Question 1

Northern Drilling is an oil-drilling company that has defaulted on several of its loans.Petrogiant Oil Refining is owed $230,000 on a loan that is secured by some of Northern Drilling's equipment.This equipment is worth around $180,000.Petrogiant has repossessed the equipment pursuant to its security agreement and has notified Northern that it proposes to keep the equipment rather than sell it.Northern does not want Petrogiant to keep the equipment and wants it to be sold.Discuss the legal issues in this situation.

Accepted Answer

The answer of Northern Drilling is an oil-drilling company that...

Question 2

Which of the following is true about security agreements and financing statements?

Accepted Answer

A)  These are two terms for essentially the same document. 
B)  Both must be filed in order to perfect a security agreement. 
C)  Both must exist in order for a security interest to attach. 
D)  The financing statement gives constructive notice to the world of the existence of the related security agreement. 
E)  The security agreement is unenforceable until a financing statement has been filed.

Question 3

A security interest can attach to the property prior to the debtor having an interest in the property.

Accepted Answer

A) True 
 B)False

Question 4

A secured party may cure a default by taking possession of the debtor's collateral.

Accepted Answer

A) True 
 B)False

Question 5

Unless otherwise agreed,a security agreement automatically gives the creditor rights in the proceeds of the collateral.

Accepted Answer

A) True 
 B)False

Question 6

A perfected security interest will take priority over an unperfected security interest even if the unperfected security interest attached first.

Accepted Answer

A) True 
 B)False

Question 7

The parties are free to define the term "default" in their security agreement.

Accepted Answer

A) True 
 B)False

Question 8

A secondhand buyer of consumer goods that were subject to a purchase money security interest in the hands of the original buyer takes those goods free of the purchase money security interest:

Accepted Answer

A)  under no circumstances 
B)  so long as the original creditor perfected by automatic perfection 
C)  so long as the original creditor perfected by filing a financing statement 
D)  if the original creditor did not file a financing statement and the secondhand buyer does not have actual or constructive notice of the security interest 
E)  in all circumstances

Question 9

A "buyer in the ordinary course of business" who purchases goods from a merchant takes those goods free of any perfected or unperfected security interest in that merchant's inventory.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following persons can defeat a perfected security interest?

Accepted Answer

A)  a buyer in the ordinary course of business 
B)  certain buyers of secondhand consumer goods when a financing statement has not been filed 
C)  people with artisan's or mechanic's liens 
D)  A,B,and C 
E)  A and B only

Question 11

Ajax Corporation borrowed $50,000 from National Bank,giving National a security interest in its factory equipment.The agreement stated that the equipment would be security for this $50,000 loan and any future loans that National made to Ajax.National filed a valid financing statement.Over the next several months,Ajax borrowed another $100,000 from National.No additional financing statements were filed.Ajax has not made any payments on its loans from National.Ajax defaults on these loans.National wants to foreclose on the collateral.Assuming this security agreement is valid and perfected,how much of National's debt is secured?

Accepted Answer

A)  None,because this was not a purchase money situation. 
B)  Only the first $50,000 because financing statements were not filed on the last $100,000. 
C)  Only the first $50,000 because future advances clauses are not valid. 
D)  The entire $150,000 is secured.

Question 12

What is the purpose of an after-acquired property clause? In what circumstances could it be used abusively by creditors toward debtors?

Accepted Answer

The answer of What is the purpose of an after-acquired...

Question 13

Ownership or possessory rights to property have no bearing on the security interest being given.

Accepted Answer

A) True 
 B)False

Question 14

If one party's security interest attached in March,but has not been perfected,and another creditor's security interest attached and perfected in April,which of the following is true as of the following December?

Accepted Answer

A)  The security interests have equal priority. 
B)  The security interest that attached in March has priority. 
C)  The security interest that attached in March has priority,but only if it became perfected prior to the other creditor bringing an action on the collateral. 
D)  The security interest that was perfected in April has priority.

Question 15

Which of the following is not personal property?

Accepted Answer

A)  motor vehicles 
B)  jewelry 
C)  stock certificates 
D)  condominiums 
E)  copyrights

Question 16

Kraco is a retailer of televisions and related products.Kraco buys its inventory from DEF,the manufacturer,on credit,giving DEF a security interest in this inventory.Beth buys a television from Kraco,paying cash.Beth also knows of DEF's security interest in this television.Sometime later,Kraco defaults on its debt to DEF,and DEF wants to foreclose on its collateral,including the television purchased by Beth.Does DEF have a security interest in Beth's television? Discuss your reasoning.

Accepted Answer

The answer of Kraco is a retailer of televisions and...

Question 17

Which of the following statements is false?

Accepted Answer

A)  If an attachment occurs,there is a valid security interest between the debtor and the creditor. 
B)  Perfection is required to protect the security interest against the claims of third parties. 
C)  Some third parties have preference over the holders of perfected security interests. 
D)  Some security interests are automatically perfected. 
E)  There must always be a written agreement for attachment.

Question 18

Betty owns a home electronics store.Betty borrowed $100,000 a couple of years ago from Thirdbank,and Betty granted a security interest to Thirdbank on "present and after-acquired inventory." Betty is a generous store owner.Each employee is able to select electronics and place them in his or her office.Most employees have put elaborate stereo systems in their offices,and some have even installed home theater systems.One manager often brings his family in late in the evening to watch rented movies.The understanding was that these systems would be sold as demonstrator units after a few months,but that has happened only once.Most of the systems have been in the offices since shortly after the store opened 2 years ago.Betty has also supplied several of her relatives with stereo systems at no charge,also with the understanding that she can take them back and sell them at any time,although she has not taken any of these back.Betty defaults on the debt to Thirdbank.Will Thirdbank be able to recover the electronic components in employee offices and homes,as well as in Betty's relatives' homes?

Accepted Answer

The answer of Betty owns a home electronics store.Betty borrowed...

Exam 27: Secured Transactions and Electronic Filing

Which of the following is true about security agreements and financing statements?

A security interest can attach to the property prior to the debtor having an interest in the property.

A secured party may cure a default by taking possession of the debtor's collateral.

Unless otherwise agreed,a security agreement automatically gives the creditor rights in the proceeds of the collateral.

A perfected security interest will take priority over an unperfected security interest even if the unperfected security interest attached first.

The parties are free to define the term "default" in their security agreement.

A secondhand buyer of consumer goods that were subject to a purchase money security interest in the hands of the original buyer takes those goods free of the purchase money security interest:

A "buyer in the ordinary course of business" who purchases goods from a merchant takes those goods free of any perfected or unperfected security interest in that merchant's inventory.

Which of the following persons can defeat a perfected security interest?

What is the purpose of an after-acquired property clause? In what circumstances could it be used abusively by creditors toward debtors?

Ownership or possessory rights to property have no bearing on the security interest being given.

If one party's security interest attached in March,but has not been perfected,and another creditor's security interest attached and perfected in April,which of the following is true as of the following December?

Which of the following is not personal property?

Which of the following statements is false?