VA Bar Secured Transactions 3

Question 1

Two unperfected security interests in the same collateral are in conflict. Which has priority under UCC Article 9?

Accepted Answer

The security interest that attached first

Answer

Under UCC § 9-322(a)(3), as between two unperfected security interests, priority goes to the one that first attached to the collateral.

Question 2

A PMSI in inventory obtains superpriority over a prior perfected security interest only if the PMSI holder:

Accepted Answer

Perfects before the debtor receives the inventory AND sends written notice to prior secured parties before the debtor receives it

Answer

Under UCC § 9-324(b), inventory PMSI superpriority requires both pre-delivery perfection AND written notification sent to prior secured parties before the debtor receives the inventory.

Question 3

Bank holds a perfected 'all assets' security interest. Supplier sells equipment to Debtor on credit, retaining a PMSI, and perfects 15 days after Debtor receives the equipment. What is Supplier's priority as to the equipment?

Accepted Answer

Supplier has priority because it perfected within the 20-day superpriority window

Answer

Under UCC § 9-324(a), a PMSI in non-inventory goods has superpriority over prior perfected security interests if perfected within 20 days of the debtor's receipt — Supplier's 15-day filing qualifies.

Question 4

Bank 1 files a financing statement covering Debtor's accounts in January but its security agreement is later discovered to be fatally defective. Bank 2 files a valid security interest in the same accounts in March. Who has priority?

Accepted Answer

Bank 2, because Bank 1's security interest never attached due to the defective agreement

Answer

A fatally defective security agreement prevents attachment, so Bank 1 has no security interest despite its earlier filing, giving Bank 2 — with a valid interest — priority.

Question 5

A buyer in ordinary course of business takes collateral free of a security interest created by the seller. This protection applies even if:

Accepted Answer

The buyer knows of the existence of the security interest at the time of purchase

Answer

Under UCC § 9-320(a), a buyer in ordinary course of business takes free of security interests created by the seller even with knowledge that the security interest exists.

(VA Bar) Virginia Bar Exam Practice Test

(VA Bar) Virginia Bar Exam Practice Test

VA Bar Secured Transactions 3