Question 1

Which of the following elements is an exception that validates a financing statement which covers goods that are to become fixtures,without it being lapsed?

Accepted Answer

A)  Name of the debtor 
B)  Name of the secured party 
C)  Description of a real estate mortgage 
D)  Description of a nonfixture

Question 2

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.

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.

Question 4

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

Question 5

Tom takes his car to be repaired at Smith Auto Garage.Tom was surprised the total of the bill and refuses to pay the total of the work performed.Smith Auto Garage holds onto Tom's car based on a Mechanic Lien.Tom stops make payments on the car to Northshore Credit Union which has a perfected security interest in Tom's car.Smith Auto Garage will get their full amount of their lien prior to Northshore Credit Union receiving funds from a sale of Tom's car.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is true about financing statements?

Accepted Answer

A)  A financing statement never includes descriptions of the real estate. 
B)  A financing statement serves as an implied notice to the world. 
C)  A financing statement is effective for a period of three years from the date of filing. 
D)  A financing statement must give the name of the secured party.

Question 7

A typewriter,which was subject to a prior UCC security interest,was delivered to Ed Fogel for repair.Fogel,who is engaged in the business of repairing typewriters,repaired the typewriter.However,the owner of the typewriter now refuses to pay for the services performed by Fogel.The state in which Fogel operates his business has a statute which gives Fogel a mechanics lien on the typewriter.Fogel's mechanics lien:

Accepted Answer

A)  takes priority over a prior perfected security interest under all circumstances. 
B)  is subject to a prior perfected purchase money security interest under all circumstances. 
C)  is subject to a prior unperfected security interest where the statute is silent as to priority. 
D)  takes priority over a prior perfected security interest unless the statute expressly provides otherwise.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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.

Question 10

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.

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.

Question 12

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.

Question 13

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.

Question 14

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

The answer of On July 1,Acledes Bank attaches and perfects...

Question 15

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.

Question 16

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

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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.

Question 19

Which of the following is a means of obtaining control over the collateral?

Accepted Answer

A)  The secured party becomes the bank's customer for the deposit account. 
B)  The debtor is the bank with which the deposit is maintained. 
C)  The bank has agreed to comply with the debtor's instructions regarding the funds in the account. 
D)  The debtor becomes the bank's customer for the deposit account.

Question 20

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.

Exam 29: Security Interests in Personal Property

Which of the following elements is an exception that validates a financing statement which covers goods that are to become fixtures,without it being lapsed?

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?

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

Which of the following is true about financing statements?

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

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

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

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?

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 buyer in the ordinary course of business is:

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

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 a means of obtaining control over the collateral?

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: