CHAPTER 27

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1. In the event of a dispute between creditors regarding which holds priority by virtue of having a security interest in a specified asset of the debtor, priority goes to

the first to have loaned money to the debtor
the first to have the debtor execute a financing statement
the first to register its financing statement
the first to issue a statement of claim
the first to file a notice of intention to proceed

2. If a lender holds a security interest in certain assets of the borrower and the borrower defaults, the lender has a right to

sue the borrower for breach of the loan agreement
seize the relevant assets and have them sold to realize collection of the debt
attempt to renegotiate the terms of the loan
all of the above
none of the above

3. The topics covered in a letter of commitment usually do not include

the repayment terms
collateral required as security
remedies available to the borrower if the lender breaches
remedies available to the lender if the borrower breaches
events that constitute default

4. Security for a loan can take the form of

an interest in real property
an interest in tangible personal property
an interest in intangible personal property
an interest in intellectual property
all of the above

5. When a company engages in business activities that cut across provincial borders,

it is subject only to the laws of its home province
it is subject only to the laws of provinces other than its home province
it is subject only to federal laws
it is subject only to municipal bylaws
none of the above

6. Susan provided a guarantee of her brother's $5,000 loan at the bank. Her brother made some bad investments and lost several thousand dollars. He went to the bank and borrowed an additional $5,000, without Susan's knowledge. Then he lost his job, and was unable to make the loan payments. The remaining balance of the loan is $9,000, and the bank has called on Susan to honour her guarantee.

Susan has to pay $5,000, because that is the amount she guaranteed
Susan has to pay $9,000, because that is the amount her brother owes
Susan has to pay whatever amount was owed when the loan was increased by $5,000
Susan does not have to pay
None of the above

7. Canuck Bank took a general security agreement to cover Build Co's. operating line of credit in January. Supply Co. has a security interest in Build Co's. truck. Supply Co. sold the truck to Build Co., and its security interest was taken as part of the sale financing arrangement in March. Both Canuck and Supply duly registered their interests. It is now June and Build Co. can't meet its financial obligations, so it sold the truck to Buy Co. Who has first claim to the truck?

Canuck Bank
Build Co.
Supply Co.
Buy Co.
the receiver

8. Smith has a loan from Rich Bank. He has been paying $500 per month, and currently owes $10,000. Rich Bank holds a collateral interest in Smith's car as security for the loan, and it includes an acceleration clause. The car is worth $12,000, and there are several potential buyers available that would pay that much for it. Smith has missed his last two payments and Rich Bank wants to enforce its rights. Rich Bank can

demand the entire balance immediately
seize the car, sell it and keep all the money
seize the car, sell it and keep the amount owing on the loan
a & b
a & c

9. Smith has a loan from Rich Bank. He has been paying $500 per month, and currently owes $10,000. Rich Bank holds a collateral interest in Smith's car as security for the loan, and it includes an acceleration clause. The car is worth $5,000, and there are several potential buyers available that would pay that much for it. Smith has missed his last two payments and Rich Bank wants to enforce its rights. In most provinces, Rich Bank can

demand the entire balance immediately
seize the car, sell it and keep the money
seize the car, sell it, keep the money, and sue for the other $5,000
a & b
a & c

10. In some provinces, retailers who have sold assets on credit are prohibited from seizing the assets even if they hold a security interest in them, if

the buyer has paid two-thirds of the loan
the buyer needs the assets for his/her work
the buyer has dependants
the lender is not a bank
the buyer files a notice of protest