Law 19 Quizzes

Chapter 28-2 Quiz

1  Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from Finest Quality Motors.   If Edie signs the application but fails to con­di­tion her signature on Finest’s agreement to pursue its legal remedies against Dina before looking to her, then Edie is

 

a. a guarantor and a surety.

b. a guarantor only.

c. a surety only.

d. neither a guarantor nor a surety.


 

2.Beta Software Corporation is a new company that needs to borrow money to meet its payroll. Cliff, president and owner of Beta, asks First National Bank to loan Beta the funds.
If First National insists that Cliff sign the loan applica­tion, making himself personally liable for payment only if Beta de­faults, Cliff will be

 

a. a guarantor and a surety.

b. a guarantor only.

c. a surety only.

d. neither a guarantor nor a surety.
 

 

3. Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from Finest Quality Motors.    If Edie is a guarantor, then the guaranty is re­quired to be in writing because of

 

a. the debtor’s right of redemption.

b. the co-signer’s right of contribution.

c. the creditor’s transfer of possession.

d. the Statute of Frauds.
 

 

4.Rico signs a lease on behalf of Start-Up, Inc., with Town Properties Corporation. As part of the lease, Rico signs a document titled “GUARANTY,” which states that it is “an absolute guaranty” of the lease’s performance. If Start-Up stops paying the rent, it is most likely that li­ability or loss for the unpaid amount will rest with

 

a. no one.

b. Rico and Start-Up.

c. Start-Up only.

d. Town Properties only.


 

5. Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from Finest Quality Motors. If, after the loan agreement is signed, Dina agrees to a higher rate of interest without telling Edie, then Edie is

a. discharged from the agreement.

b. liable at the higher rate of interest.

c. liable at the lower rate of interest.

d. liable for the principal only.

 

 

6. Beta Software Corporation is a new company that needs to borrow money to meet its payroll. Cliff, president and owner of Beta, asks First National Bank to loan Beta the funds. The reason for the result in the previous question is that

 

a. Rico signed a “GUARANTY.”

b. Rico signed the lease “on Start-Up’s behalf.”

c. Town Properties probably forced Rico to sign the “GUARANTY.”

d. Town Properties still owns the property and is free to re-lease it.
 

7.Dina asks Edie to co-sign a credit application so that she can borrow money and buy a truck from Finest Quality Motors.   If Edie signs the application only after lan­guage is included that requires Finest to exhaust its legal remedies against Dina before looking to her, then Edie is

 

a. a guarantor and a surety.

b. a guarantor only.

c. a surety only.

d. neither a guarantor nor a surety.

 

8. Bill and Cody agree to guarantee Dave’s debt. Bill’s maximum liabil­ity is $60,000, and Cody’s is $40,000. Dave owes $40,000 and is in default. Bill pays the creditor the entire amount. In the ab­sence of an agree­ment to the contrary, Bill can recover from Cody

 

a. $0.

b. $16,000.

c. $20,000.

d. $40,000.

 

9. Kwik Delivery Company buys a truck from Lucky Vehicles, Inc., under a guaranty signed by Mina, Kwik’s president, who writes “President” after her signature. When Kwik does not pay for the truck, Lucky sues Mina, who claims that she did not intend to be bound by the guaranty. The court would most likely rule in favor of

 

a. Lucky, because Mina’s guaranty is unambiguous.

b. Lucky, because Mina works for Kwik.

c. Mina, because she did not intend to be bound by the guaranty.

d. Mina, because she signed only as a corporate officer.

 

10. Jay is a surety for Karen’s loan from Little Bank. Jay’s right to be repaid by Karen after having paid her debt is the right of

 

a. contribution.

b. redemption.

c. reimbursement.

d. subrogation.

 

11. Rita is a surety for Sue’s loan from Total Finance Company. Rita’s right to “step into the shoes” of Total Finance, after paying Sue’s debt, and ex­er­cise any of the Total Finance’s rights against Sue is the right of

 

a. contribution.

b. redemption.

c. reimbursement.

d. subrogation.
 

12. Drew and Earl are brothers. They agree to act as guarantors on a loan made by their sister, Flo. Flo defaults on the payments and Drew re­fuses to pay. Earl pays the debt. Earl can recover from

 

a. Drew and Flo under the right of proportionate liability.

b. Drew and Flo under the right of reimbursement.

c. Drew under the right of contribution and Flo under the right of subrogation.

d. no one, because the parties are brothers and sister.
 

13. Dora, Ed, and Fran are co-sureties of Glen’s debt to Hi-Credit Company. Dora pays Glen’s entire debt. Dora’s right to seek proportionate pay­ments from Ed and Fran is the right of

 

a. contribution.

b. redemption.

c. reimbursement.

d. subrogation.
 

14.  Mary’s home is in a state that has a $30,000 homestead exemption. Mary de­faults on a $60,000 debt that she owes to Nina. Mary’s home is sold at auc­tion for $80,000.  Nina may recover

 

a. $0.

b. $30,000.

c. $50,000.

d. $60,000.
 

15. Ross and Sally agree to guarantee Tim’s debt. Ross’s maximum liabil­ity is $30,000, and Sally’s is $20,000. Tim owes $20,000 and is in default. Ross pays the creditor the entire amount. In the ab­sence of an agree­ment to the contrary, Ross can recover from Sally

 

a. $8,000.

b. $10,000.

c. $20,000.

d. nothing.

 

16.  Mary’s home is in a state that has a $30,000 homestead exemption. Mary de­faults on a $60,000 debt that she owes to Nina. Mary’s home is sold at auc­tion for $80,000. Mary will receive

 

a. $0.

b. $30,000.

c. $50,000.

d. $60,000.


17. Rhonda’s debt to Skyler is past due. Skyler brings a legal action against A to collect the debt. To ensure that a judgment in Skyler’s favor will be collectible, Skyler asks the court to order the seizure of Rhonda’s property. Exempt from such an order in most states would be

 

a. all of Rhonda’s real property.

b. as much of Rhonda’s real property as Rhonda opts to exempt.

c. none of Rhonda’s real property.

d. Rhonda’s family home in its entirety or up to a specified amount.

 

18. Mary’s home is in a state that has a $30,000 homestead exemption. Mary de­faults on a $60,000 debt that she owes to Nina. Mary’s home is sold at auc­tion for $80,000.  If Nina recovers less than she is owed, she can realize the difference from

 

a. any property that Mary owns.

b. only exempt property that Mary owns.

c. only nonexempt property that Mary owns.

d. property that any other member of Mary’s family owns.
 
 

19. Bret defaults on a loan owed to City Bank. As a creditor, City Bank may attempt to place liens on all of Bret’s property except

 

a. motor vehicles that Bret uses to commute to work.

b. personal property that consists of stock in various corporations.

c. property that Bret elects to exempt.

d. real property on which Bret plans to open a retail store.
 
 

20. Brick’s debt to Conry is past due. Conry brings a legal action against Brick to collect the debt. To ensure that a judgment in Conry’s favor will be collectible, Conry asks the court to order the seizure of Brick’s property. Exempt from such an order in most states is

 

a. all of Brick’s personal property.

b. as much of Brick’s personal property as Brick opts to exempt.

c. equipment that Brick uses in a business up to a specified amount.

d. none of Brick’s personal property.