a.

232 MODULE 26 SECURED TRANSACTIONS

MULTIPLE-CHOICE A~SWERS

1 d - d 1 d 2 c - 2 -
- 8. - - - - - -
2.. a - - 9. a - - 5.
16. c - - 2.
23. b - - 9 c
30. - -
3. a - - 10. d - - 17. d - - 24. d - -
4. a 11. b 18. a 25. a
5. c
-
- .
-
- 12. b
-
-
-
- 19. d
-
-
-
- 26. c
-
-
-
-
6. c - - 13. a - - 20. d - - 27. a - - 1st: ~30= - %
7. c - - 14. c - - 21. d - - 28. b - - 2nd: ~30= - %
MULTIPLE-CHOICE ANSWER EXPLANATIONS

B. Attachment of Security Interests C.4. Filing a Financing Statement

1. (d) Under the Revised Article 9 on Secured Trans-
actions, attachment of a security interest takes place when
the secured party gives value, the debtor has rights in the
collateral, and one of the following three is true:
a. The secured party must possess the collateral if
the
debtor agrees to it
b. The secured party must have control of
certain
types of collateral, or
b. The secured party must have a signed security
agreement (or an authenticated electronic transmis-
sion).
2. (a) An after-acquired property clause in a security
agreement allows the secured party's interest in such prop-
erty to attach once the debtor acquires the property, without
the need to make a new security agreement. These clauses
are typically used for inventory and accounts receivable, and
can also be used for equipment.
3. (a) The security interest did attach because there
was a signed security agreement, Gardner gave value, and
Holland had rights in the collateral. Upon attachment,
Gardner's security interest is fully enforceable against Hol-
land. Even though Gardner never perfected the security
interest, it still has priority over Boldon's interests because
Boldon was aware 'of the security interest.
4. (a) Security interests in tort claims are covered un-
der the Revised UCC Secured Transactions Article; this is
not true of after-acquired commercial tort claims,
s. (c) In order for attachment of a security interest to
occur, three elements must take place. First, the secured
party must give value, second, the debtor must have rights in
the collateral, and third, there must be a security agreement.
This security agreement may be oral if the secured party has
possession or control of the collateral. Otherwise, it must be
in writing and signed by the debtor. An exception to the
signature requirement is made if it is an authenticated elec-
tronic transmission.
6. (c) In order for a security interest to attach, there
must be a valid security agreement, the secured party must
have given value, and the debtor must have rights in the
collateral. If anyone of these items is missing, attachment
cannot take place. Answer (a) is incorrect because the secu-
rity interest may be oral if the secured party has possession
or control of the collateral. Answer (b) is incorrect because
if the security agreement is in writing, the secured party does
not need possession of the collateral to achieve attachment.
Answer (d) is incorrect because the secured party must give
value, not necessarily consideration. A preexisting claim,
although not consideration, does count as value.
7. (c) Perfection of a security interest is important in
that it establishes for a secured party priority over the claims
" that may be made by most subsequent secured creditors.
Answer (a) is incorrect because there are three methods of
obtaining perfection and one of them is filing a financing
statement. Answer (b) is incorrect because subsequent
creditors may still obtain security interests in the same col-
lateral although they will normally obtain a lower priority.
Answer (d) is incorrect because of times the debtor retains
possession of the collateral.
8. (d) Perfection by filing a financing statement will
not defeat all other parties who acquire an "interest in the
same collateral; rather, perfection by filing gives the secured
party most possible rights in the collateral. Note, purchasers
from a merchant in the ordinary course of business take the
collateral free from any prior perfected security interest.
The only time a purchaser would take the collateral subject
to a prior perfected security interest would be when the pur-
chaser knew that the merchant was selling the goods in vio-
lation of a financing statement. A creditor need not perfect
the security interest in order to enforce it against the debtor.
The filing of a financing statement does not protect the
de~tor's rights but rather the creditor's rights.
9., (a) Filing a financing statement is one method of
perfecting a security interest in personal property. Under the
Revised UCC Secured Transaction Article, a financing
statement must include the following: the names of the
debtor and creditor, and a listing or description of the collat-
eral. An after-acquired property provision, the creditor's
signature, and the collateral's location are not required to be
included in the financing statement.
C.S. Perfection by Possession
10. (d) One way to perfect a security interest is for the
secured party to take possession of the collateral in addition
to attaining attachment. A pawnbroker lending money is
such a case. There is a security agreement which may be
oral since the secured party has possession of the collateral.
The secured party gives value by lending the money. The
third step in attachment is that the debtor has rights in the
collateral such as ownership. Since these steps constitute
attachment, perfection is accomplished by the pawnbroker,
the secured party, taking possession of the collateral. The
secured transactions laws apply to security interests in per-
sonal property, not real property. The wholesaler (car
buyer), not the secured party, will have possession of the
collateral.
11. (b) In general, the best way to perfect a security
interest in a negotiable instrument is to take possession of
the instrument. This is true because negotiable instruments