Question 1

The provinces across Canada have each enacted a stature called the Personal Property Security Act. These acts use a common form of registration to record security interests. This system enables a province to

Accepted Answer

E

Question 2

Where security devices are agreed to in advance as terms in the contract, they are often called

Accepted Answer

When security devices such as collateral or assets are agreed to in advance as terms in the contract, they are known as consensual security interests.

Question 3

The Hendersons have purchased their new riding lawnmower on a conditional sale contract. They have just been notified that the contract was assigned to a finance company. The Hendersons may now

Accepted Answer

The assignment of the contract to a finance company does not change the Hendersons' rights or defenses under the original contract. They can still assert the same defenses against the finance company that they could have asserted against the retailer.

Question 4

Jack and Reba purchased some furniture on a conditional sale contract. This couple carries no insurance on their household goods. The furniture is stolen one Sunday afternoon. Who will most likely take the loss?

Accepted Answer

In a conditional sale contract, the buyer typically assumes the risk of loss once they take possession of the goods, even if the title has not yet fully transferred. Since Jack and Reba have no insurance, they bear the loss.

Question 5

Regarding the remedies of a conditional seller, she

Accepted Answer

The answer of Regarding the remedies of a conditional seller,...

Question 6

What is the difference between a chattel mortgage and a conditional sale contract?

Accepted Answer

The main difference between a chattel mortgage and a conditional sale contract is the security used. In a chattel mortgage, any chattels can be used as security, while in a conditional sale contract, the property sold is the security. The other options are not accurate differences between the two. For example, both a conditional sale and a chattel mortgage can create personal obligations for the buyer; both can affect third parties and both allow the seller or chattel mortgagee to seize the goods in the event of default.

Question 7

Last Fall, Mrs. Edwards purchased two expensive dresses from Fashions Galore on a conditional sale contract, Now, five months later, she has defaulted on her payments. Fashion Galore should

Accepted Answer

Fashions Galore cannot simply repossess the dresses without a court order, as that would be considered self-help and may be illegal. They must first obtain a court order if Mrs. Edwards refuses to give up possession. Once they have the court order, they can legally repossess the dresses and sell them to recover the remaining balance owed.

Question 8

A reason that a secured lender should register its secured interest is to:

Accepted Answer

Registering a secured interest will secure the priority of the lender in the event of bankruptcy, which means that the lender will have greater rights to the collateral in comparison to other creditors. This is an important safeguard for the lender's investment in the borrower. While the other options may be true, they do not fully capture the primary benefit of registration for the lender.

Question 9

Phillip, who has a loan on his car at the bank, has placed his car on consignment at the local used car lot. His law professor tells Phillip that consignments can amount to a secured type of credit. If this is true, who is the creditor?

Accepted Answer

The answer of Phillip, who has a loan on his...

Question 10

Adam Monarch is quite well off. He is selling one of his unincorporated farms and all its equipment to young Carl Gardner. Carl has very little cash but lots of potential for being a good farmer. Adam is willing to finance the sale under the easiest of terms, yet he wants to retain the best security possible. For security, Adam will accept a combination first mortgage and

Accepted Answer

A chattel mortgage allows Adam to retain a security interest in the equipment being sold to Carl. This ensures that if Carl defaults on the loan, Adam can take possession of the equipment and sell it to recover his losses. A first mortgage on the land also gives Adam a priority claim on the property if there are any other creditors. This combination of security measures provides Adam with the best protection for his investment.

Question 11

A bill of sale can be used as an instrument of credit. Which document is the bill of sale most like when it is used as an instrument of credit?

Accepted Answer

When a bill of sale is used as an instrument of credit, it functions like a chattel mortgage. This means that the creditor takes a security interest in the item being sold and the debtor retains possession of the item. If the debtor defaults on the loan, the creditor can repossess the item to satisfy the debt.

Question 12

Regarding security devices, in a the item remains the property of the vendor until the debt is paid, whereas in a _ the property is transferred to the buyer and immediately upon default re- transferred to the vendor.

Accepted Answer

In a conditional sale, the item remains the property of the vendor until the debt is paid. In a chattel mortgage, the property is transferred to the buyer but serves as collateral for the debt. In a pledge, the possession of the item is transferred to the lender as security for the debt. Therefore, only choice C describes the scenario discussed in the question.

Question 13

An interest in property of a debtor to which a creditor may look in the event of non- payment of the debt is called

Accepted Answer

Collateral security refers to an asset or property that a creditor can claim if a debtor fails to make the required payments. This serves as a form of security for the creditor, ensuring they have a means to recover the debt owed to them.

Question 14

Some provinces have provided relief to conditional buyers by

Accepted Answer

The answer of Some provinces have provided relief to conditional...

Question 15

Under the terms of most conditional sale assignments to finance companies, the conditional seller remains liable for payment if their conditional buyers should default. This arrangement is known as

Accepted Answer

Recourse financing is a type of financing in which the lender (in this case, the finance company) has the right to seek payment from the seller (the conditional seller) if the buyer (the conditional buyer) defaults on their payment obligations. This means that the seller remains liable for payment even though they have assigned the conditional sale to the finance company.

Question 16

Which one of the following requires permission from the security holder before the item(s) used as collateral can be sold?

Accepted Answer

The answer of Which one of the following requires permission...

Question 17

This form of personal covenant must be registered pursuant to the provincial Personal Property Security Act. The recording ensures validity against a would- be purchase of secured assets. This could be in reference to

Accepted Answer

The form of personal covenant that needs to be registered under the provincial Personal Property Security Act to ensure validity against a potential purchase of secured assets is a chattel mortgage.

Question 18

It is customary in U.S. and Canadian businesses for suppliers and vendors to

Accepted Answer

Giving trade credit upon request is a common practice in U.S. and Canadian businesses, as it allows for more flexible payment terms and builds relationships with suppliers and vendors. The other options listed involve more strict measures and may not align with the typical business practices in these countries.

Question 19

If an owner sells you goods that have been pledged as security for a loan, the claim against those goods is known as

Accepted Answer

A security interest is a legal claim on collateral that has been pledged, usually to obtain a loan.

Question 20

Each of the following may create consensual security interests EXCEPT

Accepted Answer

The answer of Each of the following may create consensual...

Quiz 30: Secured Transactions