Multiple Choice Secured Transactions | Quizlet 4/15/24, 3:31 PM

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Term 1 of 65
17
Ace
18 Company owes considerable amount of money to National
Bank.
19 National Bank happens to get possession of certain
valuable
20 promissory notes belonging to Ace Company because
the transactions were closed in the bank's offices and the
promissory notes were put in the bank's vault for safekeeping.
Which of the following statement is correct?
Group of answer choices:

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Give this one a try later!

The bank does not have any security interest in the notes because the
parties did not sign any written security agreement.

The bank does not have any security interest in the notes because the bank
has not given any value.

The bank's security interest does not attach to the notes because the
bank's possession of the promissory notes is not pursuant to any
security agreement with Ace Company.

The bank's security interest attaches to the notes because the bank has
physical possession of those notes.

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Term 2 of 65

Al Bundy owns and operates a women's shoe store. In addition to

shoes, the store sells belts and purses. Citibank has agreed to
loan Bundy necessary funds for operating expenses. Bundy has
signed a security agreement granting Citibank a security interest
in all of the shoes, belts and purses. To be effective, the security
agreement can describe the collateral as:
Group of answer choices:

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All of the debtor's All of the debtor's personal

inventory. property.

Any of the choices. All of the debtor's assets.

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Term 3 of 65

David and Sally were having lunch and discussing the sale of
Sally's car, a 1963 MGB, to David. Sally wanted $10,000 for the
car, but David did not have that much money. Sally said: "I'll let
you pay $1,000.00 each month. If you miss any payment, I can
take the car back." David agreed. Sally wrote these notes on a
napkin as a reminder for herself: Sally to sell David 1963 MGB,
$10,000 total. David to pay $1,000 per month, take back if no pay.
Sally put the napkin in her purse and they shook hands on the
deal. David has now missed a monthly payment. Can Sally take
the car back?
Group of answer choices:

Give this one a try later!

It depends on whether parol

No, because Sally does not
evidence of the security
have a valid security
agreement is admissible to
interest in the car.
supplement the writing.

Yes, because Sally has a security No, because Sally did not actually
interest in the car. sign any agreement.

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Term 4 of 65

Body Fitness Manufacturer (BFM) signed an agreement titled

"equipment lease" with Equipment Financing, Inc. Under the
agreement, BFM was obligated to make payments of $10,000 per
month for four years as rental payment for an assembly line and
had an option to buy the assembly line at the end of the four
year period for $1. The agreement also provided that, on default,
Equipment Financing, Inc. had the right to terminate the lease
and take back the assembly line. In this transaction, which party
may be deemed a creditor under UCC 9?

Give this one a try later!

d) Equipment, farm products, equipment, and inventory.

Correct. The classification of Article 9 focuses on the debtor's use of the

goods collateral. A professional pianist uses a piano for business purpose
(Equipment), chickens from a chicken farmer's farm (Farm Products), the
tractor that the farmer uses to transport the chickens (Equipment), and ink
used by a newspaper to print newspapers (Inventory).

In this fact pattern, the equipment lease is most likely going to be

treated as a sale with a security interest attached to the assembly line.
The lessor/seller Equipment Financing is the creditor under Article 9.

quiz 4-2

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In this fact pattern, the equipment lease is most likely going to be treated as
a sale with a security interest attached to the assembly line. The Equipment
Financing's reservation of title is treated as a security interest under Article 9.

quiz 4-2

In this fact pattern, the equipment lease is most likely going to be treated as
a sale with a security interest attached to the assembly line. The
lessee/buyer BFM is the debtor under Article 9.

quiz 4-2

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Term 5 of 65

Which of the following assets offered by the debtor as collateral

is "investment property"?
Group of answer choices:

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A certificate of deposit issued to

A rare comic book that the
the debtor by Megabank, bearing
debtor had purchased solely for
an annual interest rate of 4% and
investment purposes.
a five-year maturity date.

The condominium in Vail,

Five hundred shares of
Colorada that the debtor had
BizCorp's capital stock not
bought for investment purposes
evidenced by a tangible
(the debtor is renting the condo
certificate.
out during the skiing season).

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Term 6 of 65

On Monday, Carl and David were having lunch at a local

restaurant when David asked Carl whether he could borrow
$500 from Carl. Carl responded: "It is not that I don't trust you,
but I will feel better if I could hold onto your Ted Williams rookie
baseball card until you pay it back. "It is a deal," said David. David
and Carl shook hands on it. On Tuesday, David gave the baseball
card to Carl and Carl gave David $500. When, if ever, did
security interest attach to the baseball card?
Group of answer choices:

Give this one a try later!

Never, because the requirements On Tuesday when David

for attachment of security interest gave Carl the baseball
were not satisfied. card.

On Monday when they made the On Tuesday when Carl gave

agreement. David $500.

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Term 7 of 65

Bruce Banner gets a loan for his biotech business, putting up as

collateral his precision scientific instruments. What category of
collateral are theinstruments?

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Instruments. Inventory.

Equipment. General intangibles.

All the above.

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Term 8 of 65

Assume the financing statement is not effective. Does Slippup

Bank have an enforceable security interest?

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No. The financing statement is what makes the security interest enforceable.

No. Slippup Bank is an unsecured creditor.

Yes. Slippup Bank has a security interest that is enforceable against

Maximilian M. Milztlaf, but would probably lose its security interest if
Milztlaf went into bankruptcy or another of Milztlaf's creditors got a
judgment lien on the art collection.

Yes. The security agreement is all that is necessary to give Slippup Bank
rights in the art collection that will stand up against anyone else.

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Definition 9 of 65

A is the best answer. The transaction is just the secured loan

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A is the best answer. The transaction is just the secured loan

under another name. The terms are the same: Nightflyer hands
over $50,000 and in one year hang Equipment pays $55,000 or
loses its equipment C and D are red herrings. Although the
parties used only sales terms, the substance governs over form,
contrary to B.

from pages of 50-51 in textbook

Give this one a try later!

Joe's Auto Dealership ("Joe's") went to Whitney Bank to obtain a $200,000

loan. On June 10, Joe's and Whitney Bank signed a security agreement that
granted Whitney Bank a security interest in Joe's existing and hereafter
acquired inventory. On the same day, Whitney Bank approved the loan and
gave Joe's a cashier's check for $200,000. On June 10, Joe's had an inventory
of 500 cars. On June 14, Whitney Bank filed a financing statement covering
Joe's inventory. On June 20, Joe's received another shipment of 50 Tesla
eletric cars for sale (assume that on this date Joe's received rights in this
collateral). On which date did the security interest attach to the 50 Tesla
electric cars in favor of Whitney Bank?
Group of answer choices:
a) June 10 and June 14.
b) June 10.
c) June 14.
d) June 20.

Chang Equipment was negotiating a one-year loan of $50,000 at 10%

interest from Nightflyer Finance, putting up equipment worth $120,000
as collateral. Nightflyer wished to avoid the complexities of debtor-
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cred-itor law. Creatively, the parties crafted the following transaction.

Chang Equipment agreed to sell the equipment to Nightflyer for
$50,000, although Chang Equipment retained use of the equipment. In
one year, Chang has the option to buy the equipment back for
$55,000. If it does not buy the equipment back, Nightflyer gets the
equipment. Does Article 9 apply to the transaction?
a. Yes. The transaction, in substance if not form, is a secured loan.
b. No. The transaction is a sale of equipment with an option to buy
back, with no debt or collateral.
c. No. The transaction is a true lease.
d. No. Article 9 applies only to consumer transactions.

Dave sent an email to Carl, asking if he could borrow $5,000 for one year at
10 percent interest rate, with the obligation secured by Dave's football-card
collection. Carl said that he had to see the football-card collection first.
Dave and Carl got together at Dave's house. After looking at the collection,
Carl said: "It is a deal. You can hold onto the collection subject to my
security interest." Carl gave Dave a check for $5,000. Dave failed to pay the
loan. Carl sought to exercise his Article 9 rights to the football-card
collection. Did a security interest attach to the football-card collection?

Group of answer choices:

a) Yes, because the email from Dave satisfies the requirement of an
authenticated security agreement.
b) Yes, because the transaction was a financing transaction within Article 9.
c) No, because Dave never authenticated a security agreement.
d) No, because Carl did not file a financing statement covering the
collateral.

Room & Board sells children's furniture at retail outlets. On March 1, Room &
Board asked Whitney Bank to loan it $100,000, to be distributed on April 1
and payable on March 1 two years later. Whitney Bank agreed. Whitney Bank

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prepared the loan documents, which provided that Room & Board granted
Whitney Bank a security interest in all of its "inventory of furniture, now
owned or hereafter acquired." Both parties signed the loan documents. At
this point, do the parties have a security agreement?
Group of answer choices:
a) No, because the loan documents did not describe the collateral
sufficiently.
b) No, because Room & Board does not have rights in the collateral that has
not been acquired.
c) Yes.
d) No, because the value has not been given.

Don't know?

Term 10 of 65

Mary owns a pottery studio and sells her pottery pieces of her
own design through Pottery Gallery. Mary understands that
Pottery Gallery would try to sell her pottery pieces and would
return to her any unsold pieces. Mary delivered $2,500 worth of
pottery pieces featuring local motifs to Pottery Gallery. In the
above transaction, what may be the collateral under UCC 9?

Give this one a try later!

The pottery pieces. The consignor's reservation of title is treated as a

security interest in the collateral.

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canvas

c) based on the debtor's intended use of the collateral at the time when the
security interest is created.

Courts look at a debtor's intended use of the collateral at the time when
security interest is created. This answer states the complete rule.

Mary, the consignor, is treated as a creditor in this transaction. Mary is

essentially providing credit to finance the consignee's inventory.

canvas

c. a horse

Perishable items such as a cut flower or milk can never be equipment

because they are used or consumed. A tractor can never be a farm product.

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Term 11 of 65

David Ink owned a small printing shop. Over the years, he had
accumulated various pieces of equipment such as a press, a

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binding machine, and so forth, all of which were fully paid for. He
also owned a truck which he used to make deliveries. He went to
National Bank to borrow some money. He signed a security
agreement that described the collateral securing the loan as "all
of David Ink's assets." National Bank gave David Ink a $10,000
loan. Which of the following statement is accurate?
Group of answer choices:
-National Bank has a security interest in David Ink's equipment.
- National Bank's security interest attaches to David Ink's assets
because the description in the security agreement reasonably
identifies the collateral.
- National Bank's security interest does not attach to David Ink's
assets because the description of the collateral does not
reasonably identify the collateral.
-National Bank's security interest attaches because National Bank
has given value, David Ink has rights in the collateral and has
authenticated the security agreement.

Give this one a try later!

c) National Bank's security interest does not attach to David Ink's

assets because the description of the collateral does not reasonably
identify the collateral.

The description of the collateral in the security agreement was super

generic. The bank's security interest failed to attach to the debtor's

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assets.

d. the Court was concerned that the debtor's reservation of control over its
own accounts might mislead other creditors regarding the true financial
status of the debtor.

quiz 4-1

a) Debtor's Dell desk top computer and all of the existing and after-
acquired women's shoes.

The scope of the security interest is determined by the description of the

security agreement.

d) Citibank cannot repossess the wedding ring.

To create a security interest, the debtor (Robin's mother) would have to

authenticate the security agreement. Robin's signature was not sufficient.
Robin's mother should have also signed the security agreement. The facts
also do not indicate that Citibank took possession of the collateral.
Therefore, Citibank failed to create a security interest in the ring.

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Term 12 of 65

CarMax sells cars. Its customers include both companies that will
buy its cars for business purpose and individuals who will buy its
cars for their personal, family or household use. National Bank
intends to make a loan to CarMax and wants to take a security
interest in the cars. Assuming that you represent National Bank,
how should you classify the cars using Article 9 classification?

Group of answer choices:

Give this one a try later!

Inventory, equipment and

Inventory
consumer goods.

Inventory and consumer goods Inventory and equipment.

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Term 13 of 65

Body Fitness Manufacturer (BFM) signed an agreement titled

"equipment lease" with Equipment Financing, Inc. Under the
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agreement, BFM was obligated to make payments of $10,000 per

month for four years as rental payment for an assembly line and
had an option to buy the assembly line at the end of the four
year period for $1. The agreement also provided that, on default,
Equipment Financing, Inc. had the right to terminate the lease
and take back the assembly line. BFM defaulted on the monthly
payments. In this transaction, which party may be a debtor under
UCC 9?

Give this one a try later!

In this fact pattern, the equipment lease is most likely going to be treated as
a sale with a security interest attached to the assembly line. The lessor/seller
Equipment Financing is the creditor under Article 9.

quiz 4-2

d) Equipment, farm products, equipment, and inventory.

Correct. The classification of Article 9 focuses on the debtor's use of the

goods collateral. A professional pianist uses a piano for business purpose
(Equipment), chickens from a chicken farmer's farm (Farm Products), the
tractor that the farmer uses to transport the chickens (Equipment), and ink
used by a newspaper to print newspapers (Inventory).

In this fact pattern, the equipment lease is most likely going to be

treated as a sale with a security interest attached to the assembly line.

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The lessee/buyer BFM is the debtor under Article 9.

quiz 4-2

Mary, the consignor, is treated as a creditor in this transaction. Mary is

essentially providing credit to finance the consignee's inventory.

canvas

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Term 14 of 65

Johnnie Cochran borrowed money from Citibank to expand his

law practice. To secure the loan, he granted Citibank a security
interest in all of his equipment and agreed in writing that Citibank
could take the equipment if he defaulted. Citibank gave Cochran
the loan. However, Citibank failed to file a proper financing
statement as required by Article 9. Cochran defaulted on his
loan. Can Citibank repossess the collateral from Cochran?
Group of answer choices:

Give this one a try later!

No, because the security interest

Yes, because Citibank has a
is not effective because Citibank
valid security interest in the
failed to comply with the filing
collateral.
requirements of Article 9.

Yes, because as between creditor

No, because without filing, third
and debtor, the creditor only
parties lack notice of Citibank's
needed to make a good faith
security interest.
effort to perfect.

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Term 15 of 65

Bob and Sal were having dinner and discussing the sale of Sal's
collection of valuable baseball cards to Bob. Sal wanted
$20,000, but Bob did not have that much money. Sal said to Bob:
"I'll let you pay $1000 each month if you agree that I can keep
title to the cards until after you pay off the price." Bob agreed.
Neither Bob nor Sal wrote anything down. Sal delivered the
cards to Bob immediately after the conversation. Bob started to
pay for the baseball cards. After a few months, Bob stopped
paying. Which one of the following statements is correct?
Group of answer choices:

Give this one a try later!

Sal can have his cards back Sal can have his cards back
because he kept the title to the because he has a security interest
cards. in the cards.

Sal cannot have his cards

Sal cannot have his cards back
back he does not have a
because Bob has taken
security interest in the
possession of his cards.
cards.

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Term 16 of 65

Tom lent Della $3,000 pursuant to an oral agreement. A couple

of months later, Tom needed to borrow some money from
National Bank. He signed a security agreement with National
Bank, granting the bank a security interest in his right to payment
under the oral agreement with Della. What category best
describes Tom's right under the oral agreement using Article 9
classification?
Group of answer choices:
a. A contract right.
b. General intangible.
c. Payment intangible.
d. An account.

Give this one a try later!

c) based on the debtor's intended use of the collateral at the time when the
security interest is created.

Courts look at a debtor's intended use of the collateral at the time when
security interest is created. This answer states the complete rule.

d. an account

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Article 9-102 defines an "account" as a right to payment of a monetary

obligation whether or not earned by performance including those arising
out of the use of a credit or charge card or information contained on or for
use with the card. The definitions of instrument and chattel paper explictly
exclude those arising out of the use of a credit or charge card. Because the
credit card receipt is an account, it cannot be a payment intangible.

c) Yes

In this case, Whitney Bank has given value by promising to loan the money (a
binding commitment), the debtor (Whitney Bank) has rights in the collateral
(inventory), and the debtor has authenticated the security agreement by
signing all the loan documents. The security agreement does not have to be
in any form or use any specific words.

C. payment intangible

Tom's right to payment under the oral agreement is intangible.

However, General Intangible is a catch all category for intangibles.
Tom's right is a payment intangible, a sub category of general
intangible under which the account debtor's (Della's) principal
obligation is a monetary obligation. 9-102. Therefore, payment
intangible is the correct answer.

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Term 17 of 65

Pemulis Auto delivered a car to Lloyd under a Lease Agreement,

which provided that Lloyd would own the car after making the
required pay-ments. Because such a transaction is in substance a
secured sale on credit, Article 9 applies to the transaction. Does
that mean that Pemulis Auto would have no effective security
interest, because the parties signed a Lease Agreement, not a
security agreement?

Give this one a try later!

Pemulis Auto has an

effective security
Pemulis Auto will not have an
agreement, because the
effective security interest, for lack
Lease Agreement will
of a signed security agreement.
qualify as a security
agreement.

Pemulis Auto will not have a Pemulis Auto will not have a
security interest, because it did security interest, becauses Lloyd
not provide value has no interest in the collateral.

Don't know?

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Term 18 of 65

Art Gallery is in the business of buying and selling expensive

paintings, sculptures and limited edition prints. The markup on
such goods is high, but it often takes months before any item
sells. Recently, to supplement income and increase traffic, Art
Gallery decided to allow some people to exhibit their own art
for sale in the gallery. Under the terms of each arrangment, the
owner sets the price for the art and the gallery keeps 20 percent
of the sale proceeds. Which of the following transaction is
covered by Article 9?

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Bob who sells limited prints delivered three newly completed prints to the
gallery, each of which is to be sold for $250.

Rachel, a law school student, delivered her gently worn clothes and shoes
to a consignment boutique to get some extra spending money.

Ms. Will delivered an oil painting that she recently inherited from her uncle
to the gallery for sale for $15,000. Her uncle had displayed the oil painting in
his living room.

Monet, a professional painter, delivered a recently completed

watercolor to Art Gallery for sale for $10,000.
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Don't know?

Definition 19 of 65

B is the best answer. Article 9 generally applies to consignments,

but its definition of consignment excludes various consignments
to which the policy of giving notice to creditors is weaker. See
§9-102(20). The definition excludes consignments where the
consignor and consignee have the same name (so creditors
would likely not be affected), where the consignee is an
auctioneer (whose creditors would not expect to go after the
goods the auctioneer sells for others), or where the creditors
know the consignee generally takes goods on consignments
(and so the creditor do not need notice of that fact). It also
excludes consignments of less than $1,000 in value and excludes
consignments (as in this question) of consumer goods, because
we do not expect consumers t o know about Article 9 and
comply with it.
from pages of 50-51 in textbook

Give this one a try later!

To which of the following transactions does Article 9 apply?

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a. Baldwin put up his house on Strivers Row as collateral for a loan from
Empire Bank.
b. Stewart used her life insurance policy as a security for a debt to Fateful
Finance.
c. Darrow, a lawyer, assigned a long-unpaid account receivable, for col-
lection to Persistent Servicing.
d. Cannon leased a car for a day.
e. None of the above.

Dave sent an email to Carl, asking if he could borrow $5,000 for one year at
10 percent interest rate, with the obligation secured by Dave's football-card
collection. Carl said that he had to see the football-card collection first.
Dave and Carl got together at Dave's house. After looking at the collection,
Carl said: "It is a deal. You can hold onto the collection subject to my
security interest." Carl gave Dave a check for $5,000. Dave failed to pay the
loan. Carl sought to exercise his Article 9 rights to the football-card
collection. Did a security interest attach to the football-card collection?

Group of answer choices:

a) Yes, because the email from Dave satisfies the requirement of an
authenticated security agreement.
b) Yes, because the transaction was a financing transaction within Article 9.
c) No, because Dave never authenticated a security agreement.
d) No, because Carl did not file a financing statement covering the
collateral.

Sasha had a samovar, which had been in the family several

generations.
He took it to Karl's Konsignments, who agreed to attempt to sell it on
Sasha's behalf, for a percentage. Not long after, Karl's Konsignments
went into bankruptcy. If Article 9 applied, as we will see in later
chapters, that means Sasha would lose the samovar to the bankruptcy
trustee. Did Article 9 apply?
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trustee. Did Article 9 apply?

a. Yes. Article 9 applies to consignments.

b. No. This transaction did not fit in the Article 9 definition of consign-
ments, because it was a consignment of consumer goods.
c. No. Sasha did not borrow money from Karl's Konsignments.
d. No. Karl's Konsignments did not borrow money from Sasha.

Body Fitness Manufacturer (BFM) signed an agreement titled "equipment

lease" with Equipment Financing, Inc. Under the agreement, BFM was
obligated to make payments of $10,000 per month for four years as rental
payment for an assembly line and had an option to buy the assembly line at
the end of the four year period for $1. The agreement also provided that, on
default, Equipment Financing, Inc. had the right to terminate the lease and
take back the assembly line. Assume that this transaction is included within
UCC 9, what is the security interest created by the creditor?

Don't know?

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Term 20 of 65

The U.S. Supreme Court in Benedict v. Ratner found that the

creditor's security interest was fraudulent in law because
Group of answer choices:

Give this one a try later!

the creditor failed to obtain a list of the debtor's accounts subject to the
assignment.

the debtor engaged in fraud.

the Court was concerned that the creditor was not getting paid by the
debtor.

the Court was concerned that the debtor's reservation of control over
its own accounts might mislead other creditors regarding the true
financial status of the debtor.

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Term 21 of 65

David bought a new computer on credit from Best Buy. Best Buy
asked him to sign a "Conditional Sales Contract" by which David
agreed that title to the computer would remain with the store
until he had fully paid for his computer. David signed the
contract. The contract described the computer in detail by its
serial number. Which of the following statement is correct under
Article 9?
Group of answer choices:

Give this one a try later!

Best Buy is not a secured creditor Best Buy does not need any
because David failed to security interest because it
authenticate any security successfully reserved title to the
agreement. computer.

Best Buy is not a secured creditor

because David only promised to
The transaction is a secured
pay for the computer and did not
transaction within Article 9.
grant a security interest to Best
Buy.

Don't know?

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Term 22 of 65

Walker Furniture Company, Inc. sells home furniture at retail

outlets. On February 1, Walker asked First Bank to loan it $50,000,
payable on February 1 two years later. First Bank agreed. First
Bank prepared the loan documents and both parties signed
them. At this point, what do the parties have?
Group of answer choices:

Give this one a try later!

A security agreement that is

No agreement.
perfected.

A security agreement that is

A loan agreement.
unperfected.

Don't know?

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Term 23 of 65

Under UCC Article 9, classification of collateral is to be

determined:
Group of answer choices:

Give this one a try later!

what the secured party puts based on the debtor's intended

down in the financing statement. use of the collateral.

based on the debtor's

intended use of the
as of the time of the creation of
collateral at the time when
the security interest.
the security interest is
created.

Don't know?

Definition 24 of 65

February 15

In this case, the security interest attached on the day when all of
the requirements for the creation of the security interest were
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satisfied. That was on February 15 when the bank committed to

giving the debtor a line of credit. Under 1-204, a person gives
value if the person makes a binding commitment to extend credit
whether or not drawn upon by the debtor.

Give this one a try later!

David owned and operated a women's leather goods store, as a sole

proprietor. He needed to borrow money for his business expenses. In
addition to leather shoes, the store sold belts and purses. He also had some
accounts receivable from his preferred customers who bought items on
store credit. In addition, he owned a Dell desk top computer which he used
to keep track of his purchase orders, sales and inventory. Citibank agreed to
loan the necessary funds if David gave sufficient security for the loan. David
agreed and signed a security agreement which described the collateral as
"Debtor's Dell desk top computer and all of his existing and after-acquired
women's shoes." Citibank has a security interest in which of the following
choices?
Group of answer choices:
a) Debtor's Dell desk top computer and all of the existing and after-
acquired women's shoes.
b) Debtor's inventory and accounts, existing and after-acquired.
c) Debtor's inventory, accounts, and equipment.
d) Debtor's equipment and inventory, existing and after-acquired.

Carl and Ben were studying in the library and while taking a break, Carl told
Ben that he was trying to sell his laptop computer. It just so happened that
Ben had been looking to buy a laptop computer. Ben agreed to buy the
computer from Carl. Carl asked Ben to pay $200 for the laptop. Because
Ben did not have $200 for the purchase price, Carl proposed to Ben that

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Ben could pay $50 as a down payment and thereafter $20 a month. They
agreed that Carl would deliver the laptop to Ben after Ben paid off the
entire purchase price. Neither Carl nor Ben wrote anything down. After two
payments, Ben stopped paying. Which one of the following statements is
correct?
Group of answer choices:
a) Carl can keep his laptop because he sold the laptop on credit to Ben.
b) Carl cannot keep his laptop because Ben has taken possession of the
laptop computer.
c) Carl cannot keep his laptop because he does not have a security interest
in it.
d) Carl can keep his laptop computer because he has a security interest in
the laptop.

Carol White owned a clothing store and had a pickup truck to haul
things around for her business. She needed to get a small business
loan to expand her business operation. On February 1, she talked to a
loan officer at National Bank. The Officer asked her to complete a
loan application and sign an agreement in which the debtor promised
to grant the National Bank a security interest in "all Carol White's
inventory and equipment now owned or hereafter acquired." The loan
officer told Carol that the bank needed a few days to decide on her
loan application and would contact her as soon as it made a decision.
On February 15, the National Bank committed itself to providing Carol
with a line of credit of $10,000. National Bank filed its financing
statement covering the collateral on February 20. Carol drew $5,000
from the credit line for inventory purchase for the first time on May 18.
When did the bank's security interest first attach?
Group of answer choices:
-May 18.
-February 1.
-February 15.
-February 20.

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Banner gets his loan from Hector. The parties make an oral agreement.
sealed with a handshake. Hector delivers the money. Banner promises that
the instruments are collateral for the debt, although Banner will retain them
and use them in the lab's work. If called on to testify. Banner would freely
testily to the agreement. Is the security agreement effective to ore ate a
security interest? Meaning, for example, will it stand up if Banner goes into
bankruptcy or another creditor gets a judgment against Banner?

a) Yes, because Banner does not deny the effectiveness of the agreement
b) Yes, because Hector has performed and so may enforce the agreement.
c) Yes, if Banner can provide evidence that the money was delivered,
such as an account statement.
d) No, because there was no agreement signed by Banner and Hector was
not in possession of the collateral.

Don't know?

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Term 25 of 65

Article 9 applies to consignments as defined by Article 9. Which

of the following transactions could fall within the definition of
consignment under Article 9?

Give this one a try later!

Now that Margo's triplets are teenagers, Margo delivered three small
bicycles (each with a fair market value of $200) to a bike dealer for resale.

Print Shop delivers several used copiers (with a total value of $3,000) to
Office Equipment Consignment Shoppe for resale.

Annie, a professional musician, delivers one of her two pianos (with a

fair market value of at least $7,000) to a piano dealer for sale.

Antique Dealer delivers twenty framed vintage posters (with a total value of
$20,000) to an auction house for resale to the public during an upcoming
auction.

Don't know?

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Term 26 of 65

Best Buy sold an iphone 6 to Barbara who used her credit card
to pay for the purchase. After swiping her card through the
machine, Barbara signed a piece of paper acknowledging her
payment obligation under the credit card agreement. This credit
card receipt now held by Best Buy is
Group of answer choices:

Give this one a try later!

chatter paper if the piece of

paper evidences both the
an instrument monetary obligation and a
security interest retained by Best
Buy in the iphone.

a payment intangible An account

Don't know?

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Term 27 of 65

Under Article 9, a professional pianist's piano, chickens from a

chicken farmer's farm, the tractor that the farmer uses to
transport the chickens, and ink used by a newspaper to print
newspapers are respectively classified as the following in the
order mentioned when used as collateral by each of the parties:
Group of answer choices:

Give this one a try later!

Equipment, farm products, and Instrument, farm products,

equipment. equipment, and inventory.

Equipment, consumer goods, Equipment, farm products,

tractor, and inventory. equipment, and inventory.

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Term 28 of 65

Although goods can have only one Article 9 classification at a

time (consumer goods, equipment, farm products, inventory),
most goods can be classified in several different ways,
depending on how a debtor is using them. What one of the
following goods can most likely fit in all of the four classifications
of goods?
Group of answer choices

Give this one a try later!

Milk A cut flower

A horse A tractor

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Term 29 of 65

National Bank loans David Ink money and takes a security

interest in David Ink's equipment. The security agreement
describes the collateral as "all of the debtor's equipment."
National Bank's financing statement describes the collateral as
"all of the debtor's equipment and inventory." Does National Bank
have a security interest in David Ink's inventory?
Group of answer choices:

Give this one a try later!

Yes, because that collateral is described in the financing statement.

Yes, because the collateral is described in the security agreement.

No, because both the security agreement and the financing statement must
describe the collateral in order for a security interest to attach in favor of
National Bank.

No, because the collateral is not described in the security agreement.

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Term 30 of 65

Auto Zone buys a van from Ford on credit and grants Ford a
security interest in the van. Auto Zone plans to use the van as a
"courtesy car" to shuttle customers from their homes or offices to
the repair shop while their cars are being serviced. In the
transaction between Auto Zone and Ford, what Article 9
classification best describes the van?
Group of answer choices:

Give this one a try later!

Consumer Goods. Equipment.

Ford van. Inventory.

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Term 31 of 65

Joe's Auto Dealership ("Joe's") went to Whitney Bank to obtain a

$200,000 loan. On June 10, Joe's and Whitney Bank signed a
security agreement that granted Whitney Bank a security interest
in Joe's existing and hereafter acquired inventory. On the same
day, Whitney Bank approved the loan and gave Joe's a cashier's
check for $200,000. On June 10, Joe's had an inventory of 500
cars. On June 14, Whitney Bank filed a financing statement
covering Joe's inventory. On June 20, Joe's received another
shipment of 50 Tesla eletric cars for sale (assume that on this
date Joe's received rights in this collateral). On which date did
the security interest attach to the 50 Tesla electric cars in favor of
Whitney Bank?
Group of answer choices:

Give this one a try later!

June 10 and June 14. June 10.

June 14. June 20.

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Term 32 of 65

Dave sent an email to Carl, asking if he could borrow $5,000 for

one year at 10 percent interest rate, with the obligation secured
by Dave's football-card collection. Carl said that he had to see
the football-card collection first. Dave and Carl got together at
Dave's house. After looking at the collection, Carl said: "It is a
deal. You can hold onto the collection subject to my security
interest." Carl gave Dave a check for $5,000. Dave failed to pay
the loan. Carl sought to exercise his Article 9 rights to the
football-card collection. Did a security interest attach to the
football-card collection?

Group of answer choices:

Give this one a try later!

Yes, because the email from Dave Yes, because the transaction was
satisfies the requirement of an a financing transaction within
authenticated security agreement. Article 9.

No, because Dave never No, because Carl did not file a
authenticated a security financing statement covering the
agreement. collateral.

Don't know?

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Term 33 of 65

Carl and Ben were studying in the library and while taking a
break, Carl told Ben that he was trying to sell his laptop
computer. It just so happened that Ben had been looking to buy
a laptop computer. Ben agreed to buy the computer from Carl.
Carl asked Ben to pay $200 for the laptop. Because Ben did not
have $200 for the purchase price, Carl proposed to Ben that Ben
could pay $50 as a down payment and thereafter $20 a month.
They agreed that Carl would deliver the laptop to Ben after Ben
paid off the entire purchase price. Neither Carl nor Ben wrote
anything down. After two payments, Ben stopped paying. Which
one of the following statements is correct?
Group of answer choices:

Give this one a try later!

Carl cannot keep his laptop

Carl can keep his laptop because
because Ben has taken
he sold the laptop on credit to
possession of the laptop
Ben.
computer.

Carl can keep his laptop

Carl cannot keep his laptop
computer because he has a
because he does not have a
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because he does not have a

security interest in the
security interest in it.
laptop.

Don't know?

Term 34 of 65

DBTEL, a cellphone manufacturer, signed an agreement titled

"equipment lease" with Equipment Financing, Inc. Under the
agreement, DBTEL was obligated to make payments of $10,000
per month for four years as rental payment for an assembly line
and had an option to buy the assembly line at the end of the four
year period for $1. The agreement also provided that, on default,
Equipment Financing, Inc. had the right to terminate the lease
and take back the assembly line. DBTEL defaulted on the
monthly payments. Which one of the following statements is
correct under Article 9?
Group of answer choices:

Give this one a try later!

DBTEL owns the assembly

line, but Equipment Equipment Financing, Inc. owns
Financing, Inc. can the assembly line, but it must sue
repossess the assembly DBTEL for breach of contract.
line.

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Equipment Financing, Inc. owns

DBTEL owns the assembly line,
the assembly line, so it can take
but Equipment Financing, Inc. can
back the assembly line because
sue DBTEL for breach of contract.
DBTEL breached the lease.

Don't know?

Term 35 of 65

Maximilian M. Miltzlaf signed a security agreement to put up his

art collection as collateral and got a loan from Slippup Bank.
Slippup Bank filed a UCC financing statement, but misspelled the
debtor's name as
"Maximilian M. Milztlaf." A search of the state's UCC records
using its standard search logic under the debtor's correct name
does not disclose the financing statement. Is the financing
statement effective?

Give this one a try later!

No. The error is deemed

seriously misleading,
Yes. Even though the debtor's because a search using the
name was slightly misspelled, it correct name does not
was not seriously misleading.
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disclose the statement filed

with the incorrect name.

It depends on whether a search

It depends on whether other
with the incorrect name would
creditors had been misled by the
dis. close the financing statement
inaccurate filing.
filed under the correct name.

Yes, as long as the collateral is

described correctly. The debtor's
name is not important.

Don't know?

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Term 36 of 65

David's Print Shop ("DPS") went to National Bank to obtain a

$10,000 loan. On April 3, DPS and National Bank signed a
security agreement that granted National Bank a security interest
in DPS's existing and hereafter acquired equipment. On the same
day, National Bank gave DPS a cashier's check for $10,000. On
April 3, DPS had a printing press, two office computers that DPS
employees used for custom print designs for its customers. On
April 5, National Bank filed a financing statement covering DPS's
existing and hereafter acquired equipment. On April 20, DPS
purchased some additional computers for custom design
projects. On which date was a security interest first created in
favor of National Bank?
Group of answer choices:

Give this one a try later!

April 3 and April 20. April 3.

April 5. April 20.

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Term 37 of 65

Room & Board sells children's furniture at retail outlets. On March

1, Room & Board asked Whitney Bank to loan it $100,000, to be
distributed on April 1 and payable on March 1 two years later.
Whitney Bank agreed. Whitney Bank prepared the loan
documents, which provided that Room & Board granted Whitney
Bank a security interest in all of its "inventory of furniture, now
owned or hereafter acquired." Both parties signed the loan
documents. At this point, do the parties have a security
agreement?
Group of answer choices:

Give this one a try later!

No, because the loan documents No, because Room & Board does
did not describe the collateral not have rights in the collateral
sufficiently. that has not been acquired.

No, because the value has not

Yes.
been given.

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Term 38 of 65

Banner gets his loan from Hector. The parties make an oral
agreement. sealed with a handshake. Hector delivers the money.
Banner promises that the instruments are collateral for the debt,
although Banner will retain them and use them in the lab's work.
If called on to testify. Banner would freely testily to the
agreement. Is the security agreement effective to ore ate a
security interest? Meaning, for example, will it stand up if Banner
goes into bankruptcy or another creditor gets a judgment
against Banner?

Give this one a try later!

Yes, because Banner does not Yes, because Hector has

deny the effectiveness of the performed and so may enforce
agreement the agreement.

No, because there was no

Yes, if Banner can provide
agreement signed by
evidence that the money was
Banner and Hector was not
delivered,
in possession of the
such as an account statement.
collateral.

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Term 39 of 65

UCC Article 9 provides a comprehensive scheme for regulating

security interests in personal property. To which of the following
transactions
would Article 9 apply?

a. Pemulis Auto borrowed money from Wolters Bank, with the

parties agreeing that Pemulis Auto's inventory, equipment, and
accounts receivable would be collateral for the loan.
b. Von Richthofen provided aerial photography services for
Konstantin Farms, to guide irrigation and planting decisions. A
state statute gave Von Richthofen a lien on Konstantin Farm's
crops, to secure payment
for those services
c. Williams Bank purchases the accounts receivable of
Fitzherbert Spa, which are the debts owed by customers for spa
services.
d. Turing, unable to sell his Enigma supercomputer on eBay,
delivers it to a local electronics retailer. The parties agree that if
the retailer sells the Enigma, they will split the proceeds, and if
not Turing will take the Enigma back.
e. All of the above.

Give this one a try later!

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a) No, because Sally does not have a valid security interest in the car.

In this case, all of the requirements for the creation of security interest are
satisfied except for authentication by the debtor (David). Sally gave value by
selling the car on credit, the debtor has rights in the collateral when David
bought the car. There is no evidence that David authenticated the security
agreement. Sally does not have any security interest in the car.

c) No, because Dave never authenticated a security agreement. The

problem is that Carl failed to creat a security interest in David's football card
collection because David did not authenticate any security agreeement.
Authentication of a security agreement is necessary here because Carl does
not have possession of the card collection. David, the debtor, still has
physical possession of the cards. The email is not evidence of an security
agreement because it was an inquiry from David asking whether Carl was
willing to loan the money. Even if one can argue that the email may satisfy
the authentication requirement, the content does not evidence an
agreement. Filing of a financing statement is not relevant when the question
is whether a security interest exists in the first place.

E is the best answer. Section 9-109 states the transactions to which

Article9 applies. Answer A is a classic secured transaction, a party
agrees to use personal property as collateral for a debt, covered by
$9-109(a). But§9-109 makes Article 9 apply more broadly, to
transactions that also raise. in order to require Williams bank to
comply with the protections that Article provides, such as notice to
other creditors (thereby avoiding the secret lien of Benedict v. Ratner).
D is a consignment. This transaction is also not a secured transaction.
The retailer is not borrowing money and the Enigma is not collateral.
But the hazard of the secret lien still exists: the retailer's creditors
might not realize that the Enigma does not belong to the retailer.
Bringing such consignments within Article 9 means that Turing will (as

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later chapters will discuss) need to file a UCC financing statement to

maintain priority in the Enigma, should other creditors go after the
Enigma or should the retailer file bankruptcy.
from pages of 50-51 in textbook

d) June 20.

On June 20, the bank's security interest attaches to the 50 Tesla electric cars
by virtue of the hearafter acquired clause because the debtor acquired
rights in the collateral. On June 10, the bank did have a security interest in
the debtor's existing assets because all of the requirements are satisfied, but
the debtor did not acquire rights in the Teslas until June 20. On June 14, the
debtor does not have any rights in the Teslas, yet. The floating security
interest cannot attach to the collateral until the debtor has acquired rights in
the collateral.

Don't know?

Definition 40 of 65

E is the best answer. This question gives some of the transactions

excluded from Article 9 by $9-109. There was already well-
established law dealing with mortgages, so Article 9 excludes
transactions where the collateral is real estate. Insurance as
collateral is specifically excluded. Although assignments of
accounts generally are made subject to Article 9, some
assignments are excluded because the protections of Article 9

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are not necessary. The assignment of an account for collection is

excluded. That is not an assignment of which Darrow's creditors
need notice. True leases are not secured transactions, although a
lease that has the effect of a secured transaction is within Article
9. A one-day car rental is a true lease, not a disguised secured
transaction.
from pages of 50-51 in textbook

Give this one a try later!

Pemulis Auto offers to sell Lloyd, an Uber driver, a Somme Sedan for a down
payment of $1,000, along with 36 monthly payments of $400. Lev likes those
terms, but would prefer a lease, on the theory that he could deduct the
lease payments as a business expense. So Pemulis Auto offers a Lease
Agreement, under which Llovd ("Lessee") pays down $1,000 and is obliged
to make 36 monthly lease payments of $400 to Pemulis ("Lessor"), and then
will have an option to purchase the car for $1. The Lease Agreement further
provides that if Lev fails to make the paynents, Pemulis Auto may repossess
the car. Lev signs and hands over $1,000. Pemulis Auto signs the papers to
have the car registered in Lloyd's name and reminds him to get insurance on
the car. Is the transaction subject to Article 9?
a. No. It is a lease, not a secured loan. consignment. sale of accounts, or
agricultural lien.
b. Yes. In substance. the transaction is a sale of the car on credit. with the car
serving as collateral.
c. No. Article 9 does not apply to cars, which are regulated by Lemon laws
and the like.
d. No. Article 9 does not apply to true leases, and the parties have
draftedan agreement using only lease terminology.

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Multiple Choice Secured Transactions | Quizlet 4/15/24, 3:31 PM

Which of the following assets offered by the debtor as collateral is

"investment property"?
Group of answer choices:
a. A rare comic book that the debtor had purchased solely for investment
purposes.
b. A certificate of deposit issued to the debtor by Megabank, bearing an
annual interest rate of 4% and a five-year maturity date.
c. Five hundred shares of BizCorp's capital stock not evidenced by a
tangible certificate.
d. The condominium in Vail, Colorada that the debtor had bought for
investment purposes (the debtor is renting the condo out during the skiing
season).

To which of the following transactions does Article 9 apply?

a. Baldwin put up his house on Strivers Row as collateral for a loan
from
Empire Bank.
b. Stewart used her life insurance policy as a security for a debt to
Fateful Finance.
c. Darrow, a lawyer, assigned a long-unpaid account receivable, for
col-
lection to Persistent Servicing.
d. Cannon leased a car for a day.
e. None of the above.

Which one of the following statements is a correct statement regarding the

scope of UCC Article 9?

Group of answer choices:

a. UCC Article 9 covers all consensual liens on property.

b. UCC Article 9 covers all liens on personal property, judicial liens and
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b. UCC Article 9 covers all liens on personal property, judicial liens and
statutory liens such as mechanic's liens.
c. UCC Article 9 covers all liens on personal property.
d. UCC Article 9 covers generally consensual liens on personal property
and fixtures.

Don't know?

Term 41 of 65

David went to Bank One and borrowed $4,000. In return for the
loan, he signed an agreement which provided that Bank One had
the right to repossess David's car upon David's default. David
then went to Best Buy and bought a home theatre for $10,000.00.
He put down $4,000 as a deposit and promised in writing to pay
the rest in monthly installments of $1,000. After making 2
payments for the home theatre, David defaulted. David also
failed to pay back the $4,000 that he borrowed from Bank One.
Assuming that both Bank One and Best Buy comply with the
relevant state law governing default remedies, which one of the
following statements is correct?
Group of answer choices:

Give this one a try later!

Upon David's default, Bank One

Upon David's default, Best Buy

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can repossess David's home

can repossess David's car.
theatre.

Upon David's default, Best Buy Upon David's default, Bank

can repossess David's home One can repossess David's
theatre. car.

Don't know?

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Term 42 of 65

Aunt Em lent Dorothy, her niece, $3,000 pursuant to an oral

agreement. A couple of months later, Aunt Em needed to borrow
some money from National Bank. She signed a security
agreement with National Bank, granting the bank a security
interest in her right to payment under the oral agreement with
Dorothy. What category best describes Aunt Em's right under the
oral agreement using Article 9 classification?
Group of answer choices:

Give this one a try later!

General intangible. An account.

A contract right. Payment intangible.

Don't know?

Term 43 of 65

Snow collected gold coins dating from the Roman Empire for
investment purpose. A couple of years ago, when Snow

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purchased a new home, she borrowed $250,000 from Citibank

secured by a mortgage on the house. Because Snow's annual
income was not at a level desired by Citibank, Citibank insisted
on taking a security interest in her gold coin collection worth
$50,000 at that time. Snow signed a security agreement which
described the collateral as "Snow's gold coin collection." Snow
has now defaulted on the mortgage. The coin collection is now
worth $100,000 (the increase in value being in part due to
appreciation and to periodic addition of new coins to the
collection). Citibank tries to repossess the coin collection. Which
of the following statements is true?
Group of answer choices:

Give this one a try later!

Citibank has no right to repossess

the coin collection unless it had Citibank has no right to
properly filed a financing repossess all of the coins in
statement perfecting its security the collection.
interest.

Citibank will not be able to

Citibank has no right to repossess
repossess Snow's gold coin
more than $50,000 worth of the
collection because Citibank has a
coins.
mortgage on Snow's house.

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Don't know?

Term 44 of 65

Which one of the following statements is a correct statement

regarding the scope of UCC Article 9?

Group of answer choices:

Give this one a try later!

UCC Article 9 covers all liens on

UCC Article 9 covers all personal property, judicial liens
consensual liens on property. and statutory liens such as
mechanic's liens.

UCC Article 9 covers

UCC Article 9 covers all liens on generally consensual liens
personal property. on personal property and
fixtures.

Don't know?

Term
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Term
45 of 65

Dairy Farmer McDonalds operates a farm. He sells the milk he

produces on the farm to Winn Dixie, a grocery store. Winn Dixie
sells the milk to Joe and Moe. Joe buys the milk for the restaurant
that he owns. Moe buys the milk for his own family consumption.
Under Article 9, the milk if used as collateral by each of the
parties for a loan is classified as:

Group of answer choices:

Give this one a try later!

farm product on Farmer

McDonalds' farm, inventory inventory on Farmer McDonalds'
in the Winn Dixie store and farm, in the Winn Dixie store, and
Joe's restaurant, and Joe's restaurant, and consumer
consumer goods in Moe's goods in Moe's home.
home.

farm product on McDonalds'

farm product on McDonalds'
farm, consumer goods in Winn
farm, inventory in the Winn Dixie
Dixie store, inventory in Joe's
store, consumer goods in Joe's
restaurant, and consumer goods
restaurant and Moe's home.
in Moe's home.

Don't know?

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Term 46 of 65

Walmart sells household appliances. The Fitness Center buys

some appliances from Walmart to furnish its lounge for use by its
members. Many customers of Walmart however buy the
appliances for their own houses. National Bank intends to make a
loan to The Fitness Center and wants to take a security interest in
the appliances that The Fitness Center buys from Walmart. How
should the security agreement describe the appliances using the
code classification?
Group of answer choices:

Give this one a try later!

Inventory, equipment and

Inventory.
consumer goods.

Equipment. Inventory and equipment.

Don't know?

Term 47 of 65

Mary owns a pottery studio and sells her pottery pieces of her
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own design through Pottery Gallery. Mary understands that

Pottery Gallery would try to sell her pottery pieces and would
return to her any unsold pieces. Mary delivered $2,500 worth of
pottery pieces featuring local motifs to Pottery Gallery. In this
transaction, what may be the security interest under UCC 9?

Give this one a try later!

Mary, the consignor, is treated as a creditor in this transaction. Mary is

essentially providing credit to finance the consignee's inventory.

canvas

The title reserved by the consignor is treated as security interest.

canvas

The pottery pieces. The consignor's reservation of title is treated as a

security interest in the collateral.

canvas

Pottery Barn is treated as a debtor in this situation. see definition of "debtor"

canvas

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Don't know?

Term 48 of 65

Is the same version of UCC Article 9 found in every state?

Group of answer choices:

Give this one a try later!

No, because state

legislatures have made
Yes, because as federal law, it is
changes to the uniform
uniform through the states.
version when they enacted
the statute.

Yes, because each state has No, because some states have
adopted the uniform version. not adopted Article 9.

Don't know?

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Term 49 of 65

CarMax sells a car to Bob for $25,000. Bob puts down $5,000 as
a down payment. Bob agrees to pay the rest in installments of
$1,000 by signing a promissory note (a formal promise to pay).
Bob fails to make his payments as promised. On these facts, what
can CarMax choose to do?

Group of answer choices:

Give this one a try later!

CarMax can sue Bob for

damages for breach of CarMax can repossess the car
contract and get a because Bob promised to pay.
judgment against Bob.

CarMax can repossess the car CarMax can repossess the car or
because CarMax has a security sue for damages due to breach of
interest in the car. contract.

Don't know?

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Term 50 of 65

In which of the following transactions is Big Corp. not a "debtor"?

Give this one a try later!

Big Corp purchased from Seller a piece of equipment that (unknown to Big
Corp.) is subject to a perfected security interest held by Seller's primary
lender.

Big Corp holds for resale several units of inventory delivered to it by

Supplier under a transaction that is a "consignment" as defined by Article 9.

Big Corp sells 40% of its oustanding accounts to Finance Company.

Big Corp is the primary obligor on a $1 million loan that is secured by

the assets of Big Corp's two subsidiaries.

Don't know?

Term 51 of 65

Johnnie borrowed money from Citibank to expand his law

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practice. To secure the loan, he granted Citibank a security

interest in all of his personal property including an expensive
painting. Johnnie agreed that Citibank could take the painting if
he defaulted. Johnnie signed a security agreement which
described the collateral as "all of the debtor's personal
property." Citibank gave Johnnie the loan. Citibank did not file
any financing statement. When Johnnie defaulted on his loan,
Citibank tried to repossess the expensive painting as collateral.
Can Citibank do so under Article 9?
Group of answer choices:

Give this one a try later!

Yes, because as between creditor

No, because without filing, third
and debtor, the creditor only
parties lack notice of Citibank's
needed to make a good faith
security interest.
effort to perfect.

No, because the security interest

No. Citibank does not have
is not effective because Citibank
a valid security interest in
failed to comply with the filing
the painting.
requirements of Article 9.

Don't know?

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Term 52 of 65

Pemulis Auto offers to sell Lloyd, an Uber driver, a Somme Sedan

for a down payment of $1,000, along with 36 monthly payments
of $400. Lev likes those terms, but would prefer a lease, on the
theory that he could deduct the lease payments as a business
expense. So Pemulis Auto offers a Lease Agreement, under
which Llovd ("Lessee") pays down $1,000 and is obliged to make
36 monthly lease payments of $400 to Pemulis ("Lessor"), and
then will have an option to purchase the car for $1. The Lease
Agreement further provides that if Lev fails to make the paynents,
Pemulis Auto may repossess the car. Lev signs and hands over
$1,000. Pemulis Auto signs the papers to have the car registered
in Lloyd's name and reminds him to get insurance on the car. Is
the transaction subject to Article 9?
a. No. It is a lease, not a secured loan. consignment. sale of
accounts, or agricultural lien.
b. Yes. In substance. the transaction is a sale of the car on credit.
with the car serving as collateral.
c. No. Article 9 does not apply to cars, which are regulated by
Lemon laws and the like.
d. No. Article 9 does not apply to true leases, and the parties
have draftedan agreement using only lease terminology.

Give this one a try later!

B is the best answer. Article 9 applies to "a transaction, regardless of

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B is the best answer. Article 9 applies to "a transaction, regardless of

its form, that creates a security interest in personal property or fixtures
by contract." §9-109(a). Regardless of the legal form used (lease, sale,
trust, assignment, etc.), Article 9 will apply if the substance of the
transaction is that personal property is used as collateral for an
obligation. Here, the form of the transaction was a lease, but the
substance was a secured sale.The business deal was that Lev was
obliged to pay for the car and was entitled to keep it, subject to
Pemulis Auto's right of repossession in the event of default. In
substance. that is a sale of a car on credit, with the car serving as
collateral. It was not a true lease. contrary to D. C is misleading. Other
laws apply to cars, but they do not displace Article 3.
from pages of 50-51 in textbook

c) No, because Dave never authenticated a security agreement. The

problem is that Carl failed to creat a security interest in David's football card
collection because David did not authenticate any security agreeement.
Authentication of a security agreement is necessary here because Carl does
not have possession of the card collection. David, the debtor, still has
physical possession of the cards. The email is not evidence of an security
agreement because it was an inquiry from David asking whether Carl was
willing to loan the money. Even if one can argue that the email may satisfy
the authentication requirement, the content does not evidence an
agreement. Filing of a financing statement is not relevant when the question
is whether a security interest exists in the first place.

A is the best answer. The transaction is just the secured loan under another
name. The terms are the same: Nightflyer hands over $50,000 and in one
year hang Equipment pays $55,000 or loses its equipment C and D are red
herrings. Although the parties used only sales terms, the substance governs
over form, contrary to B.

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from pages of 50-51 in textbook

E is the best answer. This question gives some of the transactions excluded
from Article 9 by $9-109. There was already well-established law dealing
with mortgages, so Article 9 excludes transactions where the collateral is
real estate. Insurance as collateral is specifically excluded. Although
assignments of accounts generally are made subject to Article 9, some
assignments are excluded because the protections of Article 9 are not
necessary. The assignment of an account for collection is excluded. That is
not an assignment of which Darrow's creditors need notice. True leases are
not secured transactions, although a lease that has the effect of a secured
transaction is within Article 9. A one-day car rental is a true lease, not a
disguised secured transaction.
from pages of 50-51 in textbook

Don't know?

Term 53 of 65

Body Fitness Manufacturer (BFM) signed an agreement titled

"equipment lease" with Equipment Financing, Inc. Under the
agreement, BFM was obligated to make payments of $10,000 per
month for four years as rental payment for an assembly line and
had an option to buy the assembly line at the end of the four
year period for $1. The agreement also provided that, on default,
Equipment Financing, Inc. had the right to terminate the lease
and take back the assembly line. In this transaction, what is being
treated as the collateral under UCC 9?
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Give this one a try later!

A. his wedding album

Article 9-102(a) defines "consumer goods" as goods that are used or bought
for use primarily for personal, family, or household purposes." A good is
defined as something that is movable when the security interest becomes
enforcewable. of the four choices, only the wedding album and photocopier
qualify as "goods". The photocopier was used primarily for business
purpose. A certificate of deposit is an instrument. An income tax refund is an
example of a "general intangible" because it does not fit into any other
classification label.

The assembly line

quiz 4-2

a) DBTEL owns the assembly line, but Equipment Financing, Inc. can
repossess the assembly line.

In this example, the so called lease is clearly a credit sale in disguise

because the lessee is able to become the owner by paying $1. Because it is
a disguised sale, the equipment no longer belongs to Equipment Financing,
the lessor. Rather, it belongs to DBTEL. The question remains whether
Equipment Financing has the right to take back the assembly line upon
DBTEL's default. Here, Equipment Financing will have no trouble establishing
a valid security interest. It has given value by providing the financing for the

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equipment, the debtor (lessee) has rights in the equipment because it

purchased it, and debtor authenticated the security agreement (the lease
was signed by DBTEL.)

February 15

In this case, the security interest attached on the day when all of the
requirements for the creation of the security interest were satisfied. That was
on February 15 when the bank committed to giving the debtor a line of
credit. Under 1-204, a person gives value if the person makes a binding
commitment to extend credit whether or not drawn upon by the debtor.

Don't know?

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Term 54 of 65

David and Sally were having lunch and discussing the sale of
Sally's car, a 1963 MGB, to David. Sally wanted $10,000 for the
car, but David did not have that much money. Sally said: "I'll let
you pay $1,000.00 each month. If you miss any payment, I can
take the car back." David agreed. Sally wrote these notes on a
napkin: Sally to sell David 1963 MGB, $10,000 total. David to pay
$1,000 per month, take back if no pay. David initialed the napkin
and they shook hands on the deal. David has now missed a
monthly payment. Can Sally take the car back?
Group of answer choices:

Give this one a try later!

No, because Sally did not actually No, because Sally failed to obtain
sign any agreement. a valid security interest in the car.

It depends on whether parol

Yes, because Sally has a
evidence of the security
valid security interest in the
agreement is admissible to
car.
supplement the writing

Don't know?

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Term 55 of 65

Pursuant to a state statute permitting it to do so, an auto repair

shop retains possession of David's car when David fails to pay for
the repairs that the repair shop did on his car. Is this a Article 9
secured transaction?

Group of answer choices:

Give this one a try later!

Yes, because the right to retain No, because the right to

possession of the car creates a retain the car by the auto
security interest in personal repair shop is not given
property. consensually.

Yes, because the transaction

No, because the repair shop is
involves a lien in personal
not extending credit.
property.

Don't know?

Definition 56 of 65

In this fact pattern, the equipment lease is most likely going to

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In this fact pattern, the equipment lease is most likely going to

be treated as a sale with a security interest attached to the
assembly line. The Equipment Financing's reservation of title is
treated as a security interest under Article 9.

quiz 4-2

Give this one a try later!

On Monday, Carl and David were having lunch at a local restaurant when
David asked Carl whether he could borrow $500 from Carl. Carl responded:
"It is not that I don't trust you, but I will feel better if I could hold onto your
Ted Williams rookie baseball card until you pay it back. "It is a deal," said
David. David and Carl shook hands on it. On Tuesday, David gave the
baseball card to Carl and Carl gave David $500. When, if ever, did security
interest attach to the baseball card?
Group of answer choices:
a) Never, because the requirements for attachment of security interest were
not satisfied.
b) On Tuesday when David gave Carl the baseball card.
c) On Monday when they made the agreement.
d) On Tuesday when Carl gave David $500.

Body Fitness Manufacturer (BFM) signed an agreement titled

"equipment lease" with Equipment Financing, Inc. Under the
agreement, BFM was obligated to make payments of $10,000 per
month for four years as rental payment for an assembly line and had
an option to buy the assembly line at the end of the four year period
for $1. The agreement also provided that, on default, Equipment
Financing, Inc. had the right to terminate the lease and take back the

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assembly line. Assume that this transaction is included within UCC 9,

what is the security interest created by the creditor?

Aunt Em lent Dorothy, her niece, $3,000 pursuant to an oral agreement. A

couple of months later, Aunt Em needed to borrow some money from
National Bank. She signed a security agreement with National Bank, granting
the bank a security interest in her right to payment under the oral agreement
with Dorothy. What category best describes Aunt Em's right under the oral
agreement using Article 9 classification?
Group of answer choices:
a) General intangible.
b) An account.
c) A contract right.
d) Payment intangible.

Walmart sells household appliances. The Fitness Center buys some

appliances from Walmart to furnish its lounge for use by its members. Many
customers of Walmart however buy the appliances for their own houses.
National Bank intends to make a loan to The Fitness Center and wants to
take a security interest in the appliances that The Fitness Center buys from
Walmart. How should the security agreement describe the appliances using
the code classification?
Group of answer choices:
a) Inventory, equipment and consumer goods.
b) Inventory.
c) Equipment.
d) Inventory and equipment.

Don't know?

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Term 57 of 65

David paints portrait of animals for a living. On March 1, David

and Fidelity Bank entered into a security agreement that
describes the collateral as "all accounts now owned as well as
any and all accounts that may hereafter be acquired by the
Debtor." On that day, Fidelity Bank gave David the loan. On
March 8, David billed Sam $1,000 for painting a portrait of Sam's
dog. On April 15, David billed Catherine $500 for painting a
portrait of her cat. Which of the following statement is correct?
Group of answer choices:

Give this one a try later!

Fidelity Bank's security interest Fidelity Bank's security interest

attaches only to David's bill to attaches only to David's bill to
Sam. Catherine.

Fidelity Bank's security interest

Fidelity Bank's security
failed to attach to either of the
interest attached to David's
bills because it did not file a
bills to Sam and Catherine.
financing statement.

Don't know?

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Term 58 of 65

Tina bought a bedroom furniture set for herself on credit from

Walker Thomas Furniture Co. She signed a contract in which she
promised to pay Walker Thomas Furniture Co. $100 a month for
12 months and granted Walker Thomas Furniture Co. a security
interest in the bedroom furniture. Walker Thomas Furniture Co.
then borrowed money from National Bank and granted a security
interest in the contract signed by Tina. How would you classify
the bedroom furniture and the contract using Article 9
classification in the two transactions?
Group of answer choices:

Give this one a try later!

Consumer goods and Consumer goods and accounts

chattel paper. receivable.

Consumer goods and document. Furniture and chattel paper.

Don't know?

Term 59 of 65

Robin wanted to borrow money from Citibank to start a small

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Robin wanted to borrow money from Citibank to start a small

business, but was told that he had to have some collateral for the
loan. He asked his mother whether he could use her diamond
wedding ring as collateral for a loan. His mother agreed. Robin
then signed a loan agreement with Citibank which described
Robin's mother's diamond ring as the collateral. The agreement
provided that Citibank could repossess the wedding ring if Robin
failed to pay back the loan. Unfortunately, Robin's business idea
did not work out and he defaulted on his loan. Citibank now
wants to repossess the wedding ring. Which of the following
statements is correct?
Group of answer choices:

Give this one a try later!

Citibank can repossess the Citibank cannot repossess the

wedding ring because the parties wedding ring because Citibank
signed a loan agreement. failed to give value.

Citibank can repossess the

Citibank cannot repossess
wedding ring because Robin
the wedding ring.
failed to pay back the loan.

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Term 60 of 65

Mary owns a pottery studio and sells her pottery pieces of her
own design through Pottery Gallery. Mary understands that
Pottery Gallery would try to sell her pottery pieces and would
return to her any unsold pieces. Mary delivered $2,500 worth of
pottery pieces featuring local motifs to Pottery Gallery. In the
transaction between Mary and Pottery Gallery, which party may
be treated as a debtor under UCC 9?

Give this one a try later!

Mary, the consignor, is treated as a creditor in this transaction. Mary is

essentially providing credit to finance the consignee's inventory.

canvas

Pottery Barn is treated as a debtor in this situation. see definition of

"debtor"

canvas

The title reserved by the consignor is treated as security interest.

canvas

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Multiple Choice Secured Transactions | Quizlet 4/15/24, 3:31 PM

The pottery pieces. The consignor's reservation of title is treated as a

security interest in the collateral.

canvas

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Term 61 of 65

Carl and Ben were studying in the library and while taking a
break, Carl told Ben that he was trying to sell his washer and
dryer. Ben had been looking to buy a washer and dryer to furnish
his apartment. Ben agreed to buy the washer and dryer. Because
Ben did not have $500 for the purchase price, Carl proposed to
Ben that Ben could pay $50 as a down payment and thereafter
$50 a month and Carl had the right to take the washer and dryer
back if Ben did not pay the entire purchase price. Ben agreed.
After they finished studying at the library, Carl used his pickup
truck and delivered the washer and dryer to Ben. Neither Carl
nor Ben wrote anything down. After two payments, Ben stopped
paying. Which one of the following statements is correct?
Group of answer choices:

Give this one a try later!

Carl can have his washer and

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Multiple Choice Secured Transactions | Quizlet 4/15/24, 3:31 PM

Carl can have his washer and

Carl can have his washer and
dryer back because he sold the
dryer back because he has a
washer and dryer on credit to
security interest in them.
Ben.

Carl cannot have his washer Carl cannot have his washer and
and dryer back because he dryer back because Ben has
does not have a security taken possession of the washer
interest in them. and dryer.

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Multiple Choice Secured Transactions | Quizlet 4/15/24, 3:31 PM

Term 62 of 65

Farmer McDonalds stored 9,000 bushels of wheat in the Farmer's

Co-Op grain elevator and received a receipt for the wheat.
National Bank then loaned McDonalds $10,000 and took a
security interest in the receipt. How would you describe the
collateral in the loan transaction between Farmer McDonalds
and National Bank?
Group of answer choices:

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General intangible. Documents.

Farm products. Goods.

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Multiple Choice Secured Transactions | Quizlet 4/15/24, 3:31 PM

Term 63 of 65

John is a professional photographer who lives in New Orleans.

He wants to borrow $2,000 from his mother who insists on
collateral. Which of the following assets offered by John is a
"consumer good"?

Group of answer choices

Give this one a try later!

A photocopier that he used most

His wedding album of the time for his work as a
professional photographer.

A claim against the state of

Louisiana for an income tax A certificate of deposit.
refund.

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Term 64 of 65

David owned and operated a women's leather goods store, as a

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Multiple Choice Secured Transactions | Quizlet 4/15/24, 3:31 PM

sole proprietor. He needed to borrow money for his business

expenses. In addition to leather shoes, the store sold belts and
purses. He also had some accounts receivable from his preferred
customers who bought items on store credit. In addition, he
owned a Dell desk top computer which he used to keep track of
his purchase orders, sales and inventory. Citibank agreed to loan
the necessary funds if David gave sufficient security for the loan.
David agreed and signed a security agreement which described
the collateral as "Debtor's Dell desk top computer and all of his
existing and after-acquired women's shoes." Citibank has a
security interest in which of the following choices?
Group of answer choices:

Give this one a try later!

Debtor's Dell desk top

computer and all of the Debtor's inventory and accounts,
existing and after-acquired existing and after-acquired.
women's shoes.

Debtor's equipment and

Debtor's inventory, accounts, and
inventory, existing and after-
equipment.
acquired.

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Term 65 of 65

Mary owns a pottery studio and sells her pottery pieces of her
own design through Pottery Gallery. Mary understands that
Pottery Gallery would try to sell her pottery pieces and would
return to her any unsold pieces. Mary delivered $2,500 worth of
pottery pieces featuring local motifs to Pottery Gallery. In the
transaction between Mary and Pottery Gallery, who may be a
creditor under UCC 9?

Give this one a try later!

Mary, the consignor, is treated as a creditor in this transaction. Mary is

essentially providing credit to finance the consignee's inventory.

canvas

d. UCC Article 9 covers generally consensual liens on personal property

and fixtures.

quiz 4-1

a. CarMax can sue Bob for damages for breach of contract and get a
judgment against Bob.

quiz 4-1

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Multiple Choice Secured Transactions | Quizlet 4/15/24, 3:31 PM

d) a loan agreement.

The parties signed the agreement, but there is no indication of any security
interest in personal property or fixtures created by the transaction.

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Privacy Terms English (USA)

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