Business Law, 8e: Chapter 25

Chapter 25
Secured Transactions: Security Interests and Perfection:

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1. The purpose of a security interest is to secure payment.: a. True
b. False

3. Most states have adopted the 1972 version of Article 9.: a. True
b. False

4. Big Roar is a motorcycle dealership. First Federal Bank loaned Big Roar $1 million taking a security interest in all of Big Roar's equipment now owned and here after-acquired. The security agreement is void because the security interest purports to attach to equipment that Big Roar does not yet possess.: a. True
b. False

5. In Re: Cybernetic Services, Inc. involved the question of whether a patent could serve as collateral for a security interest.: a. True
b. False

6. Wells Fargo Bank loaned $100,000 to Truckco taking a security interest in one of its flat bed trailers. Truckco defaulted on the loan. The trailer was sold in a commercially reasonable manner with a $5,000 deficiency. Truckco is liable for the deficiency.: a. True
b. False

7. A security interest is a property right that enables the creditor to take possession of the property if the debtor does not pay the amount owed.: a. True
b. False

8. Attachment refers to the creation of a security interest.: a. True
b. False

9. For a security interest to attach, the creditor must file a financing statement.: a. True
b. False

10. Perfection can occur merely by possession of the collateral by the creditor.: a. True
b. False

11. A ___________ occurs when a seller sells on credit and is given a security interest in the goods.: a. floating lien.
b. security agreement.
c. purchase money security interest.
d. future transaction.

12. If the collateral is moved to another jurisdiction, the creditor:: a. is protected by the original filing.
b. must file in the new state within four months.
c. must file in the new state within thirty days.
d. may repossess the property.

13. February 15, Big Roar used his motorcycle inventory as well as any future inventory as collateral for a loan from First Bank. First Bank perfected by filing a financing statement the same day. May10, Big Roar bought 50 motorcycles from Bikes R Us, Inc. under a purchase money security interest. Bikes R Us notified First Bank of the PMSI and perfected the PMSI by filling a financing statement before delivering the motorcycles to Big Roar. Big Roar later filed for bankruptcy. As between First Bank and Bikes R Us, who has the priority to the rave runners bought on May 10?: a. First Bank. The first to file has the priority interest in the inventory.
b. Bikes R Us. In this situation the PMSI in inventory takes priority over a conflicting perfected security interest.
c. Bikes R Us and First Bank share proportionally the priority interest in the inventory.
d. Neither Bikes R Us nor First Bank have a priority interest. The employees and the IRS have superior claims.

14. A security interest will be perfected without filing when:: a. the transaction involves any consumer goods.
b. the transaction involves inventory goods.
c. the transaction involves equipment.
d. the transaction involves a purchase money security interest in consumer goods.

15. Second National Bank made a loan to Marcus and took a security interest in his car. Second National did not perfect the security agreement. Third National Bank made a loan to Marcus and also took a security interest in his car. Third Bank filed a financing statement. If Marcus fails to pay the bank, who will prevail in a dispute over the collateral?: a. Second National as its interest attached first.
b. Second National as there was automatic perfection.
c. Third National as it filed first.
d. Neither would prevail as they both would have equal interests.