Secured Transactions

Question 1

A security agreement is…

Answer 1

an agreement that creates or provides for a security interest.

Question 2

A security interest is not enforceable unless:

Answer 2

it has been attached to the collateral.

Question 3

A security interest attaches to the collateral if:

Answer 3

(1) Value is given by the secured party;

(2) The debtor has rights in the collateral;

(3) There is a security areement that either:
(i) is authenticated and describes the collateral; OR
(ii) is unauthenticated but where the secured party has possession or control over the collateral.

Question 4

After-aquired collateral clauses are generally….

Answer 4

valid in Virginia.

Question 5

When a debtor is a corporation organized under Virginia law, the usual means of perfecting a security interest is….

Answer 5

filing a financing statement with the State Corporation Commission.

Question 6

When two parties with perfected security interests are competing for the same collateral, priority normally goes to the one who was either….

Answer 6

1. First to perfect; or
2. First to file a valid financing statement.

Question 7

A purchase money security interest is a security interest in goods or software where ….

Answer 7

(1) The value given allows the debtor to acquire the collateral; and
(2) The collateral acquired secures the loan.

Question 8

When collateral is inventory, a PMSI will have super priority only if the creditor….

Answer 8

(1) Sends a special written notice to other security interest holders, and

(2) Takes steps to assure that its PMSI will be perfected at the time the debtor receives possession.

Question 9

Some types of collateral will automatically perfect when a security interest attaches, with no filing, possession, or control required. The most common example is….

Answer 9

A PMSI in consumer goods.

Question 10

Consumer goods are goods used for….

Answer 10

personal, family, or household use.

Question 11

In Virginia, an after-acquired collateral clause is ineffective as to…

Answer 11

consumer goods acquired more than 10 days after the creditor has given value.

Question 12

Generally, unless a secured party authorizes a sale free and clear of its security interest, a buyer takes…

Answer 12

subject to a perfected security agreement.

Question 13

A buyer in the ordinary course of business takes free of a security interest created by the buyer’s seller if:

exception to general rule

Answer 13

(1) The buyer buys goods from a merchant;

(2) In the ordinary course of the merchant’s business;

(3) In good faith and without knowledge that the sale violates the rights of other’s interests; and

(4) The seller is in the business of selling goods of the kind.

(applies even if they have knowledge of the security interest)

Question 14

If a buyer doesn’t meet the BITOCOB exception and remains subject to a creditor’s security interest, in the case of a default, the creditor….

Answer 14

has the right to resort to Article 9 remedies, including the right to repossess the collateral.

Question 15

In the case of of loan, the secured party has given value by….

Answer 15

promising to make the loan, before the loan is ever extended.

e.g., a Bank gives value when it promises to make a loan to a debtor.

Question 16

For tangible property that is not perfected outside of Article 9, such as motor vehicles, the default means of perfection is….

Answer 16

filing.

Question 17

An enforceable security interest is created by:

Answer 17

1. Attachment
2. Perfection.

Question 18

Perfection occurs for the purpose of…

Answer 18

putting the world on notice of the security interest.

Question 19

Filing, for the purpose of Article 9 perfection, occurs by ….

Answer 19

the secured party filing a financing statement in the jurisdiction where the debtor is located.

Question 20

If a debtor is a corporation located within Virginia, the secured party can record its filing statement….

Answer 20

with the State Corporation Commission anywhere in Virginia.

Question 21

A secured party’s financing statement (need/need not) be signed by the debtor.

Answer 21

Need NOT. It is solely created to put others on notice of the security interest.

Question 22

If a secured party has perfected a security interest, they should have….

Answer 22

priority over all subsequent creditors.

Question 23

Every mechanic who alters or repairs any article of personal property at the request of the owner has….

Answer 23

a lien for his just and reasonable charges and may retain possession until such charges are paid.

Question 24

A mechanic’s lien only has priority over other secured parties up to…

Answer 24

$1,000.

Question 25

If a PMSI for consumer goods or equipment is perfected within 20 days of possession, the secured creditor will have a…..

Answer 25

super priority.

Question 26

Generally, a lien creditor will have priority over…

Answer 26

unperfected creditors or creditors that perfect after the judgment lien is awarded.

Question 27

A retention or reservation of title by a seller or goods, notwithstanding shipment or delivery to the buyer, is limited to a…

Answer 27

reservation of a security interest.

Question 28

After default, a secured party may repossess collateral without judicial process, if it may….

Answer 28

proceed without breaching the peace.

Question 29

Prior to repossessing or disposing of collateral, a secured party must….

Answer 29

give reasonable notice to the debtor.

Question 30

Notice will be considered reasonable if, before a secured party respossesses or disposes of collateral, they provide such notice within….

Answer 30

10 days.

Question 31

If a debtor does not recieve reasonable notice of a secured party’s intent to dispose of collateral, they may seek to recover….

Answer 31

actual damages from the secured party.

[the amount of any loss caused by a failure to comply with the Art. 9]

Question 32

After receiving proper notification from a Bank that a Buyer should make payments to them instead of the Seller, due to a default, the Buyer should….

Answer 32

make payments to the Bank.

Question 33

A buyer ordinarily cannot acquire better title than…

Answer 33

his seller’s.

Question 34

If a seller does not have good title, he may not….

Answer 34

convey good title.

Question 35

In making a sale, a seller warrants that they have…

Answer 35

good title and the right to transfer.

Question 36

If a seller breaches their warranty to good title, the buyer may recover….

Answer 36

all that he paid, plus incidental and consequential damages.

Question 37

Nonpossessory liens on farm products are created by statute in favor of persons providing…

Answer 37

goods, services, or rental land to farmers.

Question 38

A debtor whose collateral has been respossessed may redeem it only by tendering….

Answer 38

the entire balance due on the loan, plus expenses of repossession.

Question 39

Timing of notice of a sale by a repossessing creditor must be…

Answer 39

reasonable.