DE Bar Secured Transactions 2

Question 1

A bank takes a security interest in a debtor's equipment but never files a financing statement. The debtor later sells the equipment to a buyer who knows about the security interest. What is the buyer's status?

Accepted Answer

The buyer takes subject to the security interest because attachment alone makes it effective against the debtor and third parties with knowledge

Answer

An unperfected security interest is still enforceable against buyers who have knowledge of it; only buyers without knowledge who give value take free under UCC 9-317(b).

Question 2

A debtor grants a security interest in 'all inventory now owned or hereafter acquired.' Six months later the debtor acquires new inventory. When does the security interest attach to the new inventory?

Accepted Answer

When the debtor acquires rights in the new inventory

Answer

Under UCC 9-204, an after-acquired property clause is effective, but attachment occurs only when the debtor acquires rights in the new collateral.

Question 3

A creditor perfects a security interest in a debtor's negotiable promissory note. Which method of perfection gives the creditor priority over a later purchaser who takes possession of the note for value?

Accepted Answer

Taking possession of the note

Answer

Possession of a negotiable instrument defeats competing claims because a purchaser who takes possession for value in ordinary course can otherwise achieve priority over a filed interest under UCC 9-330(d).

Question 4

A seller delivers goods to a debtor and retains a purchase-money security interest (PMSI) in the goods, which are equipment. To have priority over an earlier-filed blanket lien, the seller must perfect within what period?

Accepted Answer

Within 20 days after the debtor receives possession

Answer

Under UCC 9-324(a), a PMSI in goods other than inventory has priority if perfected within 20 days after the debtor receives possession of the collateral.

Question 5

A financing statement lists the debtor as 'Bob's Auto Shop' when the debtor is actually an individual named Robert Smith. A search under 'Smith, Robert' using the filing office's standard search logic does not disclose the filing. What is the result?

Accepted Answer

The filing is seriously misleading and ineffective

Answer

Under UCC 9-506, a financing statement with an incorrect debtor name is seriously misleading and ineffective unless a search under the correct name using standard search logic would disclose it.

(DE Bar) Delaware Bar Exam Practice Test

(DE Bar) Delaware Bar Exam Practice Test

DE Bar Secured Transactions 2