Question 1

The Total Household Appliance store sells a refrigerator to Alvin, on the condition of making payments in installments. In this case, the store:

Accepted Answer

A)  has to file its purchase money security interest. 
B)  need not file its purchase money security interest. 
C)  has to take possession of the refrigerator. 
D)  need not attach the refrigerator. 
A)  has to file its purchase money security interest. 
B)  need not file its purchase money security interest. 
C)  has to take possession of the refrigerator. 
D)  need not attach the refrigerator.

Question 2

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 3

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 Secured Transactions Article. 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 4

For which of the following is the filing of a financing statement necessary for perfection to occur?

Accepted Answer

A)  A security interest in documents of title. 
B)  A security interest in chattel paper. 
C)  A security interest in consumer goods. 
D)  A security interest in general intangibles. 
A)  A security interest in documents of title. 
B)  A security interest in chattel paper. 
C)  A security interest in consumer goods. 
D)  A security interest in general intangibles.

Question 5

In which of the following orders are the proceeds from the sale of collateral by the secured party distributed?

Accepted Answer

A)  Debtor, creditor's debt, selling expenses, and junior interests 
B)  Selling expenses, creditor's debt, junior interests, and debtor 
C)  Creditor's debt, selling expenses, debtor, and junior interests 
D)  Junior interests, debtor, selling expenses, and creditor's debt 
A)  Debtor, creditor's debt, selling expenses, and junior interests 
B)  Selling expenses, creditor's debt, junior interests, and debtor 
C)  Creditor's debt, selling expenses, debtor, and junior interests 
D)  Junior interests, debtor, selling expenses, and creditor's debt

Question 6

Which of the following statements is true regarding a secured creditor's disposition of the collateral after the debtor's default?

Accepted Answer

A)  The debtor cannot redeem the collateral after his default. 
B)  The collateral must be disposed of by private sale. 
C)  The creditor may opt not to repossess the collateral and instead sue the debtor on his underlying obligation. 
D)  If the proceeds realized from the sale of the collateral exceed the various expenses that must be satisfied from those proceeds, the surplus goes to the creditor. 
A)  The debtor cannot redeem the collateral after his default. 
B)  The collateral must be disposed of by private sale. 
C)  The creditor may opt not to repossess the collateral and instead sue the debtor on his underlying obligation. 
D)  If the proceeds realized from the sale of the collateral exceed the various expenses that must be satisfied from those proceeds, the surplus goes to the creditor.

Question 7

Which of the following is true about possession of collateral by 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.

Question 8

With regard to a prior perfected security interest in goods for which a financing statement has been filed, which of the following parties is most likely to have a superior interest in the same collateral?

Accepted Answer

A)  A buyer in the ordinary course of business who purchased the goods from a merchant. 
B)  A subsequent buyer of consumer goods who purchased the goods from another customer. 
C)  The trustee in bankruptcy of the debtor. 
D)  Lien creditors of the debtor. 
A)  A buyer in the ordinary course of business who purchased the goods from a merchant. 
B)  A subsequent buyer of consumer goods who purchased the goods from another customer. 
C)  The trustee in bankruptcy of the debtor. 
D)  Lien creditors of the debtor.

Question 9

A _____ serves as constructive notice to the world that the creditor claims an interest in collateral that belongs to a certain named debtor.

Accepted Answer

A)  model audit 
B)  financial report 
C)  financing statement 
D)  continuation statement 
A)  model audit 
B)  financial report 
C)  financing statement 
D)  continuation statement

Question 10

The state statutory law prescribes the place where the financing statement has to be filed.

Accepted Answer

A) True 
 B)False

Question 11

Mark filed a financing statement on Daniel's collateral on March 2. However, attachment of this interest did not occur until March 4. Meanwhile, Charles, who had attached a security interest on the same collateral on March 1, filed a financing statement on March 3. Which interest has priority and why?

Accepted Answer

A)  Mark's interest has priority because he filed the security before Charles did. 
B)  Charles' interest has priority because he attached the security first. 
C)  Mark's interest has priority because his attaching was the latest. 
D)  Charles' interest has priority because his filing was the latest. 
A)  Mark's interest has priority because he filed the security before Charles did. 
B)  Charles' interest has priority because he attached the security first. 
C)  Mark's interest has priority because his attaching was the latest. 
D)  Charles' interest has priority because his filing was the latest.

Question 12

Under the UCC Secured Transactions Article, for a security interest to attach, the:

Accepted Answer

A)  debtor must agree to the creation of the security interest. 
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. 
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 13

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 14

Which of the following are automatically covered as of the time the security interest attaches to the collateral?

Accepted Answer

A)  Future advances 
B)  Loaned funds 
C)  Sale expenses 
D)  Proceeds 
A)  Future advances 
B)  Loaned funds 
C)  Sale expenses 
D)  Proceeds

Question 15

Perfection by public filing of a financing statement in the appropriate public office serves as a(n) _____ notice to the world.

Accepted Answer

A)  express 
B)  implied 
C)  constructive 
D)  public 
A)  express 
B)  implied 
C)  constructive 
D)  public

Question 16

Under the UCC, a collateral which has been sold in a private sale by a secured party to a good faith purchaser for value, after the debtor's default:

Accepted Answer

A)  may be redeemed by the debtor within 10 days after the disposition. 
B)  may be redeemed by creditors with subordinate claims. 
C)  remains subject to the security interests of subordinate lien creditors in all cases where the collateral is disposed of at a private sale. 
D)  discharges the security interest pursuant to which such sale was made and any security interest or lien subordinate thereto. 
A)  may be redeemed by the debtor within 10 days after the disposition. 
B)  may be redeemed by creditors with subordinate claims. 
C)  remains subject to the security interests of subordinate lien creditors in all cases where the collateral is disposed of at a private sale. 
D)  discharges the security interest pursuant to which such sale was made and any security interest or lien subordinate thereto.

Question 17

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 fixtures obtains perfection merely by attachment of her security interest to the 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 fixtures obtains perfection merely by attachment of her security interest to the good.

Question 18

A perfected purchase money security interest in a manufacturer's stock has priority over a conflicting security interest in the same stock if the notification states that the person expects to acquire a purchase money security interest in stock of the debtor and describes the stock. Which of the following priority rules does this statement correspond to?

Accepted Answer

A)  PMSI in non-inventory collateral 
B)  PMSI in inventory collateral 
C)  Buyer in the ordinary course of business 
D)  Artisan's and mechanic's lien 
A)  PMSI in non-inventory collateral 
B)  PMSI in inventory collateral 
C)  Buyer in the ordinary course of business 
D)  Artisan's and mechanic's lien

Question 19

A secured creditor repossesses the collateral from the debtor and sells it to satisfy the debt. Which of the following has the first claim on the proceeds of the sale?

Accepted Answer

A)  Debtor 
B)  Consequential damages suffered by the creditor due to the debtor's default 
C)  Court costs 
D)  Expenses of repossessing, storing, and selling the collateral 
A)  Debtor 
B)  Consequential damages suffered by the creditor due to the debtor's default 
C)  Court costs 
D)  Expenses of repossessing, storing, and selling the collateral

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 29: Security Interests in Personal Property

The Total Household Appliance store sells a refrigerator to Alvin, on the condition of making payments in installments. In this case, the store:

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

For which of the following is the filing of a financing statement necessary for perfection to occur?

In which of the following orders are the proceeds from the sale of collateral by the secured party distributed?

Which of the following statements is true regarding a secured creditor's disposition of the collateral after the debtor's default?

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

With regard to a prior perfected security interest in goods for which a financing statement has been filed, which of the following parties is most likely to have a superior interest in the same collateral?

A _____ serves as constructive notice to the world that the creditor claims an interest in collateral that belongs to a certain named debtor.

The state statutory law prescribes the place where the financing statement has to be filed.

Under the UCC Secured Transactions Article, for a security interest to attach, the:

Which of the following are automatically covered as of the time the security interest attaches to the collateral?

Perfection by public filing of a financing statement in the appropriate public office serves as a(n) _____ notice to the world.

Under the UCC, a collateral which has been sold in a private sale by a secured party to a good faith purchaser for value, after the debtor's default:

Which of the following is true about perfection of fixtures?

A secured creditor repossesses the collateral from the debtor and sells it to satisfy the debt. Which of the following has the first claim on the proceeds of the sale?

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

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

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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

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The Federal Trade Commission Act and Consumer Protection Laws

Antitrust: the Sherman Act

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

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