To Ensure an Unsecured Line of Credit Is Used Solely

question 39

Multiple Choice

To ensure an unsecured line of credit is used solely for short-term purposes, the loan arrangement frequently includes which one of the following?

• A)Cleanup period
• B)Grace period
• C)Revolver
• D)Factoring arrangement
• E)Lien on the borrower's inventory

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Definitions:

Preexisting Duty

An obligation that a party is already legally required to perform, which cannot serve as consideration for a new contract.

Executory Contract

A contract that has not yet been fully performed or completed by one or more parties.

Executory

Pertaining to a contract or agreement in which not all obligations or terms have yet been fulfilled by the involved parties.

Partially Performed

Refers to a contract or agreement that has been started but not completed, fulfilling some but not all obligations.