R7 - Secured Transactions

Question 1

Attachment requires:

Answer 1

(i) the parties agree to create a security interest - evidenced by either an authenticated security agreement or the creditor’s taking possession or control of the collateral, (ii) the debtor must have the rights in the collateral, and (iii) the creditor must give value.

There is no requirement that the security agreement be filed.

Question 2

Under the Secured Transactions Article of the UCC, which purchaser will own consumer goods free of a perfected security interest in goods?

Answer 2

A consumer who purchases the goods in the ordinary course of business (underwear from the store)

Question 3

Because a HDC of a negotiable instrument has priority over a prior perfected security interest, the best way to perfect a security interest in a negotiable instrument is to:

Answer 3

Take possession of it, because taking possession of the instrument prevents a later person from become a holder in due course (HDC)

Question 4

Article 9 of the UCC specifically excludes:

Answer 4

Landlord’s liens, the assignment of a claim for wages, and the sale of chattel paper as a part of the sale of business out of which it arose.

Question 5

Once filed, a financing statement is effective for an indefinite period of time provided:

Answer 5

Continuation statements are timely filed.

Question 6

Under the Secured Transactions Article of the UCC, which type of collateral must a financing statement be filed in order to perfect a purchase money security interest?

Answer 6

Inventory. If the debtor has possession of the inventory (which is almost always the case) the creditor cannot perfect by possession or control, therefore a financing statement must be filed to perfect.