DE Bar Secured Transactions 3

Question 1

A debtor uses a tractor 90% of the time on the family farm and 10% for personal errands. For Article 9 classification purposes, the tractor is best classified as what type of collateral?

Accepted Answer

Equipment

Answer

Goods used primarily in a business or farming operation are equipment, and classification depends on the debtor's principal use of the collateral.

Question 2

A lender files a financing statement on June 1 but the security agreement is signed and value is given on August 1. A second lender attaches and perfects by filing on July 1. Who has priority in the collateral?

Accepted Answer

The first lender, because priority dates from its earlier filing

Answer

Under UCC 9-322(a)(1), priority goes to the first to file or perfect, so the first lender's June 1 filing gives it priority even though attachment came later.

Question 3

A consumer buys a refrigerator on credit from an appliance store, which retains a PMSI. The store never files a financing statement. The consumer later sells the refrigerator to a neighbor for personal use, who pays value and has no knowledge of the security interest. Who prevails?

Accepted Answer

The neighbor, under the garage-sale (consumer-to-consumer) exception since no financing statement was filed

Answer

Under UCC 9-320(b), a buyer of consumer goods for personal use who pays value without knowledge takes free of an automatically perfected PMSI unless a financing statement was filed.

Question 4

A secured party with a perfected security interest in a debtor's inventory claims the cash the debtor received from selling that inventory. For how long is the security interest in the identifiable cash proceeds perfected?

Accepted Answer

It remains continuously perfected because the proceeds are identifiable cash proceeds

Answer

Under UCC 9-315(d)(2), a security interest in identifiable cash proceeds remains perfected beyond the 20-day period without further action.

Question 5

A debtor corporation is incorporated in Delaware but has its chief executive office and all collateral in Pennsylvania. Where must a creditor file a financing statement to perfect a security interest in the debtor's accounts?

Accepted Answer

Delaware, the state of incorporation

Answer

A registered organization is located in its state of organization under UCC 9-307(e), so filing must occur in Delaware regardless of where offices or collateral sit.

(DE Bar) Delaware Bar Exam Practice Test

(DE Bar) Delaware Bar Exam Practice Test

DE Bar Secured Transactions 3