CLFP EXAM - Leasing Law UPDATED
ACTUAL Questions and CORRECT
Answers
What is Statutory Law? - CORRECT ANSWER - Includes law enacted by legislative
bodies such as state legislatures and US Congress. The Uniform Commercial Code or "UCC" is a
body of the state statutory law.
What is Regulatory Law? - CORRECT ANSWER - Consists of regulations adopted by
public bodies. Examples of regulatory law are regulations issued by the Internal Revenue Service
(IRS) or the Securities Exchange Commission (SEC). Generally regulatory laws are not binding
up the courts in the manner or statutory laws, but may be subject to broader interpretation
What is Federal Law? - CORRECT ANSWER - Encompasses laws adopted by the US
Congress such as the IRS and Bankruptcy Code. Although federal case precedent may be
important in interpreting these and other statutory laws, federal common law generally has little
application to equipment leasing and finance transactions
What is State Law? - CORRECT ANSWER - General more relevant to the day to day
leasing operations. State law include the UCC and cases interpreting it. Particular sate statutory
tax laws are also important in leasing consideration
What is Conflicts of Law? - CORRECT ANSWER - Refers to inconsistencies in laws
from state to state. Because state laws are not uniform, the concept of "conflict of laws" often
comes into play. This is the concept under which a court chooses to apply the law of one state
over another. For example,, the usury law of a given sate my hold a lease unenforceable, while
the law of another state will allow it to be enforced as written
What is "choice of law" provision? - CORRECT ANSWER - language added to lease
documents in which the lease states that the law of a particular state will be applied in any
dispute regarding the lease. Generally speaking the courts uphold the choice of law if the overall
transaction bear some "reasonable" relation" to the states law is chosen
, What is Contract Law? - CORRECT ANSWER - Generally a matter of state law.
Although certain statues are important to contract enforcement, case law plays a major role in
each state.
Requirements for a "valid enforceable contract" include "an offer and acceptance evidencing a
mutual agreement on principal terms and consideration, or something of value, given or
promised by each party."
What is Capacity? - CORRECT ANSWER - Each party must be legally able to enter into a
contract.
What is Legality? - CORRECT ANSWER - A requirement often used to prohibit
enforcements of secured financings that exceed the legal usury limit, but also available to
prohibit leases of equipment used in illegal activity, such as gambling where it is not permitted
by applicable law
What is Statute of Frauds? - CORRECT ANSWER - Provides that certain types of
contracts are not enforceable unless in writing. Example under UCC, a lease contract with
payments in excess of $1,000 are not enforceable unless written.
What is Bundle of Rights Concept? - CORRECT ANSWER - the parties have identified
specific rights listed in the contract each of which is legally enforceable. It is not uncommon for
each party's rights to conflict in some respect with others - thus legal analysis/litigation results
Where is the legal definition of a lease found? - CORRECT ANSWER - UCC Article 1-
201. Article 2A for true lease. Article 9 for secured loan
When is the first a transaction create a security interest? - CORRECT ANSWER - If the
consideration the lessee is to pay the lessor for the right to possession and use of the goods is an
obligation for the term of the lease not subject to termination by the lessee
1.) the term of the lease is equal to or greater than the remaining economic life of the goods
2) the lessee is bound to renew for economic life or own the property
ACTUAL Questions and CORRECT
Answers
What is Statutory Law? - CORRECT ANSWER - Includes law enacted by legislative
bodies such as state legislatures and US Congress. The Uniform Commercial Code or "UCC" is a
body of the state statutory law.
What is Regulatory Law? - CORRECT ANSWER - Consists of regulations adopted by
public bodies. Examples of regulatory law are regulations issued by the Internal Revenue Service
(IRS) or the Securities Exchange Commission (SEC). Generally regulatory laws are not binding
up the courts in the manner or statutory laws, but may be subject to broader interpretation
What is Federal Law? - CORRECT ANSWER - Encompasses laws adopted by the US
Congress such as the IRS and Bankruptcy Code. Although federal case precedent may be
important in interpreting these and other statutory laws, federal common law generally has little
application to equipment leasing and finance transactions
What is State Law? - CORRECT ANSWER - General more relevant to the day to day
leasing operations. State law include the UCC and cases interpreting it. Particular sate statutory
tax laws are also important in leasing consideration
What is Conflicts of Law? - CORRECT ANSWER - Refers to inconsistencies in laws
from state to state. Because state laws are not uniform, the concept of "conflict of laws" often
comes into play. This is the concept under which a court chooses to apply the law of one state
over another. For example,, the usury law of a given sate my hold a lease unenforceable, while
the law of another state will allow it to be enforced as written
What is "choice of law" provision? - CORRECT ANSWER - language added to lease
documents in which the lease states that the law of a particular state will be applied in any
dispute regarding the lease. Generally speaking the courts uphold the choice of law if the overall
transaction bear some "reasonable" relation" to the states law is chosen
, What is Contract Law? - CORRECT ANSWER - Generally a matter of state law.
Although certain statues are important to contract enforcement, case law plays a major role in
each state.
Requirements for a "valid enforceable contract" include "an offer and acceptance evidencing a
mutual agreement on principal terms and consideration, or something of value, given or
promised by each party."
What is Capacity? - CORRECT ANSWER - Each party must be legally able to enter into a
contract.
What is Legality? - CORRECT ANSWER - A requirement often used to prohibit
enforcements of secured financings that exceed the legal usury limit, but also available to
prohibit leases of equipment used in illegal activity, such as gambling where it is not permitted
by applicable law
What is Statute of Frauds? - CORRECT ANSWER - Provides that certain types of
contracts are not enforceable unless in writing. Example under UCC, a lease contract with
payments in excess of $1,000 are not enforceable unless written.
What is Bundle of Rights Concept? - CORRECT ANSWER - the parties have identified
specific rights listed in the contract each of which is legally enforceable. It is not uncommon for
each party's rights to conflict in some respect with others - thus legal analysis/litigation results
Where is the legal definition of a lease found? - CORRECT ANSWER - UCC Article 1-
201. Article 2A for true lease. Article 9 for secured loan
When is the first a transaction create a security interest? - CORRECT ANSWER - If the
consideration the lessee is to pay the lessor for the right to possession and use of the goods is an
obligation for the term of the lease not subject to termination by the lessee
1.) the term of the lease is equal to or greater than the remaining economic life of the goods
2) the lessee is bound to renew for economic life or own the property
