Question 1

Which of the following is a way of perfecting a security interest?

Accepted Answer

A)  Mere attachment of security interest 
B)  Filing a private notice 
C)  Creditor making a private sale of the collateral 
D)  Debtor retaining the possession of the collateral 
A)  Mere attachment of security interest 
B)  Filing a private notice 
C)  Creditor making a private sale of the collateral 
D)  Debtor retaining the possession of the collateral

Question 2

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

Question 3

Bonn, a secured party, sells collateral at a private sale to a good faith purchaser for value after the debtor defaults. Which of the following statements is true with regard to the UCC Secured Transactions Article?

Accepted Answer

A)  In all cases, the collateral will remain subject to the security interests of subordinate lien creditors. 
B)  The security interest under which the sale was made and any security interest or lien subordinate to it will be discharged. 
C)  In all cases, Bonn may not buy the collateral at a private sale. 
D)  Bonn will be entitled to receive a first priority in the sale proceeds. 
A)  In all cases, the collateral will remain subject to the security interests of subordinate lien creditors. 
B)  The security interest under which the sale was made and any security interest or lien subordinate to it will be discharged. 
C)  In all cases, Bonn may not buy the collateral at a private sale. 
D)  Bonn will be entitled to receive a first priority in the sale proceeds.

Question 4

On July 1, Acledes Bank attaches and perfects a security interest in all of the Playo Inc.'s present and after-acquired equipment. On July 15, Richard sells and delivers to 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 purch

Question 5

Edith purchases a television set from Big Al's Electronic Emporium, agreeing to pay Big Al in monthly installments on a 12-month payment plan. In order to have a perfect security interest in the television set, Big Al:

Accepted Answer

A)  must file a financing statement with the appropriate public office. 
B)  must create a field warehousing arrangement. 
C)  should have Edith sign another contract recognizing Big Al's security interest. 
D)  should not do anything as it is already perfect. 
A)  must file a financing statement with the appropriate public office. 
B)  must create a field warehousing arrangement. 
C)  should have Edith sign another contract recognizing Big Al's security interest. 
D)  should not do anything as it is already perfect.

Question 6

Why is filing a financing statement the only practical way to perfect a security interest in equipment?

Accepted Answer

Possession by the creditor is usually no

Question 7

The secured party whose interest in fixtures is perfected will have priority where the security interest is perfected prior to the time the goods become fixtures.

Accepted Answer

A) True 
 B)False

Question 8

A buyer in the ordinary course of business is:

Accepted Answer

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

Question 9

Under revised Article 9, the UCC allows a security agreement to be created by the consumer online.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

A security agreement may cover after-acquired property of the debtor.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following corresponds to the priority rule for purchase money security interest 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.

Question 13

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

Question 14

Perfection by mere attachment of the security interest does not require giving of public notice.

Accepted Answer

A) True 
 B)False

Question 15

Attachment of a security interest is a necessary condition for its perfection.

Accepted Answer

A) True 
 B)False

Question 16

In which of the following cases will perfection by attachment not be effective?

Accepted Answer

A)  The goods were sold on conditional sales contract to the consumer. 
B)  The creditor has lent money to enable a consumer to buy goods. 
C)  The consumer good is a motor vehicle. 
D)  The goods were sold on a time-payment plan to the consumer. 
A)  The goods were sold on conditional sales contract to the consumer. 
B)  The creditor has lent money to enable a consumer to buy goods. 
C)  The consumer good is a motor vehicle. 
D)  The goods were sold on a time-payment plan to the consumer.

Question 17

A security interest is said to be a property interest in the collateral.

Accepted Answer

A) True 
 B)False

Question 18

What are the three options available to a secured creditor regarding the collateral if the debtor defaults?

Accepted Answer

If the debtor defaults, the secured cred

Question 19

Samson Dsouza submits a financing statement in the year 2000 to perfect his security interest against Kevin. Later in the year 2006, Samson tries to attach the security interest in the property. Will Samson succeed in the attachment of the security interest?

Accepted Answer

A)  Samson will succeed since he has filed his financing statement. 
B)  Samson will not succeed as the financing statement has lapsed. 
C)  Samson may enforce his security interest by filing continuation statement. 
D)  The security interest will automatically be enforced. 
A)  Samson will succeed since he has filed his financing statement. 
B)  Samson will not succeed as the financing statement has lapsed. 
C)  Samson may enforce his security interest by filing continuation statement. 
D)  The security interest will automatically be enforced.

Question 20

According to the Code classifications of collateral, Investment property includes:

Accepted Answer

A)  patents, copyrights, software, and franchises. 
B)  checks, notes, drafts, and certificates of deposit. 
C)  stocks, bonds, and commodity contracts. 
D)  bills of lading, dock warrants, dock receipts, and warehouse receipts. 
A)  patents, copyrights, software, and franchises. 
B)  checks, notes, drafts, and certificates of deposit. 
C)  stocks, bonds, and commodity contracts. 
D)  bills of lading, dock warrants, dock receipts, and warehouse receipts.

Exam 29: Security Interests in Personal Property

Which of the following is a way of perfecting a security interest?

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

Bonn, a secured party, sells collateral at a private sale to a good faith purchaser for value after the debtor defaults. Which of the following statements is true with regard to the UCC Secured Transactions Article?

Edith purchases a television set from Big Al's Electronic Emporium, agreeing to pay Big Al in monthly installments on a 12-month payment plan. In order to have a perfect security interest in the television set, Big Al:

Why is filing a financing statement the only practical way to perfect a security interest in equipment?

The secured party whose interest in fixtures is perfected will have priority where the security interest is perfected prior to the time the goods become fixtures.

A buyer in the ordinary course of business is:

Under revised Article 9, the UCC allows a security agreement to be created by the consumer online.

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

A security agreement may cover after-acquired property of the debtor.

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

Perfection by mere attachment of the security interest does not require giving of public notice.

Attachment of a security interest is a necessary condition for its perfection.

In which of the following cases will perfection by attachment not be effective?

A security interest is said to be a property interest in the collateral.

What are the three options available to a secured creditor regarding the collateral if the debtor defaults?

Samson Dsouza submits a financing statement in the year 2000 to perfect his security interest against Kevin. Later in the year 2006, Samson tries to attach the security interest in the property. Will Samson succeed in the attachment of the security interest?

According to the Code classifications of collateral, Investment property includes:

The Nature of Law

The Resolution of Private Disputes

Business and the Constitution

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

Crimes

Intentional Torts

Negligence and Strict Liability

Intellectual Property and Unfair Competition

Introduction to Contracts

The Agreement: Offer

The Agreement: Acceptance

Consideration

Reality of Consent

Capacity to Contract

Illegality

Writing

Rights of Third Parties

Performance and Remedies

Formation and Terms of Sales Contracts

Product Liability

Performance of Sales Contracts

Remedies for Breach of Sales Contracts

Personal Property and Bailments

Real Property

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

Checks and Electronic Transfers

The Agency Relationship

Third-Party Relations of the Principal and the Agent

Introduction to Forms of Business Andformation of Partnerships

Operation of Partnerships and Related Forms

Partners Dissociation and Partnerships Dissolution and Winding up

Limited Liability Companies, Limited Partnerships, and Limited Liability Limited Partnerships

History and Nature of Corporations

Organization and Financial Structure of Corporations

Management of Corporations

Shareholders Rights and Liabilities

Securities Regulation

Legal and Professional Responsibilities of Auditors, Consultants, and Securities Professionals

Administrative Agencies

The Federal Trade Commission Act and Consumer Protection Laws

Antitrust: the Sherman Act

The Clayton Act, the Robinsonpatman Act, and Antitrust Exemptions and Immunities

Employment Law

Environmental Regulation

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