STUDY GUIDE 2 QUESTIONS 1 Someone who buys goods in good faith from a seller who deals in such goods a Attachment b BIOC c Perfection d PMSI e Priority 2 Steps necessary to make a security interest valid against the whole world a Attachment b BIOC c Perfection d PMSI e Priority 3 A security interest taken by the person who sells the collateral or advances money so the debtor can buy it a Attachment b BIOC c Perfection d PMSI e Priority 4 The order in which creditors will be permitted to seize the property of a bankrupt debtor a Attachment b BIOC c Perfection d PMSI e Priority 5 Steps necessary to make a security interest valid against the debtor but not against third parties a Attachment b BIOC c Perfection d PMSI e Priority 1 6 Bank has loaned unsecured money to Retailer which still owes 700 000 Nervous that Retailer is on the verge of bankruptcy Bank sends a notice of security interest to Retailer claiming a security interest in all the inventory and real estate of Retailer Retailer does not respond Bank files its notice in the state s central filing office When Retailer goes bankrupt Bank a b c d e Has a perfected security interest in the inventory but not the real estate Has a perfected security interest in the real estate but not the inventory Has a perfected security interest in both the real estate and the inventory Has no security interest in either the real estate or the inventory Has an unperfected security interest in both the real estate and the inventory 7 Which case does not represent a purchase money security interest a Auto Dealer sells Consumer a care on credit b Wholesaler sells Retailer 5 000 pounds of candy on credit c Bank lends money to Retailer using Retailer s existing inventory as collateral d Bank lends money to Auto Dealer to purchase 150 new cars which are the collateral e Consumer applies to Credit Agency for a loan with which to buy a yacht 8 Millie lends Arthur her next door neighbor 25 000 He gives her his diamond ring as collateral for the loan Which statement is true a Millie has no valid security interest in the ring because the parties did not enter into a security agreement b Millie has no valid security interest in the ring because she has not filed appropriate papers c Millie has an attached unprotected security interest in the ring d Millie has an attached unprotected security interest in the ring but she can perfect her interest by filing e Millie has an attached perfected security interest in the ring 9 Someone who issues a promissory note a Drawer b Drawee c Issuer d Maker e Holder 10 The person who issues a draft a Drawer b Drawee c Issuer d Maker e Holder 2 11 The person who pays a draft a Drawer b Drawee c Issuer d Maker e Holder 12 Anyone in possession of an instrument if it is indorsed to her a Drawer b Drawee c Issuer d Maker e Holder 13 The maker of a promissory note or the drawer of a draft a Drawer b Drawee c Issuer d Maker e Holder 14 The possessor of a piece of order paper does not have an unconditional right to be paid if a The paper is negotiable b The possessor is the payee c The paper has been indorsed to the possessor d The possessor is a holder in due course e The issuer changed his mind after signing the instrument 15 An instrument is negotiable unless a It is in writing b It is signed only by the drawee c It contains an order to pay d It is payable on demand e It is payable only to bearer 16 Chloe buys a motorcycle on eBay from Junior In payment she gives him a promissory note for 7 000 He immediately negotiates the note to Terry After the motorcycle arrives Chloe discovers that it is not as advertised One week later she notifies Junior She still has to pay Terry because a On eBay the rule is buyer beware b Terry s rights are not affected by Junior s misdeeds c Terry indorsed the note d Chloe is the drawee e Chloe waited too long to complain 3 17 Donna gives a promissory note to C J Which of the following errors would make the note invalid a The instrument was written on a dirty sock b The instrument promised to pay 15 000 euros c The note stated that Donna owed C J 1 500 One thousand and five dollars d Donna signed the note without reading it e The due date was specified as three months after Donna graduates from college TRUE FALSE QUESTIONS 18 A party with a perfected security interest takes priority over a party with an unperfected interest a True b False 19 A buyer in ordinary course of business takes goods free of an unperfected security interest but does not take them free of a perfected security interest a True b False 20 When a debtor defaults a secured party must seize the collateral and hold it using reasonable care but may not sell or lease it a True b False 21 A party may take a security interest in tangible things such as goods but not in intangible things such as bank accounts a True b False 22 Without an agreement of the parties there can be no security interest a True b False 23 The possessor of a piece of commercial paper always has an unconditional right to be pai a True b False 24 Three parties are involved in a draft a True b False 4 25 To be negotiable bearer paper must be indorsed and delivered to the transferee a True b False 26 Negotiation means that an instrument has been transferred to the holder by the issuer a True b False 27 A promissory note may be valid even if it does not have a specific due date a True b False 28 In a contract for the sale of goods the offer may include any terms the offeror wishes the offeree must accept on exactly those terms or reject the deal a True b False 29 Sellers can be bound by written warranties but not by oral statements a True b False 30 Under strict liability an injured consumer could potentially recover damages from the product s manufacturer and the retailer who sold the goods a True b False 31 A contract for the sale of 300 worth of decorative stone must be in writing to be enforceable a True b False 32 The same states must be named in the Choice of Law and Choice of Forum provision a True b False 33 For a modification to a contract to be valid both parties must sign it a True b False 34 A severability provision asks the court simply to delete the offending clause and enforce the rest of the contract a True b False 5 35 A force majeure clause …