Question 1

When a debtor uses collateral to secure a loan from a bank, a purchase-money security interest is created.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is true regarding what may constitute collateral?

Accepted Answer

A)  Goods, indispensable paper, intangibles, and proceeds may all constitute collateral. 
B)  Goods, indispensable paper, and intangibles may constitute collateral, but proceeds may not. 
C)  Goods may constitute collateral, but indispensable paper, intangibles, and proceeds may not. 
D)  Goods and proceeds may constitute collateral, but indispensable paper and intangibles may not. 
E)  Goods and intangibles may constitute collateral, but indispensable paper and proceeds may not. 
A)  Goods, indispensable paper, intangibles, and proceeds may all constitute collateral. 
B)  Goods, indispensable paper, and intangibles may constitute collateral, but proceeds may not. 
C)  Goods may constitute collateral, but indispensable paper, intangibles, and proceeds may not. 
D)  Goods and proceeds may constitute collateral, but indispensable paper and intangibles may not. 
E)  Goods and intangibles may constitute collateral, but indispensable paper and proceeds may not.

Question 3

Which of the following terms is not defined in the UCC

Accepted Answer

A)  purchase money security interest 
B)  collateral 
C)  default 
D)  attachment 
E)  perfection 
A)  purchase money security interest 
B)  collateral 
C)  default 
D)  attachment 
E)  perfection

Question 4

Which statement is correct regarding a secured party's interest in proceeds when a debtor sells collateral?

Accepted Answer

A)  A secured party automatically has an interest in proceeds. 
B)  A secured party has an interest in proceeds only if the proceeds are taken into the possession of the secured party. 
C)  A secured party has an interest in proceeds only if a financing statement is filed on the proceeds. 
D)  A secured party has an interest in proceeds only if the secured party has a signed statement from the debtor granting an interest in proceeds. 
E)  The secured party may not acquire a security interest in proceeds. 
A)  A secured party automatically has an interest in proceeds. 
B)  A secured party has an interest in proceeds only if the proceeds are taken into the possession of the secured party. 
C)  A secured party has an interest in proceeds only if a financing statement is filed on the proceeds. 
D)  A secured party has an interest in proceeds only if the secured party has a signed statement from the debtor granting an interest in proceeds. 
E)  The secured party may not acquire a security interest in proceeds.

Question 5

[Pottery Store] A&B Bank loaned money to Potter's Pottery Store to finance the purchase of several kilns, a delivery van, and pottery wheels. In return, Potter's granted a security interest to A&B Bank for "all equipment of Potter's". The kiln manufacturer also wants to place a security interest on the kilns and the delivery van for Potter's Pottery.
-Before perfecting its interest, if the kiln manufacturer examines the van's title but does not find any notation of a secured interest, which of the following statements is true?

Accepted Answer

A)  The kiln manufacturer would have to check if any other creditors filed financing statements with the state in order to determine if any other creditors have priority. 
B)  The kiln manufacturer would have to check if any other creditors filed financing statements with the state in order to determine if any other creditors have priority, and if not, the kiln manufacturer would have priority if it filed its financial statement. 
C)  The kiln manufacturer would have to check if any other creditors filed financing statements with the state in order to determine if any other creditors have priority, and if not, the kiln manufacturer would have priority if it made a notation on the van's title. 
D)  The kiln manufacturer can assume that no other creditors have a secured interest in the vehicle and thus it would have priority if it perfected its interest by making a notation on the van's title. 
E)  The bank's interest in the van would take priority over the kiln manufacturer because it filed first. 
A)  The kiln manufacturer would have to check if any other creditors filed financing statements with the state in order to determine if any other creditors have priority. 
B)  The kiln manufacturer would have to check if any other creditors filed financing statements with the state in order to determine if any other creditors have priority, and if not, the kiln manufacturer would have priority if it filed its financial statement. 
C)  The kiln manufacturer would have to check if any other creditors filed financing statements with the state in order to determine if any other creditors have priority, and if not, the kiln manufacturer would have priority if it made a notation on the van's title. 
D)  The kiln manufacturer can assume that no other creditors have a secured interest in the vehicle and thus it would have priority if it perfected its interest by making a notation on the van's title. 
E)  The bank's interest in the van would take priority over the kiln manufacturer because it filed first.

Question 6

Assume the bank's filing of the financing statement constitutes a proper perfection, what type of interest does Dryden have in the hang glider?

Accepted Answer

A)  Dryden would have a claim against the hang glider only as an unsecured creditor. 
B)  Dryden would have no claim for the hang glider. 
C)  Dryden would be a secured creditor. 
D)  Both Dryden and the bank would have an equivalent claim to the hang glider. 
E)  Dryden would have a claim against the hang glider based on the amount of the loan. 
A)  Dryden would have a claim against the hang glider only as an unsecured creditor. 
B)  Dryden would have no claim for the hang glider. 
C)  Dryden would be a secured creditor. 
D)  Both Dryden and the bank would have an equivalent claim to the hang glider. 
E)  Dryden would have a claim against the hang glider based on the amount of the loan.

Question 7

Which of the following is the agreement by which the debtor gives the secured interest to the secured party?

Accepted Answer

A)  Collateral agreement. 
B)  Secured interest. 
C)  Debtor agreement. 
D)  Secured transaction. 
E)  Security agreement. 
A)  Collateral agreement. 
B)  Secured interest. 
C)  Debtor agreement. 
D)  Secured transaction. 
E)  Security agreement.

Question 8

An instrument is a writing that demonstrates ________.

Accepted Answer

A)  security interest in collateral 
B)  a right to payment of money 
C)  a right to secure collateral 
D)  an authorization 
E)  a notarization 
A)  security interest in collateral 
B)  a right to payment of money 
C)  a right to secure collateral 
D)  an authorization 
E)  a notarization

Question 9

The UCC defines default as when a debtor fails to make payments on a loan.

Accepted Answer

A) True 
 B)False

Question 10

[Repo] Meredith sells used cars and trucks. She sold a used pick-up truck to Jill and a used convertible to Caleb. She properly obtained a security interest in both vehicles. Both Jill and Caleb defaulted on payments owed to Meredith for the vehicles. Meredith was under the belief that her only option was to take possession of the collateral. She decided to repossess Jill's pick-up at Jill's house. Meredith slipped into Jill's driveway after midnight and started the truck's engine. Jill immediately ran out and confronted Meredith. Meredith shoved Jill away and drove off in the pick-up truck. Meredith was able to repossess Caleb's convertible in a public parking lot with no altercation with him.
-Which statement is correct regarding Meredith's taking possession of Caleb's convertible?

Accepted Answer

A)  Meredith breached the peace because she did not provide Caleb prior notification that she was going to repossess the vehicle. 
B)  Meredith breached the peace because she took the vehicle from a public lot. 
C)  Meredith breached the peace unless she can establish that Caleb gave her prior permission to repossess the vehicle in a public lot. 
D)  Meredith did not breach the peace because she acted in a reasonable manner in taking the collateral. 
E)  Meredith did not breach the peace because Caleb sustained no documented physical injury. 
A)  Meredith breached the peace because she did not provide Caleb prior notification that she was going to repossess the vehicle. 
B)  Meredith breached the peace because she took the vehicle from a public lot. 
C)  Meredith breached the peace unless she can establish that Caleb gave her prior permission to repossess the vehicle in a public lot. 
D)  Meredith did not breach the peace because she acted in a reasonable manner in taking the collateral. 
E)  Meredith did not breach the peace because Caleb sustained no documented physical injury.

Exam 30: Secured Transactions

When a debtor uses collateral to secure a loan from a bank, a purchase-money security interest is created.

Which of the following is true regarding what may constitute collateral?

Which of the following terms is not defined in the UCC

Which statement is correct regarding a secured party's interest in proceeds when a debtor sells collateral?

Assume the bank's filing of the financing statement constitutes a proper perfection, what type of interest does Dryden have in the hang glider?

Which of the following is the agreement by which the debtor gives the secured interest to the secured party?

An instrument is a writing that demonstrates ________.

The UCC defines default as when a debtor fails to make payments on a loan.

An Introduction to Dynamic Business Law

Business Ethics

The Us Legal System

Alternative Dispute Resolution

Constitutional Principles

International and Comparative Law

Crime and the Business Community

Tort Law

Negligence and Strict Liability

Product Liability

Liability of Accountants and Other Professionals

Intellectual Property

Introduction to Contracts

Agreement

Consideration

Capacity and Legality

Legal Assent

Contracts in Writing

Third-Party Rights to Contracts

Discharge and Remedies

Introduction to Sales and Lease Contracts

Title, Risk of Loss, and Insurable Interest

Performance and Obligations Under Sales and Leases

Remedies for Breach of Sales and Lease Contracts

Warranties

Negotiable Instruments: Negotiability and Transferability

Negotiation, Holder in Due Course, and Defenses

Liability, Defenses, and Discharge

Checks and Electronic Fund Transfers

Other Creditors Remedies and Suretyship

Bankruptcy and Reorganization

Agency Formation and Duties

Liability to Third Parties and Termination

Forms of Business Organization

Partnerships: Nature, Formation, and Operation

Partnerships: Termination and Limited Partnerships

Corporations: Formation and Financing

Corporations: Directors, Officers, and Shareholders

Corporations: Mergers, Consolidations, Terminations

Corporations: Securities and Investor Protection

Employment and Labor Law

Employment Discrimination

Administrative Law

Consumer Law

Environmental Law

Antitrust Law

The Nature of Property, Personal Property, and Bailments

Real Property

Landlord-Tenant Law

Insurance Law

Wills and Trusts

Filters