Question 1

The attachment of the security interest takes place in a legal sense rather than in a physical sense.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following is true about possession of collateral by the secured party as public notice?

Accepted Answer

A) Change of possession is a convenient way for perfecting most security interests in consumer goods. 
B) Possession of collateral by the creditor is rarely executed to perfect a security interest in chattel paper and negotiable documents of title. 
C) Possession is a possible way of perfecting a security interest in inventory which is achieved through a field warehousing arrangement. 
D) Possession by the creditor is a practicable way of perfecting a security interest in equipment or farm products. 
A) Change of possession is a convenient way for perfecting most security interests in consumer goods. 
B) Possession of collateral by the creditor is rarely executed to perfect a security interest in chattel paper and negotiable documents of title. 
C) Possession is a possible way of perfecting a security interest in inventory which is achieved through a field warehousing arrangement. 
D) Possession by the creditor is a practicable way of perfecting a security interest in equipment or farm products. C

Question 3

In the case in the text,In re Lance,the court held that the credit union's security interest in the snowmobile automatically perfected because:

Accepted Answer

A) the snowmobile was a consumer good. 
B) the credit union filed a financing statement with the secretary of state. 
C) the credit union possessed the snowmobile. 
D) the credit union filed a continuation statement before the financing statement lapsed. 
A) the snowmobile was a consumer good. 
B) the credit union filed a financing statement with the secretary of state. 
C) the credit union possessed the snowmobile. 
D) the credit union filed a continuation statement before the financing statement lapsed. A

Question 4

Which of the following is the "catchall" category for Code classifications of collateral?

Accepted Answer

A) General intangibles 
B) Chattel paper 
C) Goods 
D) Instruments 
A) General intangibles 
B) Chattel paper 
C) Goods 
D) Instruments

Question 5

Which of the following statements about a creditor's right to repossess collateral is false?

Accepted Answer

A) The Code authorizes a creditor to repossess collateral when the debtor defaults. 
B) The creditor can obtain the collateral through self-help if she can obtain possession peacefully. 
C) If the collateral cannot be obtained without disturbing the peace,the creditor must go through the courts to repossess the collateral. 
D) If the collateral is intangible,the secured party can get payments made to her,even if performance has not been rendered to the debtor. 
A) The Code authorizes a creditor to repossess collateral when the debtor defaults. 
B) The creditor can obtain the collateral through self-help if she can obtain possession peacefully. 
C) If the collateral cannot be obtained without disturbing the peace,the creditor must go through the courts to repossess the collateral. 
D) If the collateral is intangible,the secured party can get payments made to her,even if performance has not been rendered to the debtor.

Question 6

Which of the following is the only form of perfection that occurs without the giving of public notice?

Accepted Answer

A) Perfection by public filing 
B) Perfection by attachment 
C) Perfection by possession 
D) Perfection by control 
A) Perfection by public filing 
B) Perfection by attachment 
C) Perfection by possession 
D) Perfection by control

Question 7

On July 1,Acledes Bank attaches and perfects a security interest in all of Playo Inc.'s present and after-acquired equipment.On July 15,Richard sells and delivers a new toy-manufacturing machine to Playo Inc.Richard attaches a security interest in the machine on July 16 and perfects it by filing on July 17.Which security interest has priority and why?

Accepted Answer

Richard's interest has priority.A purcha

Question 8

Control is the only available perfection method if the collateral is a deposit account.

Accepted Answer

A) True 
 B)False

Question 9

A security agreement may grant a creditor a security interest in the after-acquired property of the debtor.

Accepted Answer

A) True 
 B)False

Question 10

If there are conflicting security interests,but neither has been perfected,then the interest that attaches to the collateral first will have priority.

Accepted Answer

A) True 
 B)False

Question 11

Acorn Marina Inc.sells and services boat motors.On April 1,1989,Acorn financed the purchase of its entire inventory with GAC Finance Company.GAC required Acorn to execute a security agreement and financing statement covering the inventory and proceeds of sale.On April 14,1989,GAC filed the financing statement pursuant to the UCC.On April 27,1989,Acorn sold one of the motors to Mike for use in his charter business.Mike,who had once worked for Acorn,knew that Acorn regularly financed its inventory with GAC.Acorn has defaulted on its obligations to GAC.The motor purchased by Mike is:

Accepted Answer

A) subject to the GAC security interest because he should have considered the fact that GAC financed the inventory purchased by Acorn. 
B) subject to the GAC security interest because he purchased the motor for commercial use. 
C) not subject to the GAC security interest because he is regarded as a buyer in the ordinary course of Acorn's business. 
D) not subject to the GAC security interest because GAC failed to file the financing statement until more than 10 days after April 1,1989. 
A) subject to the GAC security interest because he should have considered the fact that GAC financed the inventory purchased by Acorn. 
B) subject to the GAC security interest because he purchased the motor for commercial use. 
C) not subject to the GAC security interest because he is regarded as a buyer in the ordinary course of Acorn's business. 
D) not subject to the GAC security interest because GAC failed to file the financing statement until more than 10 days after April 1,1989.

Question 12

Which of the following is not a class of goods?

Accepted Answer

A) Equipment 
B) Farm products 
C) Software 
D) Fixtures 
A) Equipment 
B) Farm products 
C) Software 
D) Fixtures

Question 13

What type of agreement is required in nearly all security interest transactions?

Accepted Answer

A) An authenticated security agreement 
B) An international depositor's agreement 
C) Foreign assignment agreement 
D) Title conveyance agreement 
A) An authenticated security agreement 
B) An international depositor's agreement 
C) Foreign assignment agreement 
D) Title conveyance agreement

Question 14

A creditor who sells consumer goods to a consumer on credit has a purchase money security interest in the goods.

Accepted Answer

A) True 
 B)False

Question 15

Safeco Corporation manufactures toys for distribution to retailers.In Safeco's hands,the toys are consumer goods.

Accepted Answer

A) True 
 B)False

Question 16

Each state specifies by statute where the financing statement has to be filed.

Accepted Answer

A) True 
 B)False

Question 17

________ refer(s)to the goods used or bought primarily for personal purposes.

Accepted Answer

A) Inventory 
B) Fixtures 
C) Consumer goods 
D) Equipment 
A) Inventory 
B) Fixtures 
C) Consumer goods 
D) Equipment

Question 18

As discussed in Giles v.First Virginia Credit Services,Inc. ,the case in the text,creditors that act improperly in repossessing collateral:

Accepted Answer

A) lose their security interest in the collateral. 
B) must return the repossessed collateral. 
C) are liable to the parties injured. 
D) lose priority in bankruptcy proceedings. 
A) lose their security interest in the collateral. 
B) must return the repossessed collateral. 
C) are liable to the parties injured. 
D) lose priority in bankruptcy proceedings.

Question 19

Carter sold a $20,000 boat to Davis on credit for personal use.As part of the deal,Davis completed an installment note payable to Carter and a security agreement giving Carter a security interest in the boat,which was attached on July 1.Carter never filed a financing statement.On August 1,Davis borrowed $15,000 from Bank,by completing a security agreement giving the Bank a security interest in the boat.This interest attached on the same day and the Bank filed a financing statement on August 6.Davis defaulted on both his installment payments to Carter and his loan obligation to the Bank.Each of these parties wants to satisfy Davis's obligation by repossessing and selling the boat.Whose security interest in the boat has priority and why?

Accepted Answer

A) Bank's interest has priority because Carter never filed a financing statement. 
B) Carter's interest has priority because his security interest was perfected before Bank's interest. 
C) Bank's interest has priority because Carter failed to attach his security interest. 
D) Bank's interest has priority because the Bank perfected the interest within ten days after Davis received the collateral. 
A) Bank's interest has priority because Carter never filed a financing statement. 
B) Carter's interest has priority because his security interest was perfected before Bank's interest. 
C) Bank's interest has priority because Carter failed to attach his security interest. 
D) Bank's interest has priority because the Bank perfected the interest within ten days after Davis received the collateral.

Question 20

Which of the following corresponds to the priority rule for purchase money security interests in inventory?

Accepted Answer

A) The PMSI has priority if it is perfected at the time the debtor receives possession of the inventory. 
B) The PMSI has priority if it is perfected within 20 days after the debtor receives possession of the inventory. 
C) The PMSI has priority if the holder of the competing security interest received notification within three years before the debtor receives the inventory. 
D) The PMSI has priority when it has been filed or perfected before the other interest on the same collateral. 
A) The PMSI has priority if it is perfected at the time the debtor receives possession of the inventory. 
B) The PMSI has priority if it is perfected within 20 days after the debtor receives possession of the inventory. 
C) The PMSI has priority if the holder of the competing security interest received notification within three years before the debtor receives the inventory. 
D) The PMSI has priority when it has been filed or perfected before the other interest on the same collateral.

Exam 29: Security Interests in Personal Property

The attachment of the security interest takes place in a legal sense rather than in a physical sense.

Which of the following is true about possession of collateral by the secured party as public notice?

In the case in the text,In re Lance,the court held that the credit union's security interest in the snowmobile automatically perfected because:

Which of the following is the "catchall" category for Code classifications of collateral?

Which of the following statements about a creditor's right to repossess collateral is false?

Which of the following is the only form of perfection that occurs without the giving of public notice?

Control is the only available perfection method if the collateral is a deposit account.

A security agreement may grant a creditor a security interest in the after-acquired property of the debtor.

If there are conflicting security interests,but neither has been perfected,then the interest that attaches to the collateral first will have priority.

Which of the following is not a class of goods?

What type of agreement is required in nearly all security interest transactions?

A creditor who sells consumer goods to a consumer on credit has a purchase money security interest in the goods.

Safeco Corporation manufactures toys for distribution to retailers.In Safeco's hands,the toys are consumer goods.

Each state specifies by statute where the financing statement has to be filed.

________ refer(s)to the goods used or bought primarily for personal purposes.

As discussed in Giles v.First Virginia Credit Services,Inc. ,the case in the text,creditors that act improperly in repossessing collateral:

Which of the following corresponds to the priority rule for purchase money security interests in inventory?

The Nature of Law

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Business and the Constitution

Business Ethics, Corporate Social Responsibility, Corporate Governance, and Critical Thinking

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Intellectual Property and Unfair Competition

Introduction to Contracts

The Agreement: Offer

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Capacity to Contract

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Product Liability

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Landlord and Tenant

Estates and Trusts

Insurance Law

Introduction to Credit and Secured Transactions

Bankruptcy

Negotiable Instruments

Negotiation and Holder in Due Course

Liability of Parties

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Introduction to Forms of Business and Formation of Partnerships

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History and Nature of Corporations

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