Deck 30: Secured Transactions

Question 1

Jullian fails to make her monthly loan payment to the bank. She is said to be in denial.

Answer 1

False

Question 2

When perfection by possession occurs, the parties must have a written security agreement.

Answer 2

False

Question 3

The party that perfects its interest in collateral has first claim, when two parties have an interest in the same collateral.

Answer 3

True

Question 4

When a debtor uses collateral to secure a loan from a bank, a purchase-money security interest is created.

Question 5

A buyer in the ordinary course of business can take goods free of any security interest created by the seller of the goods unless the security interest is perfected, under the UCC.

Question 6

Generally, unsecured parties have priority over secured creditors.

Question 7

An interest in personal property or fixtures that secures payment or performance of an obligation is ________.

A) An approved interest.
B) A secured interest.
C) A secured transaction.
D) A debt transaction.
E) A security agreement.

Question 8

UCC ________ governs secured transactions in personal property.

A) Article 1.
B) Article 4.
C) Article 5.
D) Article 7.
E) Article 9.

Question 9

A description of the collateral does not need to be included in a security agreement.

Question 10

Value is consideration, according to the UCC.

Question 11

The property that is subject to a security interest is called vested.

Question 12

Perfection of a security interest in a motor vehicle generally occurs when the secured party files the interest with the state's Department of Motor Vehicles.

Question 13

A security interest may apply to personal property that is not yet in the debtor's possession.

Question 14

A secured transaction is a transaction in ________.

A) which the payment of a debt is guaranteed by personal property owned by the debtor
B) which the payment of a loan is made to a bank
C) which a guarantor gives collateral for any transaction
D) which a bank receives property as collateral
E) which two parties agree to a loan

Question 15

The UCC defines default as when a debtor fails to make payments on a loan.

Question 16

A bank taking possession of collateral does not have to file a financing statement in order to perfect its interest.

Question 17

A person or party that has an obligation to the secured party is a ________.

A) Creditor.
B) Debtor.
C) Secured creditor.
D) Secured debtor.
E) Transaction debtor.

Question 18

________ is the person or the party that holds the interest in the secured property.

A) A debtor
B) A ruling party
C) An approved party
D) A secured party
E) An attached party

Question 19

The creditor must perfect a security interest in the collateral of the debtor in order to become a secured party.

Question 20

The buyer can obtain the good involved free of any security interest, if a buyer purchases chattel paper in the ordinary course of business and without notice of any prior security interest.

Question 21

According to the UCC, which of the following should a financing statement list?

A) The names and addresses of all parties involved only.
B) Two items: (1) the names and addresses of all the parties involved and (2) a description of the collateral.
C) Three items: (1) the names and addresses of all the parties involved, (2) a description of the collateral, and (3) the signature of the debtor.
D) Three items: (1) the name of the financing bank, (2) the name of the debtor, and (3) a description of the collateral.
E) Three items: (1) the name of the financing bank, (2) the signature of the debtor, and (3) a description of the collateral.

Question 22

Which of the following under the UCC is a good used or bought for use primarily for personal, family, or household purposes?

A) A retail good.
B) A consumer good.
C) A pledged good.
D) A financed good.
E) An approved good.

Question 23

How long does a secured party's interest in proceeds lasts after the debtor receives the proceeds, under the UCC?

A) 5 Days
B) 10 Days
C) 30 days
D) 6 months
E) 1 year

Question 24

Which of the following is true under the UCC regarding a security interest in collateral that has been perfected in one state when the collateral is moved to another state?

A) A security interest in collateral that has been perfected in one state will generally expire immediately when the collateral is moved to another state.
B) A security interest in collateral that has been perfected in one state will generally transfer to another state for a period of four months from the date that the property is brought into the other state.
C) A security interest in collateral that has been perfected in one state will generally transfer to another state for a period of six months from the date that the property is brought into the other state.
D) A security interest in collateral that has been perfected in one state will generally transfer to another state for a period of two months from the date that the property is brought into the other state.
E) A security interest in collateral that has been perfected in one state will generally transfer to another state for a period of 30 days from the date that the property is brought into the other state.

Question 25

The term ________ is the designation for property acquired by the debtor after a security agreement covering the property is made.

A) post-dated property
B) after-acquired property
C) profits
D) post-acquired property
E) subsequently acquired property

Question 26

________ is defined as the series of legal steps taken by a secured party to protect its rights in the collateral from other creditors who wish to have their debts satisfied through the same collateral.

A) Perfection
B) Filing
C) Noticing
D) Financing noticing
E) Arrangement

Question 27

When Brenn, who is a debtor, sells collateral that she has, Brenn will receive ________, something that is exchanged for collateral.

A) after-acquired property
B) subsequent-acquired property
C) proceeds
D) collateral
E) post-financed funds

Question 28

The transfer of collateral to the secured party for the purpose of perfection is called the ________

A) purpose
B) pledge
C) endeavor
D) detriment
E) collateral

Question 29

Which of the following is the term associated with a creditor becoming the secured party who has a security interest in the collateral when this event happens?

A) Attachment.
B) Transformation.
C) Perfecting.
D) Reformation.
E) Protecting.

Question 30

Which of the following would not be considered collateral?

A) Farm products.
B) Equipment.
C) Documents of title.
D) Proceeds.
E) Indispensable paper.

Question 31

Which statement is correct regarding a secured party's interest in proceeds when a debtor sells collateral?

A) A secured party automatically has an interest in proceeds.
B) A secured party has an interest in proceeds only if the proceeds are taken into the possession of the secured party.
C) A secured party has an interest in proceeds only if a financing statement is filed on the proceeds.
D) A secured party has an interest in proceeds only if the secured party has a signed statement from the debtor granting an interest in proceeds.
E) The secured party may not acquire a security interest in proceeds.

Question 32

Which of the following was the result in Bayer CropScience, LLC v. Stearns Bank Nat'l Ass'n., the case in the text in which the court assessed proceeds after a lawsuit involving Bayer CropScience and the introduction of genetically altered rice that damaged equipment?

A) The court ruled that some portion of the proceeds were attributable to damage to Texana's equipment which was subject to Stearns' security interest.
B) The court ruled that Bayer CropScience had perfected their interest with another bank and did not have an obligation to share proceeds with Stearns.
C) The court ruled that the case be remanded to the lower court to settle the issues of who perfected their interest first.
D) The court ruled that the creditor was entitled to the full settlement proceeds, without consideration of the amount of the debt, on the basis that it had a secured interest.
E) The court ruled that Stearn had not properly perfected their security interest and therefore had no rights to any of the proceeds.

Question 33

Which of the following is true regarding what may constitute collateral?

A) Goods, indispensable paper, intangibles, and proceeds may all constitute collateral.
B) Goods, indispensable paper, and intangibles may constitute collateral, but proceeds may not.
C) Goods may constitute collateral, but indispensable paper, intangibles, and proceeds may not.
D) Goods and proceeds may constitute collateral, but indispensable paper and intangibles may not.
E) Goods and intangibles may constitute collateral, but indispensable paper and proceeds may not.

Question 34

Veronica and Helen are discussing the definition of "goods" and have come up with the following list. Which of the following have they incorrectly classified as a good?

A) Consumer goods.
B) Farm products.
C) Documents of title.
D) Inventory.
E) Equipment.

Question 35

Assuming Constantine files a financing statement with the correct agency, how long is a financing statement valid under the UCC?

A) 30 days
B) 90 days
C) 1 year
D) 5 years
E) 10 years

Question 36

A purchase-money security interest is formed ________

A) when a debtor uses a credit card to buy collateral
B) when a bank attaches a debtor's account to the collateral
C) when a second debtor buys the collateral
D) when a debtor uses borrowed money from the secured party to buy the collateral.
E) when parties stipulate in a contract that they want a purchase-money security interest

Question 37

Which of the following is the agreement by which the debtor gives the secured interest to the secured party?

A) Collateral agreement.
B) Secured interest.
C) Debtor agreement.
D) Secured transaction.
E) Security agreement.

Question 38

Which of the following is true regarding a security interest in consumer goods?

A) A financing statement must be filed in order to perfect a security interest in consumer goods.
B) Under federal consumer protection legislation, a seller may not hold a security interest in consumer goods.
C) Under most state laws, a seller may not hold a security interest in consumer goods.
D) When a creditor sells a consumer good to a debtor on a credit basis, the security interest perfects automatically.
E) When a creditor sells a consumer good to a debtor on a credit basis, the security interest is perfected by the seller's possession.

Question 39

A pledge is the transfer of ________ to a secured party for the purposes of perfection.

A) accounts
B) collateral
C) documents
D) allonge
E) rights

Question 40

Which of the following is true in regards to a dispute when two parties have given a loan over collateral?

A) The party with the secured interest will have priority in repossessing the collateral over the party with the unsecured interest.
B) Both parties will be able to claim an interest in the collateral and a court will allocate the percentage owed to both.
C) The first to file a lawsuit is the one who receives the collateral.
D) The first to physically reposse the collateral will be the winning party.
E) The banks will assess allocation between themselves based on who was the first to secure the loan on the collateral.

Question 41

Which of the following is false regarding a creditor's rights to collateral upon a debtor's default?

A) If a debtor defaults on a loan, the secured party can take possession of the collateral so long as the secured party does not breach the peace.
B) Under the UCC, the secured party can sell, lease, or transfer the collateral in any commercially reasonable method.
C) Regardless of where the collateral is sold, the secured party must strive to receive the best price for the collateral.
D) Instead of disposing of the collateral, the secured party may choose to keep the collateral in full or partial satisfaction of the debt.
E) A debtor in default has no rights in regard to whether collateral is retained by the secured party or sold.

Question 42

Thomas and Pauline are two secured parties. Neither party has perfected their interests. Assuming a purchase-money security interest is not involved, who would prevail in a dispute?

A) The party who attached its interest first will prevail.
B) The party who loaned money first will prevail.
C) Thomas and Pauline will divide the proceeds from the sale of the collateral evenly between them.
D) The party who loaned the most money on the collateral has priority.
E) The party who first notified the debtor of a missed payment has priority.

Question 43

[Overextended Debtor] Michael bought a flat screen television for his living room from ABC Electronics, and financed the purchase through ABC Electronics. Later, Michael bought a boat, a new car, and an expensive engagement ring for his girlfriend, and found he was unable to continue making payments on the television. The manager of ABC Electronics called 60 days after the sale and asked Michael to return the television. Michael refused on the basis that ABC Electronics never perfected its interest in the television. He also explained that he had later granted a secured interest in the television along with his other goods to XYZ Credit in return for a loan. No financing statement was filed on behalf of ABC Electronics although XYZ Credit, with no knowledge of any interest of ABC Electronics, did file a financing statement.
What is the term for the type of agreement Michael had with ABC Electronics?

A) A pledged money interest.
B) A collateralized interest.
C) A purchase-money security interest.
D) A security perfection interest.
E) A cash deferred security interest.

Question 44

________ is a writing that indicates both a monetary obligation and a security interest in specific goods.

A) Chattel paper
B) Control paper
C) Transactional paper
D) Secured paper
E) Bank paper

Question 45

[Dirty Laundry] Morgan planned to start her own laundry business. She borrowed $60,000 from ABC Bank. She used her car and home as collateral and also gave ABC Bank an interest in any property she acquired after the security interest was made. The bank perfected its interest. Morgan purchased a new computer from XYZ Electronics for use in her business. XYZ obtained a purchase money security interest on the computer. Morgan was having problems with cash flow and failed to make payments to XYZ Electronics on the new computer. After the sale and before Morgan stopped making payments, XYZ had filed a financing statement. The electronics store sought to repossess the computer, but the bank opposed that. Morgan's business picked up and she was able to completely repay her loan to the bank and to XYZ. She requested that the bank discontinue its security interest, but the bank did not do so as requested by Morgan, and still had not done so 45 days after Morgan had paid off the loan and requested that the bank terminate its interest.
Which statement is correct regarding priority in rights to the computer?

A) The bank had priority because the computer was considered after-acquired property properly covered by the initial security interest.
B) XYZ Electronics had priority because XYZ Electronics had a purchase-money security interest in the computer.
C) XYZ Electronics had priority only if XYZ Electronics perfected its security interest within 10 days of the purchase.
D) XYZ Electronics had priority only if XYZ Electronics perfected its security interest within 20 days of the purchase.
E) The bank had a security interest in the computer because it perfected its security interest before XYZ Electronics did so.

Question 46

Anna runs a business in Oklahoma and purchases goods to stalk her store every month from her supplier Glenn in Michigan. Anna would be considered a(n)

A) buyer in the typical course of business.
B) approved buyer.
C) approved buyer in the ordinary course of business.
D) buyer in the ordinary course of business.
E) exchanger in the typical course of business.

Question 47

An instrument is a writing that demonstrates ________.

A) security interest in collateral
B) a right to payment of money
C) a right to secure collateral
D) an authorization
E) a notarization

Question 48

[Dirty Laundry] Morgan planned to start her own laundry business. She borrowed $60,000 from ABC Bank. She used her car and home as collateral and also gave ABC Bank an interest in any property she acquired after the security interest was made. The bank perfected its interest. Morgan purchased a new computer from XYZ Electronics for use in her business. XYZ obtained a purchase money security interest on the computer. Morgan was having problems with cash flow and failed to make payments to XYZ Electronics on the new computer. After the sale and before Morgan stopped making payments, XYZ had filed a financing statement. The electronics store sought to repossess the computer, but the bank opposed that. Morgan's business picked up and she was able to completely repay her loan to the bank and to XYZ. She requested that the bank discontinue its security interest, but the bank did not do so as requested by Morgan, and still had not done so 45 days after Morgan had paid off the loan and requested that the bank terminate its interest.
________ property is the proper designation for any equipment subject to the bank's security interest that Morgan obtains after the initial loan agreement.

A) After-acquired
B) Post-dated
C) Cover
D) Post-security
E) Valid

Question 49

Which of the following is true if a buyer of a consumer good subject to purchase-money security interest later sells the good?

A) The security interest immediately terminates.
B) The security interest passes to the new buyer.
C) Regardless of whether the buyer is aware of the security interest, so long as the buyer purchases the good for his or her personal use, the security interest terminates if the sale to the new buyer is made before the original secured party files a financial statement.
D) As long as the buyer is not aware of the security interest, purchases the good for his or her personal use, and purchases the good before the secured party files a financing statement, the new buyer obtains the good free of the security interest.
E) As long as the buyer is not aware of the security interest, purchases the good for personal use or resale, and purchases good before the secured party files a financial statement, the buyer obtains the good free of the security interest.

Question 50

Which of the following terms is not defined in the UCC

A) purchase money security interest
B) collateral
C) default
D) attachment
E) perfection

Question 51

If Michael, ABC Electronics, and XYZ Credit have a dispute regarding entitlement to the television, who is likely to win and why?

A) ABC Electronics will prevail because, as a seller of consumer goods, it did not need a perfected security interest in order to prevail against other creditors.
B) ABC Electronics will prevail because it had a perfected security interest.
C) XYZ Credit will prevail because although ABC Electronics had a perfected security interest, it did not file a financing statement.
D) XYZ Credit will prevail because a luxury good was involved and, although ABC Electronics had a perfected security interest, it did not file a financing statement as required within 10 days of the sale.
E) XYZ Credit will prevail because it had a perfected security interest in a greater amount of goods than did ABC Electronics.

Question 52

[Dirty Laundry] Morgan planned to start her own laundry business. She borrowed $60,000 from ABC Bank. She used her car and home as collateral and also gave ABC Bank an interest in any property she acquired after the security interest was made. The bank perfected its interest. Morgan purchased a new computer from XYZ Electronics for use in her business. XYZ obtained a purchase money security interest on the computer. Morgan was having problems with cash flow and failed to make payments to XYZ Electronics on the new computer. After the sale and before Morgan stopped making payments, XYZ had filed a financing statement. The electronics store sought to repossess the computer, but the bank opposed that. Morgan's business picked up and she was able to completely repay her loan to the bank and to XYZ. She requested that the bank discontinue its security interest, but the bank did not do so as requested by Morgan, and still had not done so 45 days after Morgan had paid off the loan and requested that the bank terminate its interest.
Which statement is correct regarding the effect of XYZ Electronics filing a financing statement?

A) The interest was perfected.
B) The interest was guaranteed.
C) The interest was secured.
D) The interest was acknowledged.
E) There was no effect because there can only be one security interest, and the bank already had that.

Question 53

What is the time period in which a debtor has the right to object to retention of collateral to satisfy a debt?

A) 24 hours
B) 48 hours
C) 3 days
D) 20 days
E) 30 days

Question 54

[Overextended Debtor] Michael bought a flat screen television for his living room from ABC Electronics, and financed the purchase through ABC Electronics. Later, Michael bought a boat, a new car, and an expensive engagement ring for his girlfriend, and found he was unable to continue making payments on the television. The manager of ABC Electronics called 60 days after the sale and asked Michael to return the television. Michael refused on the basis that ABC Electronics never perfected its interest in the television. He also explained that he had later granted a secured interest in the television along with his other goods to XYZ Credit in return for a loan. No financing statement was filed on behalf of ABC Electronics although XYZ Credit, with no knowledge of any interest of ABC Electronics, did file a financing statement.
Which statement is true regarding Michael's statement that the security interest of ABC was not perfected?

A) Michael is wrong because the security interest perfected immediately.
B) Michael is correct because the security interest perfected when he was still in possession of the collateral 30 days after the purchase.
C) Michael is correct because the security interest perfected when he was still in possession of the collateral 60 days after the purchase.
D) Michael is correct because no financing statement was filed.
E) Michael is correct only because in the case of luxury goods, a financing statement must be filed within 20 days of the sale in order for the seller to establish perfection.

Question 55

Which of the following is an amendment to a financing statement that states that the debtor has no obligation to the secured party?

A) An ending statement.
B) A termination statement.
C) A bind-up statement.
D) A release statement.
E) A reversion statement.

Question 56

[Overextended Debtor] Michael bought a flat screen television for his living room from ABC Electronics, and financed the purchase through ABC Electronics. Later, Michael bought a boat, a new car, and an expensive engagement ring for his girlfriend, and found he was unable to continue making payments on the television. The manager of ABC Electronics called 60 days after the sale and asked Michael to return the television. Michael refused on the basis that ABC Electronics never perfected its interest in the television. He also explained that he had later granted a secured interest in the television along with his other goods to XYZ Credit in return for a loan. No financing statement was filed on behalf of ABC Electronics although XYZ Credit, with no knowledge of any interest of ABC Electronics, did file a financing statement.
What is the proper designation for the television, under the UCC?

A) It is a consumer good
B) It is a pledge
C) It is an allonge
D) It is unsecured property
E) It is equipment

Question 57

What did the court conclude in the Case Opener, the case in which the plaintiff claimed that her repossessed vehicle was not sold in a commercially reasonably manner and that she was wrongly left with a deficiency?

A) That showing that the sale grossed more than 50% of the vehicle's value established that the sale was commercially reasonable.
B) That good faith in selling the vehicle established commercial reasonableness as a matter of law.
C) That the secured party failed to prove that its sale of the vehicle conformed with established industry practices.
D) That there was no obligation on the seller to engage in a commercially reasonable sale because the plaintiff was in default.
E) That while not every aspect of the sale had to be commercially reasonable, the seller failed to show that sufficient advertisement of the sale was accomplished, thereby rendering the sale itself commercially unreasonable.

Question 58

Which of the following is true regarding the court's opinion in Price Auto Sales, Inc. v. Sanders, the case in the text in which a debtor sued an auto company for injuries sustained during an attempt to repossess his automobile?

A) The court ruled that the debtor had no right to protest the repossession.
B) The court ruled that repossession was not completed and that a breach of the peace occurred in the process of the repossession.
C) The court ruled that, because repossession had been completed, there could be no breach of the peace as a matter of law.
D) The court ruled that a debtor's protest does not affect whether or not repossession is complete, and it is not relevant to whether or not a breach of the peace occurred
E) The court ruled that once repossession is complete, it is not relevant whether or not a breach of the peace occurred.

Question 59

Which of the following is true regarding priority in a dispute involving a purchase-money security interest in business goods other than inventory?

A) The purchase-money security interest has priority over any other secured perfected interests as long as the purchase-money security interest is perfected within 20 days of the debtor's possession of the collateral.
B) The purchase-money security interest has priority over any other secured perfected interests as long as the purchase-money security interest is perfected within 30 days of the debtor's possession of the collateral.
C) The purchase-money security interest has priority over any other secured perfected interests as long as the purchase-money security interest is perfected within 40 days of the debtor's possession of the collateral.
D) The purchase-money security interest has priority over any other secured perfected interests as long as the purchase-money security interest is perfected within 45 days of the debtor's possession of the collateral.
E) The purchase-money security interest has priority over any other secured perfected interests as long as the purchase-money security interest is perfected within 60 days of the debtor's possession of the collateral.

Question 60

Which of the following is true regarding the manner in which a secured party may sell collateral?

A) The sale must be in a private sale only.
B) The sale must be in a public sale only.
C) The sale must be in an acknowledged sale.
D) The sale may be in a private sale, public sale, or an acknowledged sale.
E) The sale may be in either a private sale or a public sale.

Question 61

The owner of Potter's Pottery also purchased two laptop computers under the name "Potter's Pottery" from BigBox Store for use in the store. Does BigBox Store's security interest automatically perfect?

A) Yes, even though the laptops are used primarily for business, the laptops are consumer goods.
B) Yes, because the laptops are consumer goods, and, for public policy reasons, the security interest in them will always perfect automatically.
C) No, the laptops are purchased for business use and the secured party would have to file a financing statement to perfect the security interest in them.
D) No, the laptops are purchased for business use and the secured party would have to make a notation on the title to perfect the security interest in them.
E) No, even though the laptops are used primarily for business, the laptops are consumer goods and the secured party would have to file a financing statement to perfect the security interest in them.

Question 62

Which statement is correct regarding any compensation that Morgan is entitled to from the bank because the bank did not timely file notice that it had no interest in her goods?

A) She may recover $100 from the bank.
B) She may recover $200 from the bank.
C) She may recover $500 from the bank.
D) She may recover $1,000 from the bank.
E) She may not recover anything unless she incurred damages; and, in that event, she may recover the amount of her compensatory damages.

Question 63

[Repo] Meredith sells used cars and trucks. She sold a used pick-up truck to Jill and a used convertible to Caleb. She properly obtained a security interest in both vehicles. Both Jill and Caleb defaulted on payments owed to Meredith for the vehicles. Meredith was under the belief that her only option was to take possession of the collateral. She decided to repossess Jill's pick-up at Jill's house. Meredith slipped into Jill's driveway after midnight and started the truck's engine. Jill immediately ran out and confronted Meredith. Meredith shoved Jill away and drove off in the pick-up truck. Meredith was able to repossess Caleb's convertible in a public parking lot with no altercation with him.
Which statement is correct about the creation of a security interest?

A) The debtor has no actual rights to the collateral until final payment is made.
B) The secured party must give a consumer good to get the security agreement.
C) A written agreement is necessary to create a security interest.
D) To create a security interest, either a written agreement is necessary or the secured party is in possession of the collateral.
E) The secured party must be a bank.

Question 64

[Pottery Store] A&B Bank loaned money to Potter's Pottery Store to finance the purchase of several kilns, a delivery van, and pottery wheels. In return, Potter's granted a security interest to A&B Bank for "all equipment of Potter's". The kiln manufacturer also wants to place a security interest on the kilns and the delivery van for Potter's Pottery.
Before perfecting its interest, if the kiln manufacturer examines the van's title but does not find any notation of a secured interest, which of the following statements is true?

A) The kiln manufacturer would have to check if any other creditors filed financing statements with the state in order to determine if any other creditors have priority.
B) The kiln manufacturer would have to check if any other creditors filed financing statements with the state in order to determine if any other creditors have priority, and if not, the kiln manufacturer would have priority if it filed its financial statement.
C) The kiln manufacturer would have to check if any other creditors filed financing statements with the state in order to determine if any other creditors have priority, and if not, the kiln manufacturer would have priority if it made a notation on the van's title.
D) The kiln manufacturer can assume that no other creditors have a secured interest in the vehicle and thus it would have priority if it perfected its interest by making a notation on the van's title.
E) The bank's interest in the van would take priority over the kiln manufacturer because it filed first.

Question 65

[Pottery Store] A&B Bank loaned money to Potter's Pottery Store to finance the purchase of several kilns, a delivery van, and pottery wheels. In return, Potter's granted a security interest to A&B Bank for "all equipment of Potter's". The kiln manufacturer also wants to place a security interest on the kilns and the delivery van for Potter's Pottery.
If the bank wants to have priority in its loan to the pottery store, how should the bank perfect its interest?

A) The interest is perfected automatically because the collateral are goods.
B) The bank would have to file a financing statement for all items.
C) The bank would have to make a notation on the certificate of title for the van and would have to file a financing statement on the other items.
D) The bank could make a notation on the certificate of title for the van and on the ownership documents of the other items because they are goods used to conduct business.
E) The bank would have to make a notation on the certificate of title for the van, but the other items would be perfected automatically.

Question 66

Which of the following methods of perfection should a bank use if it wishes to ensure it will not have to expend efforts in repossession?

A) Perfection by possession.
B) Perfection by filing.
C) Perfection by implication.
D) Perfection by collateral in interest.
E) A bank cannot ensure it will not have to repossess the collateral.

Question 67

Does the fact that the financing statement was filed four years ago affect the bank's claim?

A) No, under the UCC, a financing statement is valid indefinitely.
B) No, under the UCC, a financing statement is valid for five years.
C) Yes, under the UCC, a financing statement is valid for three years.
D) Yes, under the UCC, a financing statement is valid for two years.
E) Yes, under the UCC, a financing statement is valid for three years and can be automatically renewed for two year increments.

Question 68

The bank should have done what to terminate its interest in any property belonging to Morgan?

A) The bank should have filed a termination statement within 20 days.
B) The bank should have filed a termination statement within one month.
C) The bank should have filed a waiver statement within 20 days.
D) The bank should have filed a waiver statement within one month.
E) The bank should have filed a stopgap statement by the time Morgan's next payment was due had she not paid off the loan.

Question 69

Trevor goes to the AutoShop and purchases a new truck on credit for his business. He signs an agreement with AutoShop under which the truck is the collateral for AutoShop's loan to him. Trevor then goes to First Bank and signs an agreement for a loan so that he can buy supplies for his business. Do either of these agreements involve a purchase-money security interest?

A) The agreement with AutoShop is a purchase-money security interest.
B) The agreement with First Bank is a purchase-money security interest.
C) Both agreements are a purchase-money security interest.
D) Neither of the agreements involved a purchase-money security interest.
E) The agreement with AutoShop is a primary purchase-money security interest and the agreement with First Bank is a secondary purchase-money security interest.

Question 70

[Repo] Meredith sells used cars and trucks. She sold a used pick-up truck to Jill and a used convertible to Caleb. She properly obtained a security interest in both vehicles. Both Jill and Caleb defaulted on payments owed to Meredith for the vehicles. Meredith was under the belief that her only option was to take possession of the collateral. She decided to repossess Jill's pick-up at Jill's house. Meredith slipped into Jill's driveway after midnight and started the truck's engine. Jill immediately ran out and confronted Meredith. Meredith shoved Jill away and drove off in the pick-up truck. Meredith was able to repossess Caleb's convertible in a public parking lot with no altercation with him.
Which statement is correct regarding Meredith's repossession of the pick-up truck?

A) Meredith breached the peace in recovering the collateral.
B) Meredith did not breach the peace in recovering the collateral unless Jill can establish the existence of actual injuries.
C) Meredith did not breach the peace because she was entitled to repossess the vehicle and any injury sustained by Jill was her own fault.
D) Meredith breached the peace, but only because she did not provide Jill with prior notification that she was coming to repossess the collateral.
E) Meredith breached the peace, but only because she acted to repossess the collateral after 10:00 p.m. at night.

Question 71

Where should the bank have filed the financing statement?

A) The state in which the hang glider is registered.
B) Any state that accepts the UCC.
C) The state in which the branch where Monte took out his loan is located.
D) The state in which the bank is headquartered.
E) The state in which Monte resides.

Question 72

[Hang Glider] Monte borrows money from A&Z Bank and the bank has a secured interest in Monte's hang glider. The bank files a financing statement which identifies Dryden, another debtor of the bank, as the debtor for this transaction. Monte also borrows money from his neighbor, and he uses the hang glider as collateral on that transaction. His neighbor was unaware that Monte had used the hang glider as collateral for the bank loan. Monte fails to make his payment to the bank. The bank claims it should take possession of the hang glider because it has a perfected interest. When Dryden learns about the bank's interest in the hang glider, he calls that bank and tells them he has first dibs on the hang glider because their loan to Monte was not public knowledge. The bank tells Dryden that they have priority because they perfected their security interest in the hang glider when they filed the financing statement four years ago.
Is Dryden correct that the bank does not have priority because the loan was not public knowledge?

A) Yes, private persons should not be expected to search for notification of secured interests.
B) No, once the financing statement is filed, the statement becomes public knowledge and parties considering making a loan to another party are expected to search for notification of secured interests.
C) Yes, although financial statements become public knowledge, only banks and businesses, but not private persons, are expected to search for notification of secured interests.
D) Yes, financial statements are not generally considered public knowledge.
E) No, although financial statements are generally not considered public knowledge, private persons are expected to search for notification of secured interests.

Question 73

[Repo] Meredith sells used cars and trucks. She sold a used pick-up truck to Jill and a used convertible to Caleb. She properly obtained a security interest in both vehicles. Both Jill and Caleb defaulted on payments owed to Meredith for the vehicles. Meredith was under the belief that her only option was to take possession of the collateral. She decided to repossess Jill's pick-up at Jill's house. Meredith slipped into Jill's driveway after midnight and started the truck's engine. Jill immediately ran out and confronted Meredith. Meredith shoved Jill away and drove off in the pick-up truck. Meredith was able to repossess Caleb's convertible in a public parking lot with no altercation with him.
Which statement is correct regarding Meredith's belief that her only option was to take possession of the collateral?

A) Meredith was correct regardless of whether a vehicle or another type of good was involved.
B) Meredith was correct, but only because a vehicle was involved.
C) Meredith was incorrect, because only when a vehicle is involved, a party must disregard the collateral and proceed to judgment.
D) Meredith was incorrect because regardless of whether a vehicle or another type of good was involved, Meredith only had the right to ignore the collateral and proceed to judgment.
E) Meredith was incorrect because regardless of whether a vehicle or another type of good was involved, Meredith had the right to either take possession of the collateral or ignore rights in the collateral and proceed to judgment.

Question 74

Jo purchases a car from Used-Carz and signs a security agreement that identifies Jo's "blue car" as the collateral. If Jo is unable to make payments, how likely would Used-Carz be in a suit to recover the collateral if Jo defaults on her payments?

A) Very likely because Jo's car is identified as collateral.
B) Unlikely, because the collateral is not clearly described in the written agreement.
C) Very likely, because, although the collateral is not clearly described in the written agreement, creditors cannot lose rights to collateral.
D) Very likely, because collateral need not be identified in a security agreement.
E) Unlikely, because Used-Carz must first attempt to repossess the car.

Question 75

Which method(s) of perfection must be used for stocks and bonds?

A) Automatic perfection.
B) Perfection by filing.
C) Perfection by possession.
D) Perfection by filing or perfection by possession.
E) Any method of perfection is acceptable for stocks and bonds.

Question 76

[Hang Glider] Monte borrows money from A&Z Bank and the bank has a secured interest in Monte's hang glider. The bank files a financing statement which identifies Dryden, another debtor of the bank, as the debtor for this transaction. Monte also borrows money from his neighbor, and he uses the hang glider as collateral on that transaction. His neighbor was unaware that Monte had used the hang glider as collateral for the bank loan. Monte fails to make his payment to the bank. The bank claims it should take possession of the hang glider because it has a perfected interest. When Dryden learns about the bank's interest in the hang glider, he calls that bank and tells them he has first dibs on the hang glider because their loan to Monte was not public knowledge. The bank tells Dryden that they have priority because they perfected their security interest in the hang glider when they filed the financing statement four years ago.
Is the bank correct that it has priority because it has a perfected interest in the hang glider?

A) Yes, because it filed a financing statement, thus perfecting its interest.
B) Yes, even though the financing statement is filed under a correct name, the filing of the statement perfected its interest in the hang glider.
C) No, because the financing statement is filed under an incorrect name, thus perfection is likely not effective.
D) No, it takes more than simply filing a financing statement for perfection to be effective.
E) Yes, because banks are excused from minor errors in financial documents, and thus the incorrect name in the financing statement does not affect perfection.

Question 77

What is the likely effect on perfection when a financing statement is filed under an incorrect name?

A) Perfection is effective if the secured party's name is incorrect, but not if the debtor's name is incorrect.
B) Perfection is effective if the debtor's name is incorrect, but not if the secured party's name is incorrect.
C) Perfection is effective if the error involves the name of a corporation, but not if the error involves the name of an individual.
D) The perfection is likely not effective.
E) There is usually no effect on perfection.

Question 78

Which of the following purchases can be perfected automatically?

A) A television purchased for an individual's home, a delivery van a corporation purchases to deliver product, and a certificate of deposit.
B) A television purchased for an individual's home and a delivery van a corporation purchases to deliver product, but not a certificate of deposit.
C) A television purchased for an individual's home, but not a delivery van a corporation purchases to deliver product nor a certificate of deposit.
D) A delivery van a corporation purchases to deliver product, but not a television purchased for an individual's home nor a certificate of deposit.
E) A television purchased for an individual's home, a delivery van a corporation purchases to deliver product, and a certificate of deposit must be perfected by filing.

Question 79

[Repo] Meredith sells used cars and trucks. She sold a used pick-up truck to Jill and a used convertible to Caleb. She properly obtained a security interest in both vehicles. Both Jill and Caleb defaulted on payments owed to Meredith for the vehicles. Meredith was under the belief that her only option was to take possession of the collateral. She decided to repossess Jill's pick-up at Jill's house. Meredith slipped into Jill's driveway after midnight and started the truck's engine. Jill immediately ran out and confronted Meredith. Meredith shoved Jill away and drove off in the pick-up truck. Meredith was able to repossess Caleb's convertible in a public parking lot with no altercation with him.
Which statement is correct regarding Meredith's taking possession of Caleb's convertible?

A) Meredith breached the peace because she did not provide Caleb prior notification that she was going to repossess the vehicle.
B) Meredith breached the peace because she took the vehicle from a public lot.
C) Meredith breached the peace unless she can establish that Caleb gave her prior permission to repossess the vehicle in a public lot.
D) Meredith did not breach the peace because she acted in a reasonable manner in taking the collateral.
E) Meredith did not breach the peace because Caleb sustained no documented physical injury.

Question 80

Assume the bank's filing of the financing statement constitutes a proper perfection, what type of interest does Dryden have in the hang glider?

A) Dryden would have a claim against the hang glider only as an unsecured creditor.
B) Dryden would have no claim for the hang glider.
C) Dryden would be a secured creditor.
D) Both Dryden and the bank would have an equivalent claim to the hang glider.
E) Dryden would have a claim against the hang glider based on the amount of the loan.