Law Quiz 4

True or False: Commercial paper includes checks, promissory notes, and certificates of deposit.

True

True or False: A holder, in due course, takes the instrument free of all defenses and claims.

False. A holder, in due course, takes the instrument free of all defenses and claims except those that concern its validity

True or False: A certificate of deposit is a negotiable instrument in which a bank acknowledges receiving a deposit and promises to repay the sum in the future

True

Basic types of commercial paper include:

a)Promises to pay money.

b)Orders to pay money.

c)A document of title.

d)Both A and B.

e)All of the above.

d. A document of title is a negotiable instrument but is not commercial paper.

Which of the following would be non-negotiable? 

a)Please pay to the order of Sarah $100.

b)“This promissory note is secured by my property in Pender County.”

c)“This promissory note is subject to Sarah’s graduation from college.”

d)Please pay to the order of Emily $300.

e)None of the above; they are all negotiable.

c. be careful with putting conditions

True or False: For his two dogs, Brett built a dog kennel with wood posts and wire fencing behind his house. When Brett sells his house, the kennel is a fixture that has become real property.

True

True or False: Carol opened a restaurant in an empty lease space in the City Shopping Center food court.  Carol equipped the space with ovens, shelving, glass cases, and refrigerators. When Carol’s lease is up, Carol must leave the ovens and refrigerators.

False. The ovens and refrigerators would be trade fixtures that Carol could take with her at lease end

True or False: Sheila has a drainage ditch behind her house that is described in the written deed. Sheila is not permitted to alter the ditch in any way. The drainage ditch is an easement.

True

True or False: The implied warranty of habitability guarantees that a house has no hidden defects, rendering it unsafe or unsuitable for human habitation.

True

Chris slipped on a banana peel that had fallen on the floor in the grocery store’s produce section.   If Chris sues the store, what type of law will apply? 

a)Tort law.

b)Premises liability law.

c)Breach of contract.

d)Both A and B.

e)All of the above.

d) Tort law and premises liability law

Newton owned 500 acres and leased 300 to Kelvin for farming beans. When Kelvin is working the 300 acres he leased, he is: 

a)an invitee with the right to take the bean crop as a license.

b)a lessor with the right to work the bean crop for the benefit of Newton.

c)a licensee with the right to take the bean crop as a profit.

d)none of the above.

c) a licensee with the right to take the bean crop as a profit

True or False: A landlord has no liability for injuries a tenant’s guests suffer in or on the real property

False. The general rule is that a landlord has no liability to a tenant’s guests, but landlords may be held liable for breaching certain duties, such as the duty to maintain premises or duty to guarantee a tenant’s use and quiet enjoyment of property.  

True or False: Primary duty of tenant is to pay rent

True

True or False: Constructive eviction means that tenant may terminate the lease because she has effectively been evicted due to landlord’s breach of the warranty of habitability.

True

True or False: The general rule is that landlords may not require a security deposit for greater than 10% of the lease amount.

•False. There is no general rule for this, though some states might have specific laws limiting deposit amounts.

True or False: The term “repair-and-deduct” means that landlord may repair defects and deduct costs from the security deposit.

False. Repair-and-deduct means that tenant may repair defects and deduct costs from rent after notice to landlord and opportunity to cure. 

Barb rented a house from Steven. When she tried to move in, she found the prior tenant’s furniture and trash. Barb: 

a)may terminate the lease since the landlord breached the warranty of possession.

b)must move in and pay rent, but may deduct the cost of removing the prior tenant’s furniture and trash from her rent.

c)must file a complaint with county authorities before terminating the lease.

a)may terminate the lease since the landlord breached the warranty of possession.

Jack leased a space in a shopping center from owner ABC Properties.  Jack’s customer was injured when she tripped on a very large pothole in the parking lot. Who is liable for the customer’s injury? 

a)Jack since the customer was his customer.

b)The customer since she didn’t look where she was walking.

c)ABC Properties since they are liable for maintaining common areas and failed to do so.

c)ABC Properties since they are liable for maintaining common areas and failed to do so.

MARIA

Method - is the item attached to a wall, ceiling, or floor?  (glue, cement, nails).

Adaptability - pool cover is a fixture because it goes with that pool.

Relationship - buyer, seller versus landlord, tenant.

Intention - the intention of the party when the item was attached (built-in bookcase).

Agreement – agreement between the two parties will override any other factor.

True or False: A guarantor is primarily liable for the debtor’s obligation, and the creditor can demand performance from the guarantor when the debt is due. 

•False.  A surety is primarily liable for the debtor’s obligation, and creditor can demand performance from the surety at the time the debt is due.  A guarantor is secondarily liable for the debt.

True or False: Since a surety is not the principal debtor, it has no defenses available in response to a creditor’s demand for payment.

•False. A surety may use defenses to a creditor’s demand for payment. 

True or False: A bond company is a compensated surety

True

True or False: A creditor must disclose to a surety all information about the risk involved in a particular debtor, including whether the debtor business is likely to be successful.

•False.  A creditor only has the duty to disclose material information, but information equally available to a surety (such as an opinion of success) need not be disclosed.   This is the lesson of the New Jersey Economic Development Authority v. Pavonia Restaurant, Inc case.

True or False: Foreclosure means that the mortgagor’s rights to the property are terminated.

True

True or False: A mortgage is a security interest in (or deed to) personal property

False. A mortgage is a security interest in real property

True or False: All bankruptcy proceedings begin by filing a voluntary bankruptcy petition.

False. All bankruptcy proceedings begin by filing a petition, either voluntary or involuntary, such as when creditors force a debtor into bankruptcy to reach the assets. 

True or False: Once a voluntary bankruptcy petition has been filed, the automatic stay prevents a creditor from filing suit against the debtor for repossession of the property. 

True

True or False: Chapter 11 is available only to business enterprises.

False. Chapter 11 is available to individuals and business enterprises.

Which is not part of the Brunner Test:

a)Whether the debtor has made good faith efforts to repay loans.

b)Whether the petitioner has a home.

c)Circumstances will persist for a significant period of the repayment period.

d)Based on current income, the petitioner can’t maintain a minimal standard of living.

b) Whether the petitioner has a home

True or False: A reorganization plan under Chapter 11 requires unanimous consent by all creditors before it becomes effective.

False. A reorganization plan must be confirmed by the court before it becomes effective and the court may force creditors to accept the plan.

True or False: To participate in the estate of a bankrupt debtor, unsecured creditors must file a proof of claim within a certain time, usually six months after the first meeting of creditors.  

True

Days before filing for reorganization, Bernie gave six of his properties to friends in return for an agreement that they would sell the property back to him in five years. 

Has Bernie done anything wrong? 

a)Yes, he must have sold the properties for at least $1 minimum value.

b)Yes, he engaged in a fraudulent transfer.

c)No, properties given to friends are exempt from inclusion in the bankruptcy estate.

d)None of the above.

b)Yes, he engaged in a fraudulent transfer.

In JarCo’s reorganization, the bankruptcy court forced dissenting creditors whose claims would be impaired to accept the reorganization plan. 

The court: 

a)Improperly abused its power and will be reversed on appeal.

b)Prioritized execution of the plan.

c)Engaged in a cram down.

d)none of the above.

c) Engaged in a cram down