Secured Transactions Flashcards

A bank lends money to a boutique and takes a security interest in "all inventory, now owned or hereafter acquired." The boutique later buys new dresses. Does the bank's security interest attach to the new dresses?

Answer: Yes, because an after-acquired property clause is effective for inventory

Under UCC 9-204, after-acquired property clauses are generally enforceable, especially for inventory.

A creditor files a financing statement listing the debtor as "Mike's Auto" when the debtor's registered organization name is "Michael's Automotive Repair, LLC." A standard search under the correct name does not retrieve the filing. What is the result?

Answer: The financing statement is seriously misleading and ineffective

Under UCC 9-506, a name error is seriously misleading unless a search under the correct name using standard search logic would find the filing.

A lender takes and perfects a purchase-money security interest (PMSI) in a restaurant's new oven by filing 15 days after the restaurant receives delivery. A judgment lien attached to the oven 5 days after delivery. Who prevails?

Answer: The lender, because a PMSI filed within 20 days of delivery relates back to the delivery date

Under UCC 9-317(e), a PMSI perfected by filing within 20 days after the debtor receives the collateral takes priority over intervening lien creditors.

A secured party has a perfected security interest in a debtor's equipment. The debtor sells the equipment to a buyer without the secured party's authorization. Which statement is correct?

Answer: The security interest continues in the equipment in the buyer's hands

Under UCC 9-315(a), a security interest survives disposition of the collateral unless the secured party authorized the sale free of the interest.

A consumer buys a refrigerator on credit from an appliance store, which retains a security interest. The store never files a financing statement. Is the store's interest perfected?

Answer: Yes, because a PMSI in consumer goods is automatically perfected upon attachment

Under UCC 9-309(1), a PMSI in consumer goods is perfected automatically upon attachment without filing.

Two creditors have perfected security interests in the same equipment: Creditor A filed first but attached second; Creditor B attached first but filed second. Who has priority?

Answer: Creditor A, because priority goes to the first to file or perfect

Under UCC 9-322(a)(1), priority among perfected security interests goes to the first party to file or perfect, whichever is earlier.

A debtor grants a security interest in a deposit account maintained at First Bank to Second Bank as lender. How can Second Bank perfect its interest in the deposit account as original collateral?

Answer: Only by obtaining control, such as a control agreement with First Bank

Under UCC 9-312(b)(1), a security interest in a deposit account as original collateral can be perfected only by control.