receive compensation from the creditor.
C) It is the right of a creditor to withhold payment in the case of a dispute.
D) It is the right of a guarantor to be reimbursed by the principal.

Accepted Answer

The right to indemnity refers to the guarantor's right to be reimbursed by the principal for any payments made on behalf of the principal.

Question 11

Discharge of a surety occurs:
A) if the creditor extends the time of the debt with the consent of the surety.
B) if the creditor extends the time of the debt without the consent of the surety for a consideration.
C) in case of any reduction in the rate of interest.
D) in the case of return of collateral security to the debtor.

Accepted Answer

The answer of Discharge of a surety occurs:
A) if the...

Question 12

A surety or guarantor may call on the creditor to proceed to compel the payment of the debt.

Accepted Answer

This is true. A surety or guarantor is legally responsible for ensuring that the debt is paid, and may request that the creditor take legal action to collect the debt if necessary.

Question 13

Which of the following is true of a financial statement?
A) It is not signed by a debtor.
B) It can be substituted by a security agreement.
C) It does not describe the collateral.
D) It contains the mailing address of a principal.

Accepted Answer

The answer of Which of the following is true of...

Question 14

A contract of suretyship is an agreement whereby one party promises to be responsible for the debt of another.

Accepted Answer

A contract of suretyship is a legally binding agreement in which one party (the surety) agrees to assume responsibility for the debt or obligation of another party (the principal debtor) in the event that the debtor fails to perform. The surety becomes liable for the debt or obligation to the creditor and is responsible for fulfilling the terms of the contract if the debtor defaults or fails to pay.

Question 15

_____ are items used or bought primarily for personal, family, or household purposes.
A) Industrial goods
B) Club goods
C) Capital goods
D) Consumer goods

Accepted Answer

Consumer goods are products purchased for personal, family, or household use.

Question 16

A party who has primary liability is the creditor.

Accepted Answer

A party with primary liability is the one responsible for fulfilling the obligation of a financial instrument or contract, such as the borrower in a loan agreement, not the creditor who is the party to whom the debt is owed.

Question 17

If a creditor damages collateral security given to secure a debt, surety is not discharged.

Accepted Answer

If a creditor damages or otherwise impairs the collateral security given to secure a debt, the surety may be discharged to the extent that the value of the collateral was intended to secure the debt, as the surety's risk may increase or their right to be repaid from the collateral may be jeopardized.

Question 18

If a creditor extends the time of the debt without the consent of the surety, for a consideration, the surety is discharged from further liability.

Accepted Answer

When a creditor extends the time of the debt without the surety's consent and for a consideration, it alters the original contract terms, discharging the surety from liability.

Question 19

A guarantor's right to have a creditor compel the payment of debt is known as the right of _____.
A) exoneration
B) subrogation
C) alteration
D) contribution

Accepted Answer

The right of exoneration allows a guarantor to compel the debtor to pay the debt, thereby relieving the guarantor of their obligation.

Question 20

A buyer has the right to transfer the collateral and require a determination of the amount owed.

Accepted Answer

According to the Uniform Commercial Code (UCC), a buyer who buys collateral in good faith has the right to transfer the collateral and require a determination of the amount owed. This is stated in UCC Section 9-210.

Quiz 39: Security Devices

When the rights of a seller to the collateral are inferior to those of third persons, the seller has a perfected security interest.

Articles purchased with the intention of reselling or leasing them are called consumer goods.

When sellers retain the right to repossess the items sold if the buyers breach the sales contracts, the transactions are unsecured credit sales.

Which of the following is a requirement of a security agreement?

A contract of guaranty must be in writing.

A security agreement contains the terms of payment and names of the parties.

A party who undertakes to be responsible for another is a _____.

Suretyship given for someone who handles another's money is known as _____.

Explain the right of subrogation of a surety.

Which of the following best describes the right to indemnity?

Discharge of a surety occurs:

A surety or guarantor may call on the creditor to proceed to compel the payment of the debt.

Which of the following is true of a financial statement?

A contract of suretyship is an agreement whereby one party promises to be responsible for the debt of another.

_____ are items used or bought primarily for personal, family, or household purposes.

A party who has primary liability is the creditor.

If a creditor damages collateral security given to secure a debt, surety is not discharged.

If a creditor extends the time of the debt without the consent of the surety, for a consideration, the surety is discharged from further liability.

A guarantor's right to have a creditor compel the payment of debt is known as the right of _____.

A buyer has the right to transfer the collateral and require a determination of the amount owed.