Question 1

________ is the method by which the rights of the property owner are cut off so that the lienholder can realize her security interest.
A)Reimbursement
B)Garnishment
C)Foreclosure
D)Subrogation

Accepted Answer

Foreclosure is the method by which the rights of the property owner are cut off so that the lienholder can realize her security interest.

Question 2

Which of the following statements is true regarding an accommodation surety?
A)An accommodation surety must provide adequate collateral to the creditor.
B)An accommodation surety is usually a professional such as a bonding company,who is paid for serving as a surety.
C)An accommodation surety receives relatively more protection from courts.
D)An accommodation surety is secondarily liable for the payment of the debt.

Accepted Answer

An accommodation surety is a person who acts as a surety without compensation,such as a friend who cosigns a note as a favor.The courts are more protective of accommodation sureties than of compensated sureties.

Question 3

Tina cosigns a promissory note at Globe Bank for $500 for her friend Tom.Tom defaults on the loan,and Globe Bank collects $500 from Tina.Tina then collects $500 from Tom.Tina could collect money from Tom because of her right of ________.
A)subrogation
B)reimbursement
C)contribution
D)attachment

Accepted Answer

If the surety performs or pays the principal's obligation,she is entitled to recover her costs from the principal;this is known as the surety's right to reimbursement.

Question 4

Mike operates an upholstering business.He goes to Hans' house to reupholster a sofa for Hans.After the work was complete,Hans refused to pay the agreed price.Mike wants to assert a lien against the sofa in order to collect the money due to him.Is Mike entitled to a lien under these circumstances?
A)Yes,because he is an artisan who improved personal property.
B)Yes,because Hans owes a debt to Mike.
C)No,because there is no surety involved in the transaction.
D)No,because Hans did not give up the possession of the sofa.

Accepted Answer

For the lien to come into play,possession of the goods must have been entrusted to the artisan.

Question 5

A surety has a right of ________,which is the right of the surety or guarantor to require the debtor to make good on his commitment to the creditor when he (1)is able to do so and (2)does not have a valid defense against payment.
A)reimbursement
B)exoneration
C)contribution
D)subrogation

Accepted Answer

A surety has a right of exoneration which is the right of the surety or guarantor to require the debtor to make good on his commitment to the creditor when he (1)is able to do so and (2)does not have a valid defense against payment.

Question 6

Which of the following is an essential element of a lien?
A)Presence of a written deed of trust.
B)Presence of guarantor for the payment of an artisan's service.
C)Creation of a debt by the improvement or the provision of services concerning the goods.
D)Presence of an accommodation surety who voluntarily accepts the duty of the surety.

Accepted Answer

The two essential elements of the lien are (1)possession by the improver or the provider of services and (2)a debt created by the improvement or the provision of services concerning the goods.

Question 7

A(n)________ surety is a person who acts as a surety without compensation,such as a friend who cosigns a note as a favor.
A)obligatory
B)benefactor
C)accommodation
D)subrogated

Accepted Answer

An accommodation surety is a person who acts as a surety without compensation,such as a friend who cosigns a note as a favor.

Question 8

An artisan who makes an improvement on a personal property is given a ________ on it until he is paid.
A)lien
B)warranty
C)guaranty
D)credit

Accepted Answer

An artisan uses his labor or materials to improve personal property that belongs to someone else.The improvement becomes part of the property and belongs to the owner of the property.Therefore,the artisan who made the improvement is given a lien on the property until he/she is paid.

Question 9

Miguel has been complaining to his neighbor Robert that his lawn mower is broken.Robert fixes the lawn mower for Miguel and asks Miguel for $50 for the parts he used to make the repairs.Miguel refuses to pay and Robert takes the lawn mower,threatening not to return it until Miguel pays.Is Miguel acting legally?
A)Yes because he made improvements for which he was not paid.
B)Yes,as long as the cost for repairs is reasonable.
C)No,because Robert is not an innkeeper or an artisan.
D)No,because Robert did not make repairs at the request of Miguel

Accepted Answer

An important aspect of common law liens is that the work or service must have been performed at the request of the owner of the property.

Question 10

When a rug repairer fixes a damaged rug and keeps the rug until a reasonable charge for rug repairs has been made,the rug repairer has this right because of a ________.
A)surety lien.
B)guarantor lien.
C)possessory lien.
D)foreclosure liens.

Accepted Answer

Common law liens and most statutory liens are known as possessory liens.They give lien holders the right to keep possession of a debtor's property until a reasonable charge for services has been paid.

Question 11

Why did common law give an innkeeper the right to claim a lien on property a guest brought into the hotel to secure payment on food and lodging?
A)Because the innkeeper was required by law to provide service to anyone seeking it.
B)Because the innkeeper was considered to be an artist.
C)Because of statutory lien laws.
D)Because of a contract signed by guests when staying in an inn.

Accepted Answer

Innkeepers were entitled to the protection of a lien because they were required by law to provide service to anyone seeking it.

Question 12

Kim goes to Tanya's house to tune her guitar for a reasonable fee.Tanya does not pay.Does Kim have a possessory lien on the guitar?
A)Yes,because Kim provided a service to Tanya which Tanya did not pay for.
B)Only if Kim and Tanya entered into a contract where the guitar acted as collateral.
C)No,because Kim is not an artisan or an innkeeper.
D)No,because Kim was not in possession of the guitar.

Accepted Answer

A possessory lien requires possession by the improver or provider of services,as well as debt created by the improvement or the provision of services concerning the goods.

Question 13

To be relieved of obligations as surety,a compensated surety must show that:
A)he is secondarily liable for the payment of the debt.
B)a change in the contract was material and prejudicial to him.
C)he lacks the capacity to fulfill his promise.
D)he has provided adequate collateral to the creditor.

Accepted Answer

A compensated surety must show that a change in the contract was both material and prejudicial to him if he is to be relieved of his obligation as surety.

Question 14

George has signed a promissory note,and Huber,Nick,and Jeffery are cosureties of their friend George.When George defaults,Jeffery pays the whole obligation.Jeffery is entitled to collect one third from both Nick and Huber.This is known as the:
A)right to contribution.
B)right of exoneration.
C)right of redemption.
D)right of collection.

Accepted Answer

If several people are cosureties,and one of them pays the obligation,he/she has the right to collect the shares from the others.This is called the right to contribution.

Question 15

Abby borrows money from Cain Bank and Baker cosigns on the loan contract.Abby fails to repay this loan and Cain Bank collects the debt from Baker.Baker is entitled to recover the amount he paid to the bank from Abby.This is known as the:
A)right of subrogation.
B)right of return.
C)right of reimbursement.
D)right of garnishment.

Accepted Answer

If the surety performs or pays the principal's obligation,she is entitled to recover her costs from the principal;this is known as the surety's right to reimbursement.

Question 16

Today,most artisans' liens:
A)have been repealed by statute.
B)are handled by Article 7 of the UCC.
C)require that the artisan have possession of the debtor's property.
D)apply whether or not the owner consented to the work performed by the artisan.

Accepted Answer

The common law lien and most of the statutory liens require that,for the lien to come into play,possession of the goods must have been entrusted to the artisan.

Question 17

A software engineer installs new software in Dick's computer and returns the computer to Dick.Dick defaults in his payments for the new software.The software engineer loses his right of lien because:
A)this kind of service is not covered under statutory liens.
B)there is no surety or guarantor involved in the transaction.
C)he has given the computer voluntarily without asking for any consideration.
D)the computer rightfully belongs to Dick.

Accepted Answer

If the artisan or other lienholder gives up the goods voluntarily,he loses the lien.

Question 18

A distinction between a surety and a cosurety is that only a cosurety is entitled to the right of/to:
A)contribution.
B)exoneration.
C)subrogation.
D)reimbursement.

Accepted Answer

A cosurety has the right to contribution,i.e. ,he/she can collect the shares paid on behalf of the others.

Question 19

If a debtor defaults and the debtor's surety satisfies the obligation,the surety acquires the right of:
A)subrogation.
B)primary lien.
C)indemnification.
D)chattel mortgage.

Accepted Answer

Under the right of subrogation,if the surety has to perform or pay the principal's obligation,then the surety acquires all of the rights that the creditor had against the principal.

Question 20

When can a lienholder sell goods or claim ownership if he possesses goods because his charges are not paid?
A)After two months
B)It depends upon the value of the goods.
C)After following state procedure or filing a lawsuit.
D)After posting a public notice of the sale.

Accepted Answer

Commonly,there is a procedure provided by statute for selling property once it has been held for a certain period of time.If there is no statutory procedure,the lienholder must first bring a lawsuit against the debtor.

Quiz 28: Introduction to Credit and Secured Transactions

________ is the method by which the rights of the property owner are cut off so that the lienholder can realize her security interest.

Which of the following statements is true regarding an accommodation surety?

Tina cosigns a promissory note at Globe Bank for $500 for her friend Tom.Tom defaults on the loan,and Globe Bank collects $500 from Tina.Tina then collects $500 from Tom.Tina could collect money from Tom because of her right of ________.

Mike operates an upholstering business.He goes to Hans' house to reupholster a sofa for Hans.After the work was complete,Hans refused to pay the agreed price.Mike wants to assert a lien against the sofa in order to collect the money due to him.Is Mike entitled to a lien under these circumstances?

A surety has a right of ________,which is the right of the surety or guarantor to require the debtor to make good on his commitment to the creditor when he (1) is able to do so and (2) does not have a valid defense against payment.

Which of the following is an essential element of a lien?

A(n) ________ surety is a person who acts as a surety without compensation,such as a friend who cosigns a note as a favor.

An artisan who makes an improvement on a personal property is given a ________ on it until he is paid.

When a rug repairer fixes a damaged rug and keeps the rug until a reasonable charge for rug repairs has been made,the rug repairer has this right because of a ________.

Why did common law give an innkeeper the right to claim a lien on property a guest brought into the hotel to secure payment on food and lodging?

Kim goes to Tanya's house to tune her guitar for a reasonable fee.Tanya does not pay.Does Kim have a possessory lien on the guitar?

To be relieved of obligations as surety,a compensated surety must show that:

George has signed a promissory note,and Huber,Nick,and Jeffery are cosureties of their friend George.When George defaults,Jeffery pays the whole obligation.Jeffery is entitled to collect one third from both Nick and Huber.This is known as the:

Abby borrows money from Cain Bank and Baker cosigns on the loan contract.Abby fails to repay this loan and Cain Bank collects the debt from Baker.Baker is entitled to recover the amount he paid to the bank from Abby.This is known as the:

Today,most artisans' liens:

A software engineer installs new software in Dick's computer and returns the computer to Dick.Dick defaults in his payments for the new software.The software engineer loses his right of lien because:

A distinction between a surety and a cosurety is that only a cosurety is entitled to the right of/to:

If a debtor defaults and the debtor's surety satisfies the obligation,the surety acquires the right of:

When can a lienholder sell goods or claim ownership if he possesses goods because his charges are not paid?