Essay 1

Question 1

What does “attachment” require?

Answer 1

Attachment requires three things:

1. the parties must agree that the security interest attach, evidenced by an authenticated security agreement describing the collateral or by the creditor’s possession or control of the collateral;
2. value must be given by the secured party; and
3. the debtor must have rights in the collateral.

Attachment occurs once these three requirements coexist.

Question 2

What is required for a security agreement to sufficiently describe the collateral?

Answer 2

It must make the identity of the collateral objectively determinable. No supergeneric descriptions are allowed.

Question 3

What is a “future advance” clause

Answer 3

A security agreement may provide that future loans between the parties will be secured by current or after-acquired collateral

Question 4

Why is perfection SO important?

Answer 4

It is necessary to achieve priority over other creditors

Question 5

How are security interests in tangible goods not used for household or farming purposes (i.e., inventory and equipment) perfected?

Answer 5

May be perfected by filing a financing statement.

Question 6

When is perfection complete?

Answer 6

At the later of filing or attachment

Question 7

How is priority determined when creditors have a perfected security interest in the same collateral?

Answer 7

The first to file or perfect has priority.

Question 8

When does an after-acquired property clause attach to property?

Answer 8

The security interest will attach to the collateral as soon as the debtor acquires it.

Question 9

When does a PMSI exist?

Answer 9

A PMSI exists when a creditor advances funds that are used by the debtor to purchase specific goods.

Question 10

When does a PMSI attach?

Answer 10

A PMSI usually attaches when the debtor receives the goods.

Question 11

Does a PMSI have “superpriority”?

Answer 11

Yes. A PMSI has superpriority over prior perfected security interests in circumstances dictated by the type of good in question.

Question 12

What priority does a PMSI in goods other than inventory or livestock have?

Answer 12

A PMSI in goods other than inventory or livestock has priority over conflicting security interests if the PMSI is perfected within 20 days after the debtor receives the goods.

Question 13

Who has priority between a buyer of goods and a party with a perfected security interest in the same goods?

Answer 13

A buyer in the ordinary course of business (BIOC) will prevail.