TJ_Comp 20_TB_Ch32

TJ_Comp 20_TB_Ch32 - Chapter 32—NATURE OF THE...

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Unformatted text preview: Chapter 32—NATURE OF THE DEBTOR-CREDITOR RELATIONSHIP TRUE/FALSE 1. Suretyship is governed by the UCC. ANS: F TOP: AICPA BB-Legal MSC: AACSB Analytic 2. Suretyship, guaranty, and indemnity contracts all create a relationship by which one party becomes re- sponsible for the debt or undertaking of another party. ANS: F TOP: AICPA BB-Legal MSC: AACSB Analytic 3. Suretyship and guaranty transactions have the common feature of a promise to answer for the debt or default of another. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 4. A surety primarily is liable; ordinarily, a guarantor is only secondarily liable. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 5. The creditor first must proceed against the debtor before suing the surety. ANS: F TOP: AICPA BB-Legal MSC: AACSB Analytic 6. An absolute guaranty creates the same obligation as a suretyship. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 7. Under an indemnity contract, one person pays another consideration in return for a promise to pay a specified sum of money in the event that a specified loss is suffered. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 8. In most states, the statute of frauds requires that contracts of guaranty be in writing to be enforceable. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 9. In the absence of a special statute, no writing is required for contracts of suretyship or indemnity. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 10. Sound business practice dictates the use of written contracts for both surety-ships and indemnities. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 11. Surities have no rights aimed at protecting them from loss. ANS: F TOP: AICPA BB-Legal MSC: AACSB Analytic 12. If a debtor is about to leave the state, the surety may call on the creditor to take action against the debt- or. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 13. Under common law, the creditor was not required to disclose to the surety that fact that the principal was insolvent. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 14. A growing trend in modern law requires the creditor to inform the surety of matters material to the risk. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 15. Insolvency of the principal debtor discharges the surety. ANS: F TOP: AICPA BB-Legal MSC: AACSB Analytic 16. The creditor’s failure to give the surety notice of default is not a defense. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 17. A surety is discharge when the principal debtor performs their obligation under the original debt in- strument. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 18. A surety may be discharged if the creditor substitutes a different debtor. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 19. Letters of credit are a form of advance arrangement for financing....
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TJ_Comp 20_TB_Ch32 - Chapter 32—NATURE OF THE...

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