Question 1

The most common method of perfecting a security interest under Article 9 is filing a completed financing statement.

Accepted Answer

A) True 
 B)False

Question 2

Bill lends Harvey $1,500 and the loan is secured by Harvey's furniture.If Bill files a financing statement on January 30,2012 how long will it be effective?

Accepted Answer

A) Until July 30, 2012. 
B) Until January 30, 2017. 
C) Until January 30, 2022, if a continuation statement is filed within six months prior to expiration 
D) Both (b) and (c). 
A) Until July 30, 2012. 
B) Until January 30, 2017. 
C) Until January 30, 2022, if a continuation statement is filed within six months prior to expiration 
D) Both (b) and (c).

Question 3

A security interest:

Accepted Answer

A) is an interest only in personal property to secure payment or performance of an obligation. 
B) is effective against third parties, but not the debtor, when it "attaches." 
C) may arise in fixtures under UCC Article 9. 
D) in fixtures, even if perfected, will not have priority over a mortgage in the real property to which the goods are attached. 
A) is an interest only in personal property to secure payment or performance of an obligation. 
B) is effective against third parties, but not the debtor, when it "attaches." 
C) may arise in fixtures under UCC Article 9. 
D) in fixtures, even if perfected, will not have priority over a mortgage in the real property to which the goods are attached.

Question 4

Generally,when may a security interest be perfected in collateral?

Accepted Answer

A) By the secured party's filing a financing statement in the designated public office. 
B) By the secured party's taking or retaining possession of the collateral. 
C) Automatically, on the attachment of the security interest. 
D) Temporarily, for a period specified by the Code 
E) All of the above, depending on the type of collateral. 
A) By the secured party's filing a financing statement in the designated public office. 
B) By the secured party's taking or retaining possession of the collateral. 
C) Automatically, on the attachment of the security interest. 
D) Temporarily, for a period specified by the Code 
E) All of the above, depending on the type of collateral.

Question 5

Jill owns and operates a donut shop.Under the Code,the flour,sugar,and other goods used by Jill to make donuts are classified as:

Accepted Answer

A) farm products. 
B) fixtures. 
C) consumer goods. 
D) inventory. 
A) farm products. 
B) fixtures. 
C) consumer goods. 
D) inventory.

Question 6

Elmer agreed to act as the conditional guarantor of collection on a debt of $50,000 that Fred owed to Gloria.Fred paid Elmer a premium to serve as surety.If Fred defaults on the debt,what are Gloria's rights against Elmer?

Accepted Answer

Fred has only agreed to act as

Question 7

The UCC defines a debtor's "rights in collateral" in Article 9.

Accepted Answer

A) True 
 B)False

Question 8

A car buyer in the ordinary course of business will take free and clear of a security interest created by any person who owned the automobile prior to the dealer.

Accepted Answer

A) True 
 B)False

Question 9

What party(ies)is/are involved in a suretyship relationship?

Accepted Answer

A) The principal debtor. 
B) An ancillary bailee. 
C) Principal bailee. 
D) All of the above. 
A) The principal debtor. 
B) An ancillary bailee. 
C) Principal bailee. 
D) All of the above.

Question 10

Mr.Chickilini is a surety for Wayne on a debt owed to Melvin.If Wayne fails to pay,what is Mr.Chickilini's defense to avoid payment of the debt?

Accepted Answer

Mr.Chickilini's defenses might include:

Question 11

Darlene uses her computer 75 percent of its usage time for her business and 25 percent of its usage time for personal and family purposes.Under Article 9,the computer would be classified as equipment.

Accepted Answer

A) True 
 B)False

Question 12

Diane,who is seventeen years old,purchased an auto from Elvira on credit.Florence agreed to act as surety and signed a written surety agreement.At the time of purchase,Diane specifically asked Elvira about the condition of the car's motor and was told that it had just been replaced with a new one and was in fine condition.This was blatantly untrue,because Elvira knew it was in terrible shape and would only last a short time.The auto has now stopped running and Diane refuses to make any more payments.Elvira is now proceeding against Diane and Florence.What defenses,if any,are available to (a)Diane and (b)Florence?

Accepted Answer

(a)Diane is a minor.She may assert her m

Question 13

Upon the surety's payment of the principal debtor's entire obligation,the surety gets no rights.

Accepted Answer

A) True 
 B)False

Question 14

A primary reason for requiring a surety is to reduce the creditor's risk of loss.

Accepted Answer

A) True 
 B)False

Question 15

Attachment must occur in order to make a security interest enforceable against the debtor and against third parties.

Accepted Answer

A) True 
 B)False

Question 16

If the principal debtor defaults,the surety has rights against the principal debtor,third parties,and cosureties.These rights would include:

Accepted Answer

A) exoneration. 
B) reimbursement. 
C) subrogation. 
D) contribution. 
E) All of the above. 
A) exoneration. 
B) reimbursement. 
C) subrogation. 
D) contribution. 
E) All of the above.

Question 17

Under Article 9 of the UCC,a pledge is:

Accepted Answer

A) the delivery of personal property to a creditor as security for the payment of a debt. 
B) a requirement that the secured party and the debtor agree to certain collateral. 
C) an equipment transfer before a forced sale. 
D) a form of indispensable paper. 
A) the delivery of personal property to a creditor as security for the payment of a debt. 
B) a requirement that the secured party and the debtor agree to certain collateral. 
C) an equipment transfer before a forced sale. 
D) a form of indispensable paper.

Question 18

A PMSI is created in goods when a seller retains a security interest in the goods sold on credit by a security agreement.

Accepted Answer

A) True 
 B)False

Question 19

"Perfection" is required in order for the secured party to enforce rights against the debtor.

Accepted Answer

A) True 
 B)False

Question 20

"Value" under Article 9 of the UCC is defined as including:

Accepted Answer

A) consideration under contract law. 
B) a binding commitment to extend credit. 
C) antecedent debt. 
D) All of the above. 
A) consideration under contract law. 
B) a binding commitment to extend credit. 
C) antecedent debt. 
D) All of the above.

Exam 37: Secured Transactions and Suretyship

The most common method of perfecting a security interest under Article 9 is filing a completed financing statement.

Bill lends Harvey $1,500 and the loan is secured by Harvey's furniture.If Bill files a financing statement on January 30,2012 how long will it be effective?

A security interest:

Generally,when may a security interest be perfected in collateral?

Jill owns and operates a donut shop.Under the Code,the flour,sugar,and other goods used by Jill to make donuts are classified as:

Elmer agreed to act as the conditional guarantor of collection on a debt of $50,000 that Fred owed to Gloria.Fred paid Elmer a premium to serve as surety.If Fred defaults on the debt,what are Gloria's rights against Elmer?

The UCC defines a debtor's "rights in collateral" in Article 9.

A car buyer in the ordinary course of business will take free and clear of a security interest created by any person who owned the automobile prior to the dealer.

What party(ies)is/are involved in a suretyship relationship?

Mr.Chickilini is a surety for Wayne on a debt owed to Melvin.If Wayne fails to pay,what is Mr.Chickilini's defense to avoid payment of the debt?

Darlene uses her computer 75 percent of its usage time for her business and 25 percent of its usage time for personal and family purposes.Under Article 9,the computer would be classified as equipment.

Upon the surety's payment of the principal debtor's entire obligation,the surety gets no rights.

A primary reason for requiring a surety is to reduce the creditor's risk of loss.

Attachment must occur in order to make a security interest enforceable against the debtor and against third parties.

If the principal debtor defaults,the surety has rights against the principal debtor,third parties,and cosureties.These rights would include:

Under Article 9 of the UCC,a pledge is:

A PMSI is created in goods when a seller retains a security interest in the goods sold on credit by a security agreement.

"Perfection" is required in order for the secured party to enforce rights against the debtor.

"Value" under Article 9 of the UCC is defined as including:

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