Yates ch15 - test bank PDF

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Business Law in Canada, 11e (Yates) Chapter 15 Priority of Creditors1) Which of the following is false with regard to property? A) Both real and personal property can be given as security to a creditor that he will be repaid. B) Real property consists of land but does not include the buildings on th...

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Business Law in Canada, 11e (Yates) Chapter 15 Priority of Creditors 1) Which of the following is false with regard to property? A) Both real and personal property can be given as security to a creditor that he will be repaid. B) Real property consists of land but does not include the buildings on that land. C) Personal property includes intangible rights. D) Personal property includes chattels. E) Real property includes fixtures. Answer: B Diff: 1 Type: MC Page Ref: 501 Topic: Ch. 15 - Personal Property Skill: Recall Objective: Chapter 15: 1. Outline the process of securing debt by using personal property. Bloom's Taxonomy: Knowledge 2) If you want to buy a car from a private party (other than a dealer), which of the following is false? A) If you request a search and the Personal Property Registry states that the car is free and clear of liens and encumbrances, then title is clear. B) If the seller tells you that the car is free and clear, and two months later a holder of a properly perfected and attached security interest claims a right to the car, you could lose the car. C) Even if both the seller and the Personal Property Registry indicate to you that the car's title is clear, you could still lose it to a third party. D) If the seller indicates to you that the title is clear, but after the sale the car is seized by someone with the legal right to do so, you could still sue the seller. E) If the seller makes no representations whatsoever about the car and the car is seized by a creditor, you can still sue the seller because he had an obligation to deliver good title. Answer: C Diff: 3 Type: MC Page Ref: 501 Topic: Ch. 15 - Personal Property Skill: Applied Objective: Chapter 15: 1. Outline the process of securing debt by using personal property. Bloom's Taxonomy: Knowledge 3) When the transaction is registered, the creditor's rights include all of the following except A) contractual remedies upon default. B) the right to seize the security. C) the right to resell the security. D) the right to sue the debtor rather than seize security. E) the right to order the debtor arrested or detained. Answer: E Diff: 1 Type: MC Page Ref: 501 Topic: Ch. 15 - Personal Property Skill: Recall Objective: Chapter 15: 1. Outline the process of securing debt by using personal property. Bloom's Taxonomy: Knowledge 1 Copyright © 2017 Pearson Canada, Inc.

4) Hank sold three properties for Mr. W and had been paid his commission for the first, but not for the last two. Hank had done everything according to the contract and according to the relevant statutes, but Mr. W wouldn't pay. Hank knows that Mr. W has a bank account with the Bank of Winnipeg and has money owing to him from a Mr. Gregory. With regard to the collecting of the debt owed, which of the following is false? A) Hank could sue Mr. W for breach of contract. B) After obtaining judgment, Hank could force the bank to pay into court an amount of money from Mr. W's account to satisfy the debt. C) Hank's claim for commission is unenforceable because he failed to secure the debt by retaining title until the amounts were paid. D) If Hank got judgment against Mr. W, he could get an order commanding seizure of enough of Mr. W's goods to satisfy the judgment debt. E) If Mr. W goes into bankruptcy, Hank may not get paid. Answer: C Diff: 3 Type: MC Page Ref: 501 Topic: Ch. 15 - Personal Property Skill: Applied Objective: Chapter 15: 1. Outline the process of securing debt by using personal property. Bloom's Taxonomy: Knowledge 5) After a creditor has taken possession of collateral, the debtor's right to reclaim it on payment of any money owing is known as a A) right to salvage. B) right of settlement. C) right to redeem. D) constructive trust. E) collateral contract. Answer: C Diff: 1 Type: MC Page Ref: 501 Topic: Ch. 15 - Personal Property Skill: Recall Objective: Chapter 15: 1. Outline the process of securing debt by using personal property. Bloom's Taxonomy: Knowledge 6) Attachment takes place when A) a contract is executed. B) notice of a security arrangement is given. C) after-acquired assets are secured. D) a debtor receives some value under the contract. E) a purchase money security interest arises. Answer: D Diff: 1 Type: MC Page Ref: 501 Topic: Ch. 15 - Personal Property Skill: Recall Objective: Chapter 15: 1. Outline the process of securing debt by using personal property. Bloom's Taxonomy: Knowledge 2 Copyright © 2017 Pearson Canada, Inc.

7) A company named Printers World Ltd. bought a $9000 plotter secured by a Security Agreement and, because of business reverses, is unable to make the payments. Which of the following is accurate with respect to the legal position of the parties? A) The seller could seize the goods only if it obtained a court order. B) The seller could seize the goods without a court order only if it had properly registered the conditional sale contract. C) The seller could seize the goods but, before resale can take place, the debtor must be given notice and an opportunity to redeem. D) The seller could only seize the goods and could not instead opt to sue the company. E) The seller could seize and sell the same day because it had already waited three months after default before taking any action. Answer: C Diff: 2 Type: MC Page Ref: 501 Topic: Ch. 15 - Personal Property Skill: Applied Objective: Chapter 15: 1. Outline the process of securing debt by using personal property. Bloom's Taxonomy: Knowledge 8) Consider the following statements about the use of personal property as security for a creditor in a creditor-debtor transaction. Indicate the false statement. A) If the transaction involves the use of consumer goods as collateral, upon default of payment by the debtor, the creditor can seize the goods and sell them, but also always retains the right to sue the debtor on his personal covenant to pay for any deficiency. B) Regardless of the type of personal property involved, whether tangible or intangible, as long as it is being used as security then the transaction is governed by the Personal Property Security Act, and therefore an unpaid creditor may be able to repossess them. C) Real estate professionals need to be aware of the Personal Property Security Act because items that constitute fixtures under real property law may also constitute chattel security, and thus an unpaid creditor may be able to repossess them. D) Before a creditor who has been promised an interest in personal property as security can claim priority rights, two processes must have taken place: the security interest must have attached to the collateral item, and the security must have been perfected. E) If the required procedures have taken place, a potential buyer from an unscrupulous debtor who has already given personal property as security will be protected; i.e., the creditor will either have registered his interest in the Personal Property Registry or will have actual possession of the collateral. Answer: A Diff: 2 Type: MC Page Ref: 501 Topic: Ch. 15 - Personal Property Skill: Recall Objective: Chapter 15: 1. Outline the process of securing debt by using personal property. Bloom's Taxonomy: Knowledge

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9) Identify which of the following statements is true about secured transactions in provinces having a personal property security act. A) This kind of transaction, which formerly was legal, is now prohibited by law in all provinces. B) Various kinds of secured transactions, such as conditional sales, chattel mortgages, etc., are regulated by their own distinct statutes. C) An assignment of an account receivable does not qualify as a security arrangement because no tangible property is involved. D) All kinds of security arrangements involving personal property as collateral now come under one statute. E) Only tangible personal property can be used as security. Answer: D Diff: 2 Type: MC Page Ref: 501 Topic: Ch. 15 - Personal Property Skill: Recall Objective: Chapter 15: 1. Outline the process of securing debt by using personal property. Bloom's Taxonomy: Knowledge 10) As the fishing season slowed down in the fall, Bob decided that it might be a good time to find a real bargain in used equipment for his boat. He found a navigation instrument for sale for $15,000, a great price. However, he only had $10,000, so he borrowed the other $5,000 from the bank. He also signed a Security Agreement on the equipment as collateral in favour of the bank, which promptly registered its interest in the Personal Property Registry. Bob made his payments for a while, but things started to go badly for him. He was unable to make any further payments, although he still owed over $3000. Desperate and not thinking too clearly, Bob sold his boat to his friend Claude for $50,000 and left for Central America with the funds. When the bank realized what Bob had done, it located the boat and demanded that Claude pay off the $3000+ or lose the navigational equipment. Claude was outraged because he had paid Bob in good faith and argued that he had never borrowed anything from the bank and therefore owed it nothing. Which one of the following statements accurately describes the legal situation here? A) Because Bob transferred the boat and equipment to Claude, that was an assignment of his obligations and he no longer owed the debt. B) Claude is right, and the bank's only remedy is to sue Bob. C) If Claude is unwilling to pay off the $3000, the bank has the right to remove the equipment from the boat. D) If the bank does seize the equipment and sells it for $2000, the bank can still sue Claude for the $5000. E) If the bank had failed to register the chattel mortgage, it would still have a better right to the equipment than Claude, because the mortgage was signed before Bob sold the boat to him. Answer: C Diff: 3 Type: MC Page Ref: 501 Topic: Ch. 15 - Personal Property Skill: Applied Objective: Chapter 15: 1. Outline the process of securing debt by using personal property. Bloom's Taxonomy: Knowledge

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11) Identify which of the following statements best describes the legal position of a conditional seller. A) The conditional seller must comply with the provisions of the Personal Property Security Act to protect his interest. B) He is given first priority over all of the other creditors with respect to all of the conditional buyer's assets. C) The conditional seller is in a better legal position than if instead he had been the chattel mortgagee of the same assets. D) The conditional seller loses all legal rights against the conditional buyer if he fails to register. E) The conditional seller has no legal rights because such contracts are void. Answer: A Diff: 2 Type: MC Page Ref: 501 Topic: Ch. 15 - Personal Property Skill: Recall Objective: Chapter 15: 1. Outline the process of securing debt by using personal property. Bloom's Taxonomy: Knowledge 12) Which one of the following statements about the Personal Property Security Act is true? A) This legislation applies only to all present transactions where personal property is given as security interest to enforce an obligation. B) Unless a creditor in a secured transaction covered by this act takes steps to attach and perfect his security interest, he could lose that interest to someone outside the contract. C) In a situation where a debtor fraudulently attempts to transfer property that he has given as security, the Act is designed to protect both the debtor and the secured creditor. D) If a secured creditor fails to register his security interest in the Personal Property Registry, he loses his rights against the debtor. E) If someone suspects that an item of personal property has been given as security by a particular person, he can sue on the breach of a condition. Answer: B Diff: 3 Type: MC Page Ref: 501 Topic: Ch. 15 - Personal Property Skill: Recall Objective: Chapter 15: 1. Outline the process of securing debt by using personal property. Bloom's Taxonomy: Knowledge

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13) Amy Carr looked at a 2016 Ford being sold by a private party who told Carr that the car was free and clear of all encumbrances. Carr had the Ford inspected by Automobile Association, which reported it to be in good condition. Carr bought the Ford for $8000. Two months later, the car was seized by a bank that had properly perfected and attached its security interest. On these facts, which of the following is true? A) Carr would be able to keep the Ford because the seller had represented that the Ford was free and clear of encumbrances. B) Carr would be able to keep the Ford because she was an innocent purchaser without notice of any lien or charge. C) The bank would get the Ford because it had title to it as security, and it could claim its right to title whether it perfected and attached the security interest or not. D) The bank would get the Ford because it properly perfected and attached its security interest. E) Carr will lose the car and has no recourse against anyone. Answer: D Diff: 1 Type: MC Page Ref: 501 Topic: Ch. 15 - Personal Property Skill: Applied Objective: Chapter 15: 1. Outline the process of securing debt by using personal property. Bloom's Taxonomy: Knowledge 14) With regard to guarantees and indemnities, which of the following is false? A) A guarantor can use any defence against the creditor that the debtor could use. B) A legally binding promise to be primarily responsible for someone else's obligation is an indemnity. C) A guarantee cannot be enforced in court unless it satisfies the writing requirements set out in statute. D) Subrogation can result in a guarantor's being able to sue successfully the very debtor whose obligation he guaranteed. E) A legally enforceable guarantee must satisfy all the elements required to create a binding contract except consideration. Answer: E Diff: 2 Type: MC Page Ref: 508 Topic: Ch. 15 - Guarantees Skill: Recall Objective: Chapter 15: 2. Outline the process of securing debt by using guarantees. Bloom's Taxonomy: Knowledge

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15) Which of the following statements regarding the securing of debt is true? A) The term guarantee, otherwise known as an indemnity, refers to a primary debt obligation. B) To avoid problems related to consideration, lending institutions often require that guarantees be placed under seal. C) In every province, there is now a requirement that a guarantor appear before a notary public. D) Because of the principle of caveat emptor, a creditor has no obligation to protect the interests of a guarantor. E) As guarantees are mere formalities, there is little point in getting legal advice prior to executing one. Answer: B Diff: 3 Type: MC Page Ref: 508 Topic: Ch. 15 - Guarantees Skill: Recall Objective: Chapter 15: 2. Outline the process of securing debt by using guarantees. Bloom's Taxonomy: Knowledge 16) A continuing guarantee A) allows a creditor to advance further funds without affecting the obligation of the guarantor to pay in the event of default. B) is a primary obligation of a third party to pay a debt along with a debtor. C) is a written commitment not to pursue a legal claim against another. D) is an equitable principle assuring that when security is repossessed, there will be a period of time during which the debtor can still make payment. E) allows a breaching party to pay an amount specified in a contract, rather than facing a lawsuit for damages. Answer: A Diff: 1 Type: MC Page Ref: 508 Topic: Ch. 15 - Guarantees Skill: Recall Objective: Chapter 15: 2. Outline the process of securing debt by using guarantees. Bloom's Taxonomy: Knowledge

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17) Elizabeth gave a guarantee to the Bank in support of a loan to Tomasz. Over the next few years, the Bank and Tomasz made a number of alterations to the loan agreement. The effect of these changes was to significantly increase the amount owing to the Bank. Elizabeth had no notice or knowledge of these changes, nor did she consent to any such changes. What is the likely result? A) Elizabeth is bound by the changes to the loan because guarantees are, by their nature, continuing. B) Guarantees are a mere formality; only Tomasz has obligations to the Bank. C) The guarantees are likely to be invalid and unenforceable against Elizabeth. D) A guarantee is executed under seal, therefore it will be presumed valid regardless of defect. E) The failure to notify Elizabeth would release both Elizabeth and Tomasz from their obligations. Answer: C Diff: 3 Type: MC Page Ref: 508 Topic: Ch. 15 - Guarantees Skill: Applied Objective: Chapter 15: 2. Outline the process of securing debt by using guarantees. Bloom's Taxonomy: Knowledge 18) With regard to guarantees, which of the following is false? A) A guarantor can use any defence against the creditor that the debtor could use. B) A legally binding promise to be primarily responsible for someone else's obligation is an indemnity. C) A verbal guarantee is as enforceable as a written one. D) Subrogation can result in a guarantor's being able to sue successfully the very debtor whose obligation he guaranteed. E) A legally enforceable guarantee must satisfy all the elements required to create a binding contract. Answer: C Diff: 1 Type: MC Page Ref: 508 Topic: Ch. 15 - Guarantees Skill: Recall Objective: Chapter 15: 2. Outline the process of securing debt by using guarantees. Bloom's Taxonomy: Knowledge

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19) Which of the following is the consequence of an unpaid subcontractor failing to file his lien on time? The owner had contracted with the general contractor who in turn had contracted with this subcontractor. A) He can submit documents giving his reason and he will be allowed to file the lien late. B) He will lose all of his remedies. C) He will lose his right to place a charge against the owner's property, but he can sue the owner directly for the amount owed him, because his work and materials went into the owner's house. D) He would lose his right to place a charge against the owner's property, but he can sue the contractor on the contract. E) He loses his right to claim against the building but can sue the owner of the property directly. Answer: D Diff: 1 Type: MC Page Ref: 501 Topic: Ch. 15 - Builders' Liens Skill: Recall Objective: Chapter 15: 3. Outline the process of securing debt by using other forms of security. Bloom's Taxonomy: Knowledge 20) Which one of the following is true with respect to the builder's lien acts? A) Various provincial statutes give suppliers of work and materials a claim for payment against the land enhanced by their services. B) If a lien claimant files his lien within the time set, he can be assured that he will collect the full amount of his claim. C) Compliance with the statutory holdback provisions is required, but gives an owner no protection against potential lien claims. D) If a lien claimant loses the right to file a lien, he also loses the right to sue for breach of contract. E) A lien claimant owed money by a general contractor can choose to pursue either the general contractor or the property owner for the full amount of the claim. Answer: A Diff: 2 Type: MC Page Ref: 512 Topic: Ch. 15 - Builders' Liens Skill: Applied Objective: Chapter 15: 3. Outline the process of securing debt by using other forms of security. Bloom's Taxonomy: Knowledge

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21) Which one of the following is false with respect to the Builders' Lien Act? A) The lien claim is required to be filed at the appropriate registry in order to establish a claim against the property. B) If a lien claimant files his lien within the time set, he can be assured that he will collect the full amount of his claim. C) The Builders' Lien Act gives some protection for those in the building trades, and these include contractors, subcontractors, workers, and materialmen. D) If a lien claimant loses the right to file a lien, he still has the right to sue the party who failed to pay him for breach of contract. E) A lien claimant has a limited period of time from filing his lien within which to begin his court action. Answer: B Diff: 3 Type: MC Page Ref:...