Question 1

Which section of the UCC governs the prioritization of competing security interests in collateral for secured loans?

Accepted Answer

A) 2-201 
B) 3-343 
C) 6-230 
D) 9-322 
A) 2-201 
B) 3-343 
C) 6-230 
D) 9-322

Question 2

Which of the following is true about perfection of fixtures?

Accepted Answer

A) Automatic perfection does not apply for consumer goods that are yet to become fixtures. 
B) A creditor who relies on attachment for perfection will prevail against other creditors who hold an interest in the good to which the consumer good is attached. 
C) Fixture filing is always necessary to perfect the security interest in any good. 
D) A creditor with a security interest in a consumer good that will become a fixture,obtains perfection merely by attachment of her security interest to a consumer good. 
A) Automatic perfection does not apply for consumer goods that are yet to become fixtures. 
B) A creditor who relies on attachment for perfection will prevail against other creditors who hold an interest in the good to which the consumer good is attached. 
C) Fixture filing is always necessary to perfect the security interest in any good. 
D) A creditor with a security interest in a consumer good that will become a fixture,obtains perfection merely by attachment of her security interest to a consumer good.

Question 3

Which of the following is not a way to perfect a security interest?

Accepted Answer

A) Debtor retains possession of the collateral 
B) Automatic perfection 
C) Filing a public notice of the security interest 
D) Creditor takes control of the collateral 
A) Debtor retains possession of the collateral 
B) Automatic perfection 
C) Filing a public notice of the security interest 
D) Creditor takes control of the collateral

Question 4

Where the creditor has possession of the collateral,the security agreement may be oral.

Accepted Answer

A) True 
 B)False

Question 5

Generally,a buyer in the ordinary course of business can take property free from any security interest.Which of the following buyers is an exception?

Accepted Answer

A) A person who is a consumer of durable goods 
B) A person buying inventories from a wholesaler 
C) A person buying farm products from a farmer 
D) A person who is a consumer of perishable goods 
A) A person who is a consumer of durable goods 
B) A person buying inventories from a wholesaler 
C) A person buying farm products from a farmer 
D) A person who is a consumer of perishable goods

Question 6

The two-step process for obtaining an enforceable security interest consists of attachment and perfection.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements about a buyer's right to redeem is false?

Accepted Answer

A) The buyer must tender fulfillment of all obligations secured by the collateral. 
B) The buyer must pay any expenses the secured party incurred in holding the collateral. 
C) The buyer must pay any expenses the secured party incurred in preparing the collateral for disposition. 
D) The buyer can redeem the property even after the creditor disposes of it. 
A) The buyer must tender fulfillment of all obligations secured by the collateral. 
B) The buyer must pay any expenses the secured party incurred in holding the collateral. 
C) The buyer must pay any expenses the secured party incurred in preparing the collateral for disposition. 
D) The buyer can redeem the property even after the creditor disposes of it.

Question 8

Under the UCC,for a security interest to attach,the:

Accepted Answer

A) debtor must agree to the creation of the security interest or the secured party must have possession of the property. 
B) creditor must properly file a financing statement. 
C) debtor must be denied of all rights in the collateral. 
D) creditor must take and hold the collateral. 
A) debtor must agree to the creation of the security interest or the secured party must have possession of the property. 
B) creditor must properly file a financing statement. 
C) debtor must be denied of all rights in the collateral. 
D) creditor must take and hold the collateral.

Question 9

A buyer in the ordinary course of business:

Accepted Answer

A) is subject to the security interest created by his seller. 
B) takes free from the security interest created by the secured party. 
C) takes free from the security interest created by his seller. 
D) is subject to the security interest created by the secured party. 
A) is subject to the security interest created by his seller. 
B) takes free from the security interest created by the secured party. 
C) takes free from the security interest created by his seller. 
D) is subject to the security interest created by the secured party.

Question 10

An example of chattel paper is a:

Accepted Answer

A) dock warrant. 
B) bill of lading. 
C) document of title. 
D) conditional sales contract. 
A) dock warrant. 
B) bill of lading. 
C) document of title. 
D) conditional sales contract.

Question 11

The basic priority rule for competing security interests is that the first secured party to attach wins.

Accepted Answer

A) True 
 B)False

Question 12

The debtor defaults on his agreement with the creditor,the creditor repossesses the collateral,and the creditor then sells the collateral.The creditor may retain any surplus if the amount realized on the sale exceeds the amount of the debtor's debt.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is an option for the secured creditor when the debtor defaults?

Accepted Answer

A) Transfer the collateral on to another creditor. 
B) Forget the collateral,and sue the debtor on his note or promise to pay. 
C) Sell the collateral and keep the surplus if any. 
D) Repossess the collateral and conduct a public sale without the knowledge of the debtor. 
A) Transfer the collateral on to another creditor. 
B) Forget the collateral,and sue the debtor on his note or promise to pay. 
C) Sell the collateral and keep the surplus if any. 
D) Repossess the collateral and conduct a public sale without the knowledge of the debtor.

Question 14

What are the three basic requirements for a security interest to be attached to the goods of a debtor?

Accepted Answer

There are three basic requirements for a

Question 15

Wonder Widget Company manufactures widgets that are sold to retailers.The retailers,in turn,sell these widgets to consumers for their own use.These widgets are:

Accepted Answer

A) inventory in the hands of Wonder. 
B) equipment in the hands of the consumers. 
C) equipment in the hands of the retailers. 
D) consumer goods in the hands of Wonder. 
A) inventory in the hands of Wonder. 
B) equipment in the hands of the consumers. 
C) equipment in the hands of the retailers. 
D) consumer goods in the hands of Wonder.

Question 16

Cutco Lawn Products Manufacturing Company sells 100 riding lawn mowers to the Smith Hardware Company,a retailer in the same industry.Smith pays for the mowers with a $50,000 loan from the Bass Bank.The Bank takes a security interest in the mowers to secure payment of the loan,and perfects it by filing.Later,Smith sells one of the mowers to Carl,a consumer,who buys in good faith and in the ordinary course of Smith's business.However,Carl knows that the Bank has a security interest in the mowers.Smith defaults on its loan payments,and the Bank moves to repossess all the mowers.Can it repossess the mower sold to Carl?

Accepted Answer

A) Since the Bank attached its security interest,it may repossess the mower from Carl. 
B) Since Carl bought the mower in good faith,the bank may not repossess his mower. 
C) Since Carl knew about Bass's security interest,the bank may repossess his mower. 
D) Since the mower is in Carl's possession now,the bank has no right over this third party. 
A) Since the Bank attached its security interest,it may repossess the mower from Carl. 
B) Since Carl bought the mower in good faith,the bank may not repossess his mower. 
C) Since Carl knew about Bass's security interest,the bank may repossess his mower. 
D) Since the mower is in Carl's possession now,the bank has no right over this third party.

Question 17

Bonn,a secured party,intends to sell collateral at a private sale after the debtor defaults.Which of the following statements is false?

Accepted Answer

A) The debtor has the right to redeem the collateral until Bonn actually disposes of it. 
B) As long as the debtor was given notice of the private sale,he cannot object to it,claiming that it is commercially unreasonable. 
C) Bonn must notify the debtor of the private sale. 
D) Bonn must notify the debtor of the time and place of the private sale. 
A) The debtor has the right to redeem the collateral until Bonn actually disposes of it. 
B) As long as the debtor was given notice of the private sale,he cannot object to it,claiming that it is commercially unreasonable. 
C) Bonn must notify the debtor of the private sale. 
D) Bonn must notify the debtor of the time and place of the private sale.

Question 18

Which of the following statements about security agreements is false?

Accepted Answer

A) The security agreement must reasonably describe the collateral so that it can readily be identified. 
B) The security agreement cannot require the debtor to insure the goods. 
C) The security agreement usually contains a promise by the debtor to pay certain amounts of money in a certain way. 
D) The security agreement usually specifies which events constitute a default. 
A) The security agreement must reasonably describe the collateral so that it can readily be identified. 
B) The security agreement cannot require the debtor to insure the goods. 
C) The security agreement usually contains a promise by the debtor to pay certain amounts of money in a certain way. 
D) The security agreement usually specifies which events constitute a default.

Question 19

According to the Code classifications of collateral,which of the following includes dock warrants and dock receipts?

Accepted Answer

A) Chattel paper 
B) Documents of title 
C) Deposit accounts 
D) General intangibles 
A) Chattel paper 
B) Documents of title 
C) Deposit accounts 
D) General intangibles

Question 20

Which of the following is most likely to be perfected by the secured party's possession of the collateral?

Accepted Answer

A) A security interest in inventory 
B) A security interest in consumer goods 
C) A security interest in general intangibles 
D) A security interest in equipment 
A) A security interest in inventory 
B) A security interest in consumer goods 
C) A security interest in general intangibles 
D) A security interest in equipment

Exam 29: Security Interests in Personal Property

Which section of the UCC governs the prioritization of competing security interests in collateral for secured loans?

Which of the following is true about perfection of fixtures?

Which of the following is not a way to perfect a security interest?

Where the creditor has possession of the collateral,the security agreement may be oral.

Generally,a buyer in the ordinary course of business can take property free from any security interest.Which of the following buyers is an exception?

The two-step process for obtaining an enforceable security interest consists of attachment and perfection.

Which of the following statements about a buyer's right to redeem is false?

Under the UCC,for a security interest to attach,the:

A buyer in the ordinary course of business:

An example of chattel paper is a:

The basic priority rule for competing security interests is that the first secured party to attach wins.

The debtor defaults on his agreement with the creditor,the creditor repossesses the collateral,and the creditor then sells the collateral.The creditor may retain any surplus if the amount realized on the sale exceeds the amount of the debtor's debt.

Which of the following is an option for the secured creditor when the debtor defaults?

What are the three basic requirements for a security interest to be attached to the goods of a debtor?

Wonder Widget Company manufactures widgets that are sold to retailers.The retailers,in turn,sell these widgets to consumers for their own use.These widgets are:

Bonn,a secured party,intends to sell collateral at a private sale after the debtor defaults.Which of the following statements is false?

Which of the following statements about security agreements is false?

According to the Code classifications of collateral,which of the following includes dock warrants and dock receipts?

Which of the following is most likely to be perfected by the secured party's possession of the collateral?

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