Uniform Commercial Code

Question 1

Fungible goods

Answer 1

goods that cannot be distinguished. ex. canned food.

Question 2

Tender

Answer 2

the goods have arrived and are available for the buyer to pickup.

Question 3

FAS

Answer 3

Free alongside vessel - title and risk of loss pass upon seller’s delivery of conforming goods alongside the vessel.

Question 4

FOB

Answer 4

Free on board - title and risk of loss pass upon delivery of conforming goods to the carrier.

Question 5

CIF

Answer 5

cost, insurance, freight - title and risk of loss pass from seller to buyer when the seller delivers the goods to the carrier, obtains a negotiable bill of lading covering transportation to a destination, procures an insurance policy, and forwards to buyer all documents.

Question 6

cash and delivery

Answer 6

requires the buyer to pay cash upon tender of the goods. if goods are shipped COD then the timing of the buyers right to inspection is affected.

Question 7

privity

Answer 7

a relation between two parties that is recognized by law, such that as blood, lease, or service

Question 8

sold as is

Answer 8

a written contract that disclaims both the implied warranty of merchantability and the implied warranty or fitness

Question 9

Implied warranty of fitness

Answer 9

the seller must know the purpose of the buyers use of the goods and the buyer must purchase the goods in reliance on the sellers selection or recommendation of goods to fulfill that purpose.

Question 10

Does a COD cash on delivery contract allow the buyer to inspect the goods before paying?

Answer 10

No. but once the buyer pays and inspects the goods, the buyer may then reject if they are nonconforming

Question 11

Replevin

Answer 11

a procedure whereby seized goods may be provisionally restored to their owner pending the outcome of an action to determine the rights of the parties concerned. Only available if the buyer cannot cover as a remedy.

Question 12

If a buyer accepts a nonconforming good,

Answer 12

they can deduct from the price still due or any part of the damages suffered by the buyer.

Question 13

Is an instrument payable in cash and securities negotiable?

Answer 13

no

Question 14

an instrument payable to the order of cash is negotable?

Answer 14

Yes

Question 15

Drawee

Answer 15

the party to whom a check is presented for payment. ie. a check is a draft drawn on a bank, making the bank the drawee

Question 16

Drawer

Answer 16

account holder on the check, which is a draft drawn on a bank

Question 17

For an instrument to be negotiable, when must it be payable?

Answer 17

on demand or at a definite time. A payment date need not be specified so long as the note is payable on demand.

Question 18

What does a draft need to be negotiable?

Answer 18

needs to be payable to order or bearer

Question 19

Does a check have to be payable to order or bearer?

Answer 19

No

Question 20

Whom does a promissory note need to be payable to in order to be negotiable?

Answer 20

pay to order or bearer

Question 21

Whom does a CD need to be payable to in order to be negotiable?

Answer 21

pay to order or bearer

Question 22

what does signing only your name on the back of a check do?

Answer 22

converts order paper to bearer paper and can be transferred by anyone at anytime by delivery only without restrictions and without limitations on liability

Question 23

what kind of indorsement is signing ones name

Answer 23

Blank, nonrestrictive, unqualified.

Question 24

if a promissory note is nonnegotiable, can a transferee became a holder in due course?

Answer 24

no

Question 25

Blank indorsement

Answer 25

specify no particular holder to receive payment

Question 26

Special indorsements

Answer 26

specify a person to whom payment or to whose order payment is to be made. requires the sig indorsement of the person specified plus delivery to negotiate the instrument further.

Question 27

qualified indorsement

Answer 27

“without recourse”

Question 28

restrictive indorsements

Answer 28

conditional- payment is conditional upon the happening of an event
prohibitive- purports to prohibit further transfer of the instrument
for deposit or collection - makes bank a collection agent of the indorser

Question 29

Holder in due course

Answer 29

• holder must take the instrument for value
• take the instrument in good faith
• take the instrument without notice the instrument is overdue or has been previously dishonored or of any claim or defense.

Question 30

surety

Answer 30

a person who takes responsibility for another persons performance of an undertaking

Question 31

if the holder does not present a check to the bank without 30 days and the bank fails…

Answer 31

the drawer is discharged from liability for the difference between what the FDIC will cover and the original amount

Question 32

Who has primary liability on an instrument

Answer 32

parties who sign a negotiable instrument

Question 33

who has secondary liability on an instrument?

Answer 33

drawers of a draft or check

Question 34

what kind of defense can be used against a holder in due course?

Answer 34

universal defense

Question 35

What are universal defenses?

Answer 35

forgery
infancy
fraud in the execution

Question 36

When does a perpetual letter of credit expire?

Answer 36

automatically 5 years after its stated date, or if none is stated, the date of issue.

Question 37

Once a letter of credit is presented to the issuer, what must the issuer do to avoid liability?

Answer 37

must honor the letter or give proper notice of defect within 7 business days of presentment

Question 38

are domestic letters of credit revocable?

Answer 38

yes

Question 39

are international letters of credit revoable?

Answer 39

only if agreed

Question 40

duly

Answer 40

following proper procedure

Question 41

what does the secured transactions law apply to?

Answer 41

it applies to any security interest in personal property including sale of accounts and chattel paper, but it does not apply to an artisans or mechanics lien

Question 42

Under the secured transactions article of the UCC, what is needed to create enforceable security interest

Answer 42

• security agreement must exist
• secured party must give value
• the debtor must have rights in the collateral

Question 43

what must be present for a security interest to attach?

Answer 43

• underlying debt/obligation
• either security agreement or possession of the collateral by the creditor
• debtor must have interest in the property

Question 44

what does not need to be in writing to be enforceable?

Answer 44

a security agreement where the collateral is in the possession of the secured party

Question 45

what needs to be in writing

Answer 45

A security agreement collateralizing a debt of LESS than $500.
A security agreement where the collateral is highly perishable or subject to wide price fluctuations.
A security agreement involving a purchase money security interest.

Question 46

what does not need to be included in the original filed financing statement

Answer 46

the amount of the collateral or the debt

Question 47

if inventory is used as collateral, is a filing required for perfection?

Answer 47

yes

Question 48

to whom must a seller sell to to not have to file to perfect a security interest.

Answer 48

if they have a purchase money security interest in consumer goods. the collateral must be in consumer goods and purchased by a consumer for household use.

Question 49

what must be included when filing to perfect a security interest?

Answer 49

-contains the names of the debtor and secured party and a description of the collateral

Question 50

when does a purchase money security interest in noninventory collateral have priority?

Answer 50

if it is perfected before the debtor takes possession or within 20 days thereafter

Question 51

If the debtor pays 60% of the purchase price of the item and then defaults, can the creditor keep the item?

Answer 51

no, must sell

Question 52

subrogation

Answer 52

the substitution of one person or group by another in respect of a debt or insurance claim, accompanied by the transfer of any associated rights and duties.

Question 53

exoneration

Answer 53

the action of officially absolving someone from blame; vindication.

Question 54

reimbursement

Answer 54

right of surety to collect from principal debtorx