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Law
Q:
Which of the following is generally true about state statutes establishing mechanic's and materialman's liens?
A. Most of them require the mechanics and the material men to sign a deed of trust.
B. They require that work be done in the performance of a contract to improve real property.
C. They do not allow subrogation by mechanics and materialmen.
D. They require mechanics and materialmen to enter into a quasi contract with the contractor.
Q:
Submaterialmen are entitled to a lien only when:
A. they enter into a deed of trust with the contractor.
B. they act as the surety in the transaction.
C. they execute their right of exoneration.
D. the state statute specifically includes them.
Q:
Bob borrowed $200,000 from ABC Bank to purchase his residential house. A mortgage was used as the financing vehicle. Several years later Bob encountered financial difficulties. He did not pay his mortgage payments for 4 months and the bank foreclosed. At that time the remaining loan balance was $170,000. Bob had not maintained the property well, and the winning bid at the foreclosure auction sale was only $150,000. Is Bob liable for the $20,000 deficiency that has resulted (using the majority rule)?
A. No, because the property was his residence.
B. No, because there is no guarantor with secondary liability involved in this transaction.
C. Yes, because the proceeds of sale did not satisfy the remaining loan balance.
D. Yes, because there is no surety or guarantor involved in this transaction.
Q:
A clause in a mortgage specifies that "if the mortgaged property is sold, then the remaining balance becomes immediately due and payable." This clause is called:
A. action and sale clause.
B. strict foreclosure clause.
C. due on sale clause.
D. subrogation clause.
Q:
Xavier deeds to Peter, a trustee, his property in the form of security for the loan, which is lent by Smith, the beneficiary of the trust. The nature of this transaction renders it as a deed of trust. Under these circumstances, if Xavier defaults to pay the loan, which of the following is the appropriate way in which Smith can recover his loan?
A. By asking Xavier to enter into an action and sale contract
B. By exercising the right of exoneration
C. By exercising right of reimbursement
D. By notifying Peter to sell the property
Q:
In a(n) _____ transaction, the borrower keeps the title of his real property with a third party and in the event of default, the third party can sell the property so that the creditor can recover his loan.
A. strict foreclosure
B. land contract
C. deed of trust
D. equity of redemption
Q:
Under which of the following systems of foreclosure does the creditor have no right to recover any deficiency between the value of the property and the amount of the debt?
A. Strict foreclosure
B. Conditional foreclosure
C. Accommodative foreclosure
D. Compensated foreclosure
Q:
In the case of _____, after the foreclosure, the proceeds of the sale are applied to the payment of the mortgage debt, and any surplus is paid over to the mortgagor.
A. strict foreclosure
B. foreclosure by action and sale
C. accommodative foreclosure
D. foreclosure by redemption
Q:
In the case of _____, the right must be expressly conferred on the mortgagee by the terms of the mortgage.
A. foreclosure by action and sale
B. strict foreclosure
C. accommodative foreclosure
D. foreclosure by power of sale
Q:
Jerry wants to purchase a flat. So he borrows $50,000 from XYZ bank. He signs a note for $50,000 and gives the bank a $50,000 mortgage on the flat as security for his repayment of loan. Within a year and a half, Jerry repays the entire loan. After the repayment of the loan, which of the following right does Jerry have against XYZ bank?
A. Right to foreclosure
B. Right to reimbursement
C. Right of subrogation
D. Right of redemption
Q:
Courts today view a mortgage as:
A. a lien on land.
B. conveyance of title to land.
C. assignment of property interest.
D. sublease.
Q:
A "_____" is a security interest in real property or a deed to real property that is given by the owner as security for a debt owed to the creditor.
A. bill of sale
B. note of trust
C. mortgage
D. quasi-contract
Q:
What Article of the UCC deals with liens, both carriers and warehousemen?
A. Article 2
B. Article 7
C. Article 3
D. Article 1
Q:
A party who borrows money to buy a home and signs an agreement giving the bank the right to repossess the home in case of default is called a:
A. mortgagor.
B. guarantor.
C. creditor.
D. trustee.
Q:
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.
Q:
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.
Q:
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
Q:
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.
Q:
_____ 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
Q:
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.
Q:
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.
Q:
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.
Q:
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
Q:
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.
Q:
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.
Q:
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
Q:
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.
Q:
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.
Q:
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
Q:
Robert cosigns a note for his friend Amelia, which she has given to Credit Union to secure a loan. Suppose the note was originally for $5,000 and payable in 12 months with interest at 10 percent a year. Credit Union and Amelia later agree that Amelia will have 24 months to repay the note but that the interest will be 13 percent per year. Robert is not aware of this change of terms. In the event of Amelia defaulting on the loan, will Robert have to repay the debt?
A. Robert will have to pay the debt because he is the surety.
B. Robert will not have to pay the debt because he has not received any compensation from Amelia for being a surety.
C. Robert will have to pay the debt because he is the guarantor.
D. Robert will not have to pay the debt because he has not accepted the changed terms of the loan.
Q:
A(n) _____ is secondarily liable for the debt of the principal debtor.
A. surety
B. guarantor
C. beneficiary
D. executor
Q:
A difference between a surety and a guarantor is that the guarantors:
A. must be paid for their services.
B. should enter into a deed of trust with the creditors.
C. should keep a collateral with the creditors.
D. become liable only if the principal debtor first defaults.
Q:
Payne borrowed $500 from Long Bank. At the time the loan was made to Payne, Gem orally agreed with Long that Gem would repay the loan if Payne failed to do so. Gem received no personal benefit as a result of the loan to Payne. Which of the following is most likely to be true, under the circumstances?
A. Gem must provide a collateral to Long.
B. Both Gem and Payne are primarily liable to repay the loan.
C. Gem is free from liability concerning the loan.
D. Payne must provide a lien to Gem for the amount of the debt.
Q:
Joe Smith obtains a credit card from First National Bank. The credit card is what type of credit?
A. Secured credit
B. Unsecured credit
C. Mortgage
D. Subsidized loan
Q:
A(n) "_____" is a person who is liable for the payment of another person's debt or for the performance of another person's duty.
A. beneficiary
B. trustee
C. surety
D. executor
Q:
Sarah, age 17, buys a car on credit from Lora. Sarah signs a promissory note, agreeing to pay $1000 a month on the note until the note is paid in full. Lora has Sarah's father cosign the note. Under these circumstances, Sarah's father is:
A. a surety.
B. secondarily liable on this contract.
C. a guarantor of payment on this contract.
D. not liable on this contract because Sarah is a minor.
Q:
Which of the following statements is true regarding a guarantor?
A. In order to be a guarantor, a person must enter into a deed of trust with the principal debtor.
B. A guarantor is primarily liable for the debt along with the principal debtor.
C. Generally, a guarantor's promise must be made in writing to be enforceable under the statute of frauds.
D. A guarantor joins the principal debtor in making a promise.
Q:
A subcontractor is a person who contracts with the owner of a property to build or remodel.
Q:
John receives certain goods from Tom. He promises to pay Tom later. This transaction is based on a(n) _____.
A. deed of trust
B. unsecured credit
C. mortgage
D. subrogation
Q:
What does the term "judgment-proof" imply about a debtor?
A. He/she has defaulted on a mortgage.
B. He/she has paid the full amount for the transaction.
C. He/she has provided a security interest for the debt.
D. He/she has no property subject to execution.
Q:
Which of the following is the oldest and also the simplest security device?
A. Pledge
B. Chattel mortgage
C. Deed of trust
D. Surety
Q:
Generally, the procedure for declaring a forfeiture and recovering property sold on a land contract is simpler and less time-consuming than foreclosure of a mortgage.
Q:
Generally, purchases of farm property are financed through real estate mortgage.
Q:
Under the Pennsylvania system, the general contractor's failure to perform his contract or his abandonment of the work has a direct effect on the lien rights of subcontractors and materialmen.
Q:
A submaterialman is not entitled to a lien, unless specifically stated by the Statute of the State which is applicable to him.
Q:
Most state laws say that a valid mechanic's lien has priority over all other liens that attach after the first work is performed or the first materials are furnished.
Q:
A mortgage is a security interest in real property.
Q:
In a foreclosure by "action and sale," deficiency judgments are generally not permitted if the property sold is the residence of the debtor.
Q:
Foreclosure is the process by which any rights of the mortgagor or the current property owner are cut off.
Q:
In the case of foreclosure by action and sale, the creditor has no right to a deficiency and the debtor has no right to any surplus.
Q:
A surety is a person who is liable for the payment of another person's debt.
Q:
In order for an artisan's lien to be valid, the lien holder normally must have possession of the debtor's property.
Q:
The right of a lienholder to possess goods does not automatically give the lienholder the right to sell the goods or to claim ownership if his charges are not paid.
Q:
Under the common law, artisans, innkeepers, and common carriers were not entitled to liens.
Q:
The principal debtor's lack of capacity is a defense for both the principal debtor and the surety if they are sued by the creditor.
Q:
A surety who pays a debtor's debt to the creditor gets all the rights the creditor had against the debtor. This is called surety's right of subrogation.
Q:
A surety has a right of exoneration.
Q:
Which of the following is true of insurance contracts?
A. Some statutes require them to be in writing.
B. Contracts for property insurance are usually within the statute of frauds.
C. Once formed, insurance contracts cannot be amended or reformed.
D. Insurance contracts are governed by federal laws.
Q:
Chica, a women's fashion retailer, buys merchandise from Tammy, a fashion designer, promising to pay for the merchandise within 30 days after receipt. This is an example of an unsecured credit transaction.
Q:
Article 9 of the Uniform Commercial Code deals with provisions regarding security interests involved in personal property.
Q:
An unsecured credit transaction involves the greatest benefit to the creditor.
Q:
The difference between a wagering contract and an insurance contract is that the insurance contract:
A. is commercial in nature.
B. transfers an existing risk.
C. does not contain an insurable interest.
D. is between two interested parties.
Q:
What is the express term in the insurance policy which serves as the basis for the insurer's liability?
A. Guarantee
B. Warranty
C. Surety
D. Representation
Q:
Which of the following terminates the insurer's duty to perform under the policy?
A. The insured's breach of warranty
B. An increase in the value of the insured property
C. A decrease in the value of the insured property
D. A case of innocent misrepresentation by the insured
Q:
A means by which insurance law separates insurance contracts from wagering contracts is the typical requirement that the party who purchases a policy of property or life insurance must possess a(n) _____ in the property or life being insured.
A. warranty
B. codicil
C. reformation
D. insurable interest
Q:
The person who receives the insurance proceeds in a life insurance is the:
A. insurer.
B. insured.
C. trustee.
D. beneficiary.
Q:
When does an insurer's contractual obligations to the insured commence?
A. When the insurance contract is drafted.
B. When the insurance application is dispatched.
C. When the insured receives the insurance application.
D. When the insurer accepts the insurance contract.
Q:
Which of the following agreements provides a temporary insurance cover until the time the insurer decides to accept or reject the applicant's application?
A. Co-insurance agreement
B. Binder agreement
C. Indemnity agreement
D. Guaranty agreement
Q:
With an insurance contract who typically is the party that makes the offer?
A. The insurance company
B. The party seeking coverage
C. Neither, there is no initial offer
D. The government
Q:
Sarah entered into an auto insurance contract with ABC Insurance (ABC). On the application, Sarah stated that she had never been in an accident. In truth, Sarah had been in seven accidents in the last ten years. As a result, this contract is:
A. illegal.
B. voidable at ABC's option.
C. voidable at either Sarah's or ABC's option.
D. void.
Q:
Guy takes out a property insurance policy on his home, buying the policy from Ace Insurance. Guy's home was damaged when a contractor, building an addition to his neighbor's home, negligently swung a crane through Guy's dining room wall. Ace Insurance may force Guy to seek compensation from the contractor.
Q:
As a general rule, liability insurance policies furnish the insured with coverage for his negligence and his intentional acts of a wrongful nature.
Q:
Generally in business liability policies, if the insured is liable on respondeat superior grounds, then he will be covered by the policy.
Q:
Professional insurance is also called malpractice insurance.
Q:
Since the relationship between the insurer and the insured is contractual in nature, the parties must fulfill all elements of:
A. a quasi-contract.
B. an indemnity.
C. a wager.
D. a binding contract.
Q:
Homeowners policy typically will cover damage to real property and to personal property by a peril.
Q:
Property insurance policies are indemnity contracts.
Q:
Most property insurance policies are open policies that allow the insured to recover the fair market value of the property, subject to the limits in the policy.
Q:
When insurance policy provisions must be interpreted, a court will generally interpret them as they would be understood by an average person.
Q:
Punitive damages are allowed when the insurer's breach of contract consisted of a good faith but erroneous denial of the insured's claim.