Questions Flashcards
1
Q
X was in the business of selling radios. Y wanted to buy one of X’s radios, but was unable to do presently. X decided to give the radio to Y and Y could pay the purchase price later. In return, X would hold security interest in the radio. What type of interest does X have over the radio?
A
PMSI
- Consumer goods (radio)
- Y purchased radio on credit (Y to pay purchase price later)
2
Q
X was in the business of selling radios. Y wanted to buy one of X’s radios, but was unable to do presently. X decided to provide a loan to Y to purchase the radio. In return, X would hold security interest in the radio until Y repaid the loan. What type of interest does X have over the radio?
A
PMSI
- Consumer goods (radio)
- Y purchased radio with advance funds from X (Y to pay purchase price later)
3
Q
X had bought bicycles for him and his girlfriend to use on vacation. X wanted to borrow a loan from Bank. X agreed that Bank could obtain a security interest over X’s bicycles. What type of good is this?
A
Consumer goods (Article 9)
- Tangible goods
- For personal use (vacation)
4
Q
X is a business that sells new and used bicycles and bicycle equipment. X needed a loan for his business and borrowed £25,000 from Y. In return, Y obtained a security interest over X’s bicycles. What type of good is this?
A
Inventory (Article 9)
- Tangible goods
- For sale
5
Q
X is a farmer who looks after cows and sheep for collecting milk. X began to lose profit on his milking farm. X needed a loan. Y was happy to lend $15,000 in exchange for an interest over X’s cow and sheep. What type of good is this?
A
Farm products (Article 9)
- Tangible goods
- For farm use (collect milk from animals)
6
Q
X needed a heater for his company. Y was happy to lend a heating system to X. X then borrowed a loan from a Bank, who obtained a secured interest over the heating system. What type of good is this?
A
Equipment (Article 9)
- Tangible goods
- For business use (heating)
7
Q
X lent a loan to Y for $10,000 to be paid in monthly instalments. X was short on money so he borrowed money from Z. Z retained an interest over X’s ‘present and future accounts’. What type of collateral is this?
A
Accounts receivables (Article 9)
- Intangible goods
- Nature of goods => Receive debts from TP (Y)
8
Q
X lent a loan to Y for $10,000 to be paid in monthly instalments. X then decided to transfer his interest in his bank account to Z. Y was desperate to borrow more money, so he asked X how much he still owes him. X has not told Y about Z as of yet. What must X do?
A
1) Notify Y re Z
- Assignee
2) Notify Y re X’s disclaimer in bank account within 14 days after Y’s notice
9
Q
X was renting Y’s apartment for a few months. The contract included an option for X to purchase the apartment once his rent was finished. Does this fall within Article 9?
A
Yes
- Option to purchase at end of lease => Lease was intended as secured transaction
10
Q
X wanted to sell his house to Y that included installed heating systems. In the meantime, X needed a loan and would borrow from Bank. Bank wanted security over X’s sale of his house, as well as his heating systems. Is this allowed under Article 9?
A
Heating systems
- Fixture (considerable damage if removed) => Covered by Article 9
NOT house sale
- Land transfers are covered by common law (NOT covered by Article 9)
11
Q
X borrowed a loan from Y. In return, Y wanted security over X’s car. Y never took possession of the car and X never signed any agreement to provide security. However, Y did look after the car and handle financial rights over it. Eventually, X defaulted and Y wants to take the car. But X refuses. What must Y do?
A
Attachment
1) Y gave value to X (loan)
2) X had ownership rights over car
3) Y agreed to take security interest
- NO authenticated agreement/possession
- Y had control over car (provided reasonable care + reimbursed expenses and/or profit to X by using car)
12
Q
X borrowed a loan from Bank for his business. In return, Bank wanted security over X’s deposit in his account in Bank. X never signed any agreement to provide security. Eventually, X defaulted and Bank wants to take money from X’s account. Can Bank take X’s money?
A
Attachment
1) Bank gave value to X (loan)
2) X had ownership rights over account
3) Bank agreed to take security interest
- NO authenticated agreement/possession
- Bank had control over X’s account (non-consumer - for business) (Bank is secured party) => Automatic attachment
13
Q
X borrowed a loan from Y for his business. In return, Y wanted security over X’s deposit in his account in Bank. X deposited the money in his name. X and Y agreed that Y could take security. Eventually, X defaulted and Y wants to take money from X’s account. Can Y take X’s money?
A
NO attachment
- NO consent from Bank + X’s deposit in his own name (NOT Y’s)
14
Q
X borrowed a loan from Y for his business. In return, Y wanted security over X’s deposit in his account in Bank. X deposited the money in Y’s name. X and Y agreed that Y could take security, with Bank’s consent later on. Eventually, X defaulted and Y wants to take money from X’s account. X refused and told Bank not to give access to Y. Can Y take X’s money?
A
Attachment
1) Y gave value to X (loan)
2) X had ownership rights over deposit
3) X agreed to security interest
- X deposited in Y’s name
- X + Y + Bank signed authenticated agreement
- Bank to comply with Y’s orders (NOT X’s orders)
- X’s refusal/consent NOT required
15
Q
X borrowed a loan from Y. In return, Y wanted security over X’s car. X agreed to sign a loan agreement that provided Y with a security interest in ‘all property owned by X’. Eventually, X defaulted and Y wants to take the car. But X refuses. Can Y take X’s car?
A
NO attachment
- NO agreement to take security interest (NO authenticated agreement)
- Supergeneric description (all property owned by X)
16
Q
X borrowed a loan from Y. In return, Y wanted security over X’s car. X agreed to sign a loan agreement that provided Y with a security interest in X’s personal property, including a serial number for the car. Eventually, X defaulted and Y wants to take the car. But X refuses. Can Y take X’s car?
A
Attachment 1) Y provided value to X (loan) 2) X had ownership rights over car 3) X agreed to security interest - Authenticated agreement - Broad description (type - personal property) - Serial number of car => Enough to put subsequent creditors on notice of Y's secured interest over car
17
Q
X asked Y to help him with his university dissertation. In return, Y wanted security over X’s laptop. X agreed to sign a loan agreement that provided Y with a security interest. Eventually, Y finished the dissertation and wants X’s laptop. But X refuses. Can Y take X’s laptop?
A
NO attachment
- Y did NOT provide value to X (dissertation services)
18
Q
X borrowed a loan from Y. Months later, Y wanted security over X’s car because Y realised X may not pay the loan in time. X agreed to sign a loan agreement that provided Y with a security interest in X’s car. Eventually, X defaulted and Y wants to take the car. But X refuses. Can Y take X’s car?
A
Attachment
1) X signed authenticated agreement to give security to Y over X’s car
2) X had ownership rights over car
3) Y provided value to X
- Pre-existing debt
19
Q
X borrowed a loan from Y. Y wanted security over X’s car, which he never purchased from the actual owner. X agreed to sign a loan agreement that provided Y with a security interest in X’s car. Eventually, X defaulted and Y wants to take the car. But X refuses. Can Y take X’s car?
A
Attachment
1) Y provided value to X
2) X signed authenticated agreement to give security to Y over X’s car
3) X had ownership rights over car
- NO title required
- Possession required
20
Q
X borrowed a loan from Y. Y wanted security over X’s car. X agreed to sign a loan agreement that provided Y with a security interest in X’s car, prohibiting any alienation of the car. But the Federal Government decided to seize X’s car for failure to pay outstanding federal loans. Eventually, X defaulted on Y’s loan and Y wants to take the car. But X refuses. Can Y take X’s car?
A
NO attachment
- X’s car was transferred involuntarily to Fed Gov
- Prohibition on alienation NOT relevant
21
Q
X is a business that sells new and used bicycles. X needed a loan for his business and borrowed £25,000 from Y. In return, Y obtained a security interest over X’s bicycles including ‘all of X’s inventory whether now owned or hereafter acquired’. 2 weeks later, X received 30 more bicycles for sale from the bicycle manufacturer. However, X defaulted and Y now wants all of X’s bicycles. X refuses and has just received 10 more bicycles. Is Y entitled to X’s bicycles?
A
Attachment over X’s pre-existing + 30 bicycles
1) X signed authenticated agreement to create security interest over X’s bicycles
2) Y provided value to X (loan)
3) X had ownership rights over bicycles
- After-acquired property clause (hereafter acquired)
- Non-consumer goods (bicycles for sale) => Automatic attachment once X received 30 bicycles (NOT 10 bicycles)
22
Q
X tended to purchase a new game console at the end of every year. X purchased a playstation 4. X wanted to borrow a loan from Bank. X agreed that Bank could obtain a security interest over ‘all of X’s game consoles, whether now owned or hereafter acquired’. 2 weeks later, X purchased an xbox. However, X defaulted and Y now wants all of X’s game consoles. X refuses. Is Y entitled to X’s game consoles?
A
Attachment over X’s playstation 4
1) X signed authenticated agreement to create security interest over X’s game consoles
2) Y provided value to X (loan)
3) X had ownership rights over game consoles
- After-acquired property clause (hereafter acquired)
- Consumer goods (for personal use)
- X acquired ownership rights over playstation 4 at time of receiving loan => Y is entitled
- X did NOT acquire ownership rights over xbox within 10 days after receiving loan => Y is NOT entitled
23
Q
X tended to purchase a new game console at the end of every year. X purchased a playstation 4. X wanted to borrow a loan from Bank. X agreed that Bank could obtain a security interest over ‘all of X’s game consoles, whether now owned or hereafter acquired’. 10 days later, X purchased an xbox. However, X defaulted and Y now wants all of X’s game consoles. X refuses. Is Y entitled to X’s game consoles?
A
Attachment over X’s playstation 4 + xbox
1) X signed authenticated agreement to create security interest over X’s game consoles
2) Y provided value to X (loan)
3) X had ownership rights over game consoles
- After-acquired property clause (hereafter acquired)
- Consumer goods (for personal use)
- X acquired ownership rights over playstation 4 at time of receiving loan => Y is entitled
- X acquired ownership rights over xbox within 10 days after receiving loan => Y is entitled
24
Q
X loaned some money to Y. In return, X wanted to have security over Y’s car. X was concerned other creditors may claim priority over the car. Therefore, X filed a financing statement with the secretary of state. Has X’s security interest been perfected?
A
NO
- NO attachment => NO perfection
25
X purchased a stereo from Y on credit, giving a written promissory note and written security agreement in exchange for the stereo. X then obtained a loan from a secured creditor, Z with security over the stereo as well. X defaulted and Z claims the stereo is his. Who should take priority?
Y
| - Y took control of promissory note => Y's interest was perfected
26
X borrowed a loan from Y for his business. In return, Y wanted security over X’s deposit in his account in Bank. X deposited the money in Y’s name. X and Y agreed that Y could take security, with Bank’s consent later on. After a few months, Y requested access from Bank to X’s account, without informing X. Another creditor, Z, obtained a security over X’s account for a loan. Eventually, X defaulted and Y wants to take money from X’s account. Z claims he is entitled to the account. Who should take priority?
Y
| - Y took control of non-consumer deposit account => Y's interest was perfected
27
X wanted to buy bicycles for him and his girlfriend to use on vacation. X purchased the bicycles from Y with funds and promised to pay back Y. X signed an agreement providing that Y could obtain a security interest over X’s bicycles. Y is concerned whether his security interest has priority over other creditors. Is this true?
Perfection
- Consumer goods (bicycles for personal use)
- PMSI (advanced funds) + Attachment (agreement, ownership, value) => Perfection
28
X had bought bicycles for him and his girlfriend to use on vacation. X wanted to borrow a loan from Bank. X signed an agreement providing that Bank could obtain a security interest over X’s bicycles. Y is concerned whether his security interest has priority over other creditors. Is this true?
NO perfection
- Consumer goods (bicycles for personal use)
- NO PMSI + Attachment (agreement, ownership, value) => Financing statement filing required
29
X wanted to install a heating system into his house. X purchased the heating system from Y with funds and promised to pay back Y. X signed an agreement providing that Y could obtain a security interest over X’s heating system. Y is concerned whether his security interest has priority over other creditors. Is this true?
Perfection
- Fixture (heating system)
- PMSI (advanced funds) + Attachment (agreement, ownership, value) => Perfection
30
X purchased a heating system for his house. X wanted to borrow a loan from Bank. X signed an agreement providing that Bank could obtain a security interest over X’s heating system. Y is concerned whether his security interest has priority over other creditors. Is this true?
NO perfection
- Fixture (heating system)
- NO PMSI + Attachment (agreement, ownership, value) => Financing statement filing required
31
X wanted to drive a car to work. X purchased the car from Y with funds and promised to pay back Y. X signed an agreement providing that Y could obtain a security interest over X’s car. Y is concerned whether his security interest has priority over other creditors. Is this true?
NO perfection
- Motor vehicle (car)
- Attachment (agreement, ownership, value) => Notation on certificate of title required
32
X is a business that sells new and used bicycles and bicycle equipment. X wanted to purchase more bicycles to sell for his business. X purchased bicycles from Y by borrowing a loan and promised to pay back Y. In return, Y obtained a security interest over X’s bicycles. Y is concerned whether his security interest has priority over other creditors. Is this true?
NO perfection
- Inventory (bicycles for sale)
- Attachment (agreement, ownership, value) => Filing of financing statement required
33
X borrowed a loan from Y. In return, Y wanted security over X’s car. X agreed to sign a loan agreement that provided Y with a security interest over the car. Additionally, X signed a financing statement including X and Y’s names and addresses. For X’s name, he included his nickname that no one else addressed him by. However, it was still searchable under the filing office standard search logic. X forgot to include a description of the car and simply wrote ‘all property owned by X’. X filed the statement with the secretary of state. A year later, another creditor, Z, obtained perfection over the car. Five years later, X defaulted and both Y and Z claim the car is theirs. Who takes priority?
Z
- Consumer good (car) + NO PMSI => Financing statement filing required
- Y had attachment (agreement, ownership + value)
- Y had perfection (financing statement included; (1) X's nickname (searchable under filing office standard search logic => NOT seriously misleading error); (2) Y's name; (3) Description of car ('all property' => supergeneric is acceptable); (4) X signed statement; and (5) X filed with SoS => 5 years' effective)
- After 5 years => Y lost perfection over car
- Z takes priority (still 4 years' perfection)
34
X borrowed a loan from Y. In return, Y wanted security over X’s car. X agreed to sign a loan agreement that provided Y with a security interest over the car. Additionally, X signed a financing statement and filed the statement with the secretary of state. A year later, another creditor, Z, obtained perfection over the car. A year later, X changed his address in the financing statement. X defaulted. Who takes priority?
Z
- Y amended financing statement => Dated on date of amendment (1 year after Z's perfection date) => Z takes priority over Y
35
X wanted to buy bicycles for him and his girlfriend to use on vacation. X purchased the bicycles from Y with funds and promised to pay back Y. X signed an agreement providing that Y could obtain a security interest over X’s bicycles. Another creditor, Z, obtained a security interest over the bicycles. After using the bicycles on vacation, X wanted to start making profit by providing them at his gym for members to use. Who takes priority?
Z
- Consumer goods (bicycles for personal use)
- PMSI (advanced funds) + Attachment (agreement, ownership, value) => Y's perfection
- Z perfected after Y
- Changed use from consumer goods to inventory (for business use) => Y did NOT file financing statement => Z takes priority
36
X entered an agreement with Y to receive present and future advances from Y for the next six months. X signed an agreement providing that Y could obtain a security interest over X’s bicycle that he used for work, followed by filing a financing statement. After four months, Y now wanted to terminate the financing statement. Is this allowed?
NO
| - Y still has to pay outstanding future advances (2 months left)
37
X wanted to buy bicycles for his work. X purchased the bicycles from Y with funds and promised to pay back Y. X signed an agreement providing that Y could obtain a security interest over X’s bicycles, followed by filing a financing statement. Eventually, X received the bicycles. Within a week, Y now wants to terminate the financing statement. Is this allowed?
NO
- X has bicycles in possession
- PMSI
38
X borrowed a loan from Y. In return, X signed an agreement providing that Y could obtain a security interest over X’s bicycles used for vacation, followed by filing a financing statement. Y has no further loans to pay. Y now wants to terminate the financing statement. Is this allowed? If so, when must Y terminate?
Yes
- NO PMSI
- Consumer good (bicycle for vacation)
- Y must file termination statement within 1 month (after Y's obligations ended)
39
X borrowed a loan from Y. In return, X signed an agreement providing that Y could obtain a security interest over X’s bicycles used for work, followed by filing a financing statement. Y has no further loans to pay. X now wants to terminate the financing statement. Is this allowed? If so, when must Y terminate?
Yes
- NO PMSI
- Inventory (bicycle for business)
- Y must file termination statement within 2- days after X sent authenticated demand to terminate statement
40
X borrowed a loan from Y. In return, X signed an agreement providing that Y could obtain a security interest over X’s bicycles used for vacation, followed by filing a financing statement in State A. Another creditor, Z, obtained a security interest over the bicycles. X then traded the bicycles for a used computer with his friend in State A. One month later, X defaulted on his loan. Who has priority over the computer?
Y
- Consumer goods (bicycles for vacation)
- Y attached + perfected (financing statement)
- X exchanged bicycles for computer (exchange)
- Y's interest is perfected for first 20 days
- Y's interest remains perfected after 20 days (same office rule - Y's interest was perfected, would be perfected by filing financing statement in same office (State A), NOT purchased with cash proceeds)
- Y's interest in computer relates back to perfection date for bicycles (before Z's perfection) => Y has priority over Z
41
X borrowed a loan from Y. In return, X signed an agreement providing that Y could obtain a security interest over X’s bicycles used for vacation, followed by filing a financing statement in State A. Another creditor, Z, obtained a security interest over the bicycles in State B. X then traded the bicycles for a used computer with his friend in State B. One month later, X defaulted on his loan. Who has priority over the computer?
Z
- Consumer goods (bicycles for vacation)
- Y attached + perfected (financing statement)
- X exchanged bicycles for computer (exchange)
- Y's interest is perfected for first 20 days
- Y's interest does NOT remain perfected after 20 days (NO same office rule - Y's interest was perfected but would NOT be perfected by filing financing statement in same office (State A vs State B)) => Y must perfect within first 20-day period
- Y's interest in computer does NOT relate back to perfection date for bicycles => Y's interest in computer is NOT perfected (after Z perfected) => Z has priority over Y
42
X borrowed a loan from Y. In return, X signed an agreement providing that Y could obtain a security interest over X’s bicycles used for vacation, followed by filing a financing statement in State A. Another creditor, Z, obtained a security interest over the bicycles in State B. X then sold his bicycles to a friend in State B for $100 in cash. One month later, X defaulted on his loan. Who has priority over the computer?
Y
- Consumer goods (bicycles for vacation)
- Y attached + perfected (financing statement)
- X sold bicycles
- Y's interest is perfected for first 20 days
- Y's interest remains perfected after 20 days (cash proceeds + identifiable)
- Y's interest in computer relates back to perfection date for bicycles (before Z's perfection) => Y has priority over Z
43
X borrowed a loan from Y. In return, X signed an agreement providing that Y could obtain a security interest over X’s bicycles used for vacation, followed by filing a financing statement in State A. Another creditor, Z, obtained a security interest over the bicycles in State B. X then sold his bicycles to a friend in State B for $100 by cheque. One month later, X defaulted on his loan. Who has priority over the computer?
Z
- Consumer goods (bicycles for vacation)
- Y attached + perfected (financing statement)
- X sold bicycles
- Y's interest is perfected for first 20 days
- Y's interest does NOT remain perfected after 20 days (NOT identifiable cash proceeds - cheque) (NO same office rule - Y's interest was perfected but would NOT be perfected by filing financing statement in same office (State A vs State B)) => Y must perfect within first 20-day period
- Y's interest in computer does NOT relate back to perfection date for bicycles => Y's interest in computer is NOT perfected (after Z perfected) => Z has priority over Y
44
X obtained a loan from Y. In return, X signed an agreement providing Y with secured interest over X’s television without filing a financing statement. X then decided to sell the television to his friend, Z for $500, informing him that Y has secured interest. Later, X defaulted on his loan. Y claims he is entitled to the television. Who takes priority?
Y
- Y is unperfected (consumer good - NO financing statement filed)
- Z is buyer of value + in possession of television, BUT Z is aware of Y's interest => Y has priority over Z
- Unperfected creditor (Y) > Buyer (Z)
45
X wanted to buy a computer for his company. X received funds from Y to purchase Y’s computer. Y then delivered the computer to Z. One month later, X signed an agreement providing Y with security interest over the computer, followed by filing a financing statement. X then decided to sell the computer to buyer, Z. X later defaulted on his loan. Y claims he is entitled to the television. Who takes priority?
Z
- Y has PMSI over inventory (computer for business)
- Y attached before Z received computer
- Y did NOT file financing statement within 20 days after X received computer (1 month) => Z has priority over Y
- Buyer (Z) > PMSI (Y)
46
X runs a company that sells televisions. X obtained a loan from Y. In return, X signed an agreement providing Y with secured interest over X’s television and filed a financing statement. X then decided to sell the television to a customer, Z for $500, without informing him that Y has secured interest. Later, X defaulted on his loan. Y claims he is entitled to the television. Who takes priority?
Z
- Y has attached + perfected interest
- Z bought in ordinary course of business + NO knowledge of Y's interest => Z takes priority
- Buyer (Z) > Perfected creditor (Y)
47
X recently purchased a computer from a retailer for personal use on credit. In return, X signed an agreement providing Y with secured interest over X’s computer. X decided to sell the computer to his friend, Z for $500, without informing him that Y has secured interest. Later, X defaulted on his loan. Y claims he is entitled to the computer. Who takes priority?
Z
- Y has attached + perfected interest (consumer goods + PMSI)
- Z bought NOT in ordinary course of business from buyer of consumer good + PMSI + NO knowledge of Y's interest => Z takes priority
- Buyer (Z) > Perfected creditor (Y)
48
X recently purchased a computer from a retailer for personal use. X then obtained a loan from Y. In return, X signed an agreement providing Y with secured interest over X’s computer and filed a financing statement. X then decided to sell the computer to his friend, Z for $500, without informing him that Y has secured interest. Later, X defaulted on his loan. Y agreed that Z should take priority. Who takes priority?
Z
- Y has attached + perfected interest (consumer goods + PMSI)
- Z bought NOT in ordinary course of business from buyer of consumer good + NO knowledge of Y's interest, but NO PMSI => Y would take priority
- Y consented to Z taking priority => Z takes computer free of Y's interesst
- Buyer (Z) > Perfected creditor (Y)
49
X recently purchased a computer from a retailer for personal use. X then obtained a loan from Y, including future loans. In return, X signed an agreement providing Y with secured interest over X’s computer and filed a financing statement. X then decided to sell the computer to his friend, Z for $500. Y realised that Z purchased the computer as Y agreed to send another loan to X. Later, X defaulted on his loan. Who takes priority?
Z
- Z bought NOT in ordinary course of business
- Y promised to send future advance after learning Z's purchase => Z takes priority
- Buyer (Z) > Future advance creditor (Y)
50
X recently purchased a computer from a retailer for personal use. X then obtained a loan from Y, including future loans. In return, X signed an agreement providing Y with secured interest over X’s computer and filed a financing statement. X then decided to sell the computer to his friend, Z for $500. 1 month later, Y agreed to send another loan to X. Later, X defaulted on his loan. Who takes priority?
Y
- Z bought NOT in ordinary course of business
- Y promised to send future advance within 45 days after Z's purchase (30 days) => Y takes priority
- Future advance creditor (Y) > Buyer (Z)
51
X borrows a loan from Y, in exchange for X’s negotiable promissory note. Y borrows a loan from Z and gives Z security interest in the promissory note. Y gains possession of the note and sells it to B. Who takes priority over the note?
B
- B accepted negotiable instrument (promissory note) + in good faith => B takes priority
- Holder in due course (B) > Secured creditor (Z)
52
X borrowed a loan from Y, in exchange for a security interest over X’s accounts. X then deposited some money from his accounts into a deposit account. X wrote a check drawn on the deposit account and gave it to Z, telling him that X does not want Y to access his money. Who takes priority over the check?
Y
- Z received funds from X's deposit account
- Z colluded with X to violate Y's secured interest => Y takes priority
- Secured creditor (Y) > Transferee of deposit funds (Z)
53
X purchased a car on credit from Y. X gave security interest to Y in the car. X took the car to Repair Co. Repair Co kept the car for weeks because the repair parts did not arrive. State law gives Repair Co an artisan’s lien. Who takes priority over the car?
Repair Co
- Repair Co took car in ordinary course of business + retained car in possession + has artisan's lien under state law => Repair Co has priority
- Possessory lien holder (Repair Co) > Secured creditor (Y)
54
X purchased a laptop for work on credit from Y. At the time, X signed an authenticated agreement granting Y security over the laptop and filed a financing statement. Y then delivered the laptop to X. X then obtained a loan from Z with security over the laptop. Y recognised the loan and decided to notify Z about his security interest. Who takes priority?
Z
- Inventory (business)
- PMSI (on credit)
- Y perfected before X took possession of laptop
- BUT Y did NOT notify Z re Y's security BEFORE X took possession of laptop => Z has priority
- Secured creditor (Z) > PMSI (Y)
55
X purchased a laptop for work on credit from Y. At the time, X signed an authenticated agreement granting Y security over the laptop and filed a financing statement. X then obtained a loan from Z with security over the laptop. Y recognised the loan and decided to notify Z about his security interest. Y then delivered the laptop to X. Who takes priority?
Y
- Inventory (business)
- PMSI (on credit)
- Y perfected before X took possession of laptop
- Y notified Z re Y's security BEFORE X took possession of laptop => Y has priority
- PMSI (Y) > Secured creditor (Z)
56
X purchased a laptop for his own use on credit from Y. Y delivered the laptop to X. Three weeks later, X signed an authenticated agreement granting Y security over the laptop. X then obtained a loan from Z with security over the laptop. Z had no notice of Y’s security interest. Who takes priority?
Z
- Consumer good (personal use)
- PMSI (on credit)
- Y did NOT perfect within 20 days after X took possession of laptop (21 days) => Z has priority
- Y's lack of notice to Z NOT relevant (consumer goods)
- Secured creditor (Z) > PMSI (Y)
57
X needed to borrow some money to run his pizza restaurant. X obtained a loan from Y and provided a security interest over his restaurant building. X later borrowed a loan from Z. In return, X granted Z a security interest over X’s oven installed in his pizza restaurant. Who takes priority over the oven?
Y
- Y was first to record security interest over building (whole) + oven (fixture)
- Z was second to record security interest over oven (fixture)
- Whole holder (Y) > Fixture holder (Z)
58
X needed to borrow some money to run his pizza restaurant. X obtained a loan from Y and provided a security interest over his restaurant building. X later borrowed a loan from Z. In return, X granted Z a security interest over X’s oven installed in his pizza restaurant. Z was willing to take the oven and pay X for any damages caused. Who takes priority over the oven?
Y
- Y was first to record security interest over building (whole) + oven (fixture - identity lost)
- Z was second to record security interest over oven (fixture)
- Z did NOT reimburse actual owner (NOT X) for potential removal of oven
- Whole holder (Y) > Fixture holder (Z)
59
X obtained a loan from Y in exchange for a security interest in X’s tires on his car. X obtained another loan from Z in exchange for a security interest in X’s car. Z recorded later than Y, but Z put a notation on the certificate of title to the car. Who takes priority over the tires?
Z
- Z put notation on certificate of title for car (whole) + tires (accessions - identity NOT lost) => Z takes priority
- Whole holder (Z) > Accession holder (Y)
60
X previously borrowed money from Y and has failed to pay him back timely. In the meantime, X agreed to borrow a loan from Z in exchange for a security interest over X’s piano for personal use. X filed a financing statement while waiting for Z to send the loan to X. Y has now obtained a judgment lien from the court over X’s piano. Who takes priority over the piano?
Y
- Y obtained judgment lien first
- Z has NOT perfected interest (NOT provided value to X => NO attachment) => Y takes priority
- Judgment lien creditor (Y) > Unperfected creditor (Z)
61
X previously borrowed money from Y and has failed to pay him back timely. In the meantime, X borrowed a loan from Z in exchange for a security interest over X’s piano for personal use. X filed a financing statement. Y has now obtained a judgment lien from the court over X’s piano. Who takes priority over the piano?
Z
- Z perfected interest
- Y obtained judgment lien second => Z takes priority
- Perfected creditor (Z) > Judgment lien creditor (Y)
62
X previously borrowed money from Y and has failed to pay him back timely. In the meantime, X borrowed a loan from Z subject to future obligatory advances in exchange for a security interest over X’s piano for personal use. X filed a financing statement. Y obtained a judgment lien from the court over X’s piano. Two months later, Z heard about Y’s judgment lien and Z sent another loan to X. Who takes priority over the piano?
Y
- Z perfected future advance before Y's judgment (obligatory - relates back to Z's first loan)
- BUT Z did NOT send future advance to Z within 45 days after Y's judgment (2 months later) + Z knew about Y's judgment => Y takes priority
- Judgment lien creditor (Y) > Future advance (Z)
63
X previously borrowed money from Y and has failed to pay him back timely. In the meantime, X borrowed a loan from Z subject to future obligatory advances in exchange for a security interest over X’s piano for personal use. X filed a financing statement. Y obtained a judgment lien from the court over X’s piano. Two months later, Z sent another loan to X. X then told Z about Y’s judgment lien. Who takes priority over the piano?
Z
- Z perfected future advance before Y's judgment (obligatory - relates back to Z's first loan)
- Z did NOT send future advance to Z within 45 days after Y's judgment (2 months later)
- Z did NOT know about Y's judgment => Z takes priority
- Future advance (Z) > Judgment lien creditor (Y)
64
X obtained a loan from Y in exchange for a security interest over X’s car. X signed an agreement granting the interest and filed a financing statement. X also obtained a loan from Z in exchange for a security interest over X’s car. X did not sign an agreement, but gave Z control over the car and X filed a financing statement. Who takes priority over the car?
Z
- Z took control first
- Perfected (Z) > Perfected (Y)
65
X obtained a loan from Y in exchange for a security interest over X’s car. X signed an agreement granting the interest and filed a financing statement. X also obtained a loan from Z in exchange for a security interest over X’s car. X signed an agreement granting the interest and filed a financing statement. Who takes priority over the car?
Y
- Y filed financing statement first
- Perfected (Y) > Perfected (Z)
66
X obtained a loan from Y in exchange for a security interest over X’s car. X signed an agreement granting the interest and filed a financing statement. Y has yet to provide the loan to X. X then gave away his car to his friend, Z as a birthday present. Who takes priority over the car?
Y
- Y did NOT perfect (NOT provide value to X)
- Z is donee (NOT provide value to X) => Y takes priority
- Unperfected (Y) > Donee (Z)
67
X obtained a loan from Y in exchange for a security interest over X’s car, which he purchased from a retailer. X signed an agreement granting the interest and filed a financing statement. Y has yet to provide the loan to X. X unexpectedly decided to sell the computer to his friend, Z. Who takes priority?
Y
- Y did NOT perfect (NOT provide value to X)
- Z is buyer NOT in ordinary course of business (X is NOT regular merchant) => Y takes priority
- Unperfected (Y) > Buyer not in ordinary course of business (Z)
68
X previously borrowed money from Y and has failed to pay him back timely. In the meantime, X borrowed a loan from Z for his machine project, subject to future advances to be disbursed at such times and in such amounts as Z determined to be appropriate if, in Z’s good-faith judgment, there was “satisfactory progress” made on the project. This was in exchange for a security interest over X’s piano for personal use. X filed a financing statement. Y obtained a judgment lien from the court over X’s piano. A month later, Z heard about Y’s judgment lien and Z sent another loan to X. Who takes priority over the piano?
Y
- Z sent future advance to Z within 45 days after Y's judgment (1 month later)
- BUT Z did NOT perfect future advance BEFORE Y's judgment (optional - dated when future advance was made AFTER Y's judgment) => Y takes priority
- Judgment lien creditor (Y) > Future advance (Z)
69
X runs a company that sells televisions in State A. X obtained a loan from Y in State A. In return, X signed an agreement providing Y with secured interest over X’s television and filed a financing statement. X then decided to sell the television to a customer, Z, in State B, without informing him that Y has secured interest. State A’s law provides that whichever party had secured interest over the collateral first takes priority. State B’s law provides that a buyer who purchases the collateral in the ordinary course of business and in good faith takes priority. Who takes priority?
Z
- Multiple state transactions (State A vs State B)
- Law of state where collateral is located applies (State B) => Z is buyer who purchased in ordinary course of business (X's customer) + in good faith (NO knowledge of Y's interest) => Z takes priority
70
X lived in State A. X obtained a loan from Y in State A. X signed an agreement providing Y with secured interest over X’s copyright interests over his songs and filed a financing statement. X decided to sell his copyright interests to his friend, Z, in State B without knowledge of Y’s interest. State A’s law provides that whichever party had secured interest over the collateral first takes priority. State B’s law provides that a buyer who purchases the collateral in good faith takes priority. Who takes priority?
Y
- Multiple state transactions (State A vs State B)
- Law of state where debtor is located applies (State A) (NOT where collateral is located - NO location of copyrights) => Y secured interest first => Y takes priority
71
X sold his car to Y and Y promised to pay the purchase price to X. X agreed to give a security interest over X’s car. X then filed a financing statement with no mention of assignment powers. However, X now wants to assign his secured interest to Z. Can X assign his interest?
Yes
- X's financing statement made NO mention of assignment powers
- X can amend + file new financing statement including assignment powers
72
Y was interested in purchasing a car. X regularly sold cars and told Y he sold ‘the fastest cars in the world’, which was in fact untrue. However, X successfully sold his car to Y who promised to pay the purchase price to X. X agreed to give a security interest to Y over X’s car and filed a financing statement. X later assigned his secured interest to Z and told Y about the assignment. Y has realised the car is not as fast as X claimed it to be and refuses to pay the purchase price. Z wants to sue Y. Can Z sue Y?
Yes
- Y can use defence (misrep) vs X
- Y knew of defence (misrep) AFTER notice of X's assignment => Y can NOT use defence (misrep) vs Z
73
Y was interested in purchasing a car. X regularly sold cars and told Y he sold ‘the fastest cars in the world’, which was in fact untrue. However, X successfully sold his car to Y who promised to pay the purchase price to X. X agreed to give a security interest to Y over X’s car and filed a financing statement. Y has realised the car is not as fast as X claimed it to be and refuses to pay the purchase price. X later assigned his secured interest to Z and told Y about the assignment. Z wants to sue Y. Can Z sue Y?
No
- Y can use defence (misrep) vs X
- Y knew of defence (misrep) BEFORE notice of X's assignment => Y can use defence (misrep) vs Z
74
X sold his car to Y who promised to pay the purchase price to X. X agreed to give a security interest to Y over X’s car and filed a financing statement. X later assigned his secured interest to Z. A few weeks later, X wanted to limit Z’s secured interest validity up to six months only because X was still angry at Z for a previously owed obligation. Is this allowed?
NO modification
| - NOT in good faith (anger at Z)
75
X sold his car to Y who promised to pay the purchase price to X. X agreed to give a security interest to Y over X’s car and filed a financing statement. X later assigned his secured interest to Z and informed Y. Y eventually paid the full purchase price to Z. Suddenly, X wanted to limit Z’s secured interest. Is this allowed?
NO modification
- Good faith
- Y paid full purchase price
- BUT Y had notice of assignment
76
X sold his car to Y who promised to pay the purchase price to X. X agreed to give a security interest to Y over X’s car and filed a financing statement. X later assigned his secured interest to Z without informing Y. Y eventually paid the full purchase price to Z. Suddenly, X wanted to limit Z’s secured interest. Is this allowed?
Modification
1) Good faith
2) Y paid full purchase price
3) Y had NO notice of assignment
77
X sold his car to Y who promised to pay the purchase price to X. X agreed to give a security interest to Y over X’s car and filed a financing statement. X later assigned his secured interest to Z and informed Y. Y has paid 75% of the purchase price to Z. Suddenly, X wanted to limit Z’s secured interest to half of the purchase price. Is this allowed?
NO modification
- Good faith
- X can only limit to purchase price NOT paid (25%, NOT 50%)
78
X sold his car to Y who promised to pay the purchase price to X. X agreed to give a security interest to Y over X’s car and filed a financing statement. X later assigned his secured interest to Z without informing Y. Y wants to stop paying the purchase price to X. Is this allowed?
Discharge
| - Y has NO notice of assignment
79
X sold his car to Y who promised to pay the purchase price to X. X agreed to give a security interest to Y over X’s car and filed a financing statement. X later assigned his secured interest to Z and informed Y. Y thought it was okay to pay X instead of Z. Is this allowed?
NO discharge
- Y has notice of assignment
- Y paid X (NOT Z) => NO discharge
80
X sold his car to Y and Y promised to pay the purchase price to X. X agreed to give a security interest over X’s car. The agreement strictly prohibited any assignments unless the obligor consents. X then filed a financing statement. However, X now wants to assign his secured interest to Z. Can X assign his interest?
Yes
| - NO restrictions on assignment (prohibition/obligor's consent) allowed
81
X was short on money so he borrowed money from Y. Y retained an interest over X’s ‘present and future accounts’. A month later, X subsequently requested Y for an accounting of his unpaid debts. Two weeks later, Y decided to assign his rights to Z and informed X. Is this allowed?
Yes
1) Y has secured interest in account receivables
2) X requested Y for accounting
3) Y disclaimed right to Z within 14 days
4) Y notified X of disclaimer
82
X borrowed a loan from Y in exchange for a security interest over X’s heating system in his company and filed a financing statement. A few months later, X defaulted and Y wants to sell the heating system. Y is considering instructing the technician to disable the heating system so that it cannot be used by X until X pays his debts. Is this allowed?
NO
- X defaulted
- Y committed breach of peace (prevent use of collateral) (although NOT defined under Art 9) => NO foreclosure allowed
83
X borrowed a loan from Y in exchange for a security interest over X’s heating system in his company valued at $100,000 and filed a financing statement. Two other creditors secured interests in the heating system as well. A few months later, X was no longer able to pay his debts and Y now wants to sell the heating system despite its recent malfunctions. Y put up posters solely in his work building advertising the sale to take place in Y’s office at midnight. Y put a price tag of $10,000 on the heating system. Y sent a notice to X regarding the foreclosure one week before the sale, including a description of the heating system. Y assumed X would be aware of the location and time of the sale by reading his posters in his work building. Is this allowed?
NO foreclosure
1) Default
- X unable to pay debts under agreement/Art 9
2) NOT commercially reasonable manner
- NO repair of collateral (malfunctions)
- NOT proper advertising (posters in work building 'solely')
- NOT proper time + place (midnight, Y's work office)
- NOT appropriate price (10% of original value => Bad faith attempt to find buyer)
3) NOT valid notice
- NOT sent to ALL parties (only X, NOT other secured creditors)
- NOT sent at least 10 days (1 week) before sale for non-consumer good (heating system for business)
- NO details of location + time + method of sale (only description of collateral)
84
X borrowed $100,000 from Y with a mortgage on his house. Y recorded. X then borrowed $100,000 from Z under the same conditions. Z recorded. Later, X borrowed another $50,000 from B under the same conditions. B recorded. X went into default and so Z wanted to foreclose including B. Z found a buyer who was willing to pay $125,000. The state’s statute reads 'No conveyance or mortgage of an interest in land is valid against any subsequent purchaser for value, without notice thereof, whose conveyance is first recorded'. What are the consequences?
1) X transfers ownership rights over house to Buyer
2) $100,000 is paid to Z (foreclosing creditor)
3) $25,000 is paid to B (subordinate creditor included in foreclosure action)
4) X to pay $25,000 to B (deficiency judgment)
5) Buyer is subject to Y's mortgage (superior creditor)
85
X borrowed a loan from Y in exchange for a security interest over X’s heating system in his company and filed a financing statement. A few months later, X defaulted. Y requested that unless X pays his debts, Y will levy on the heating system before the court provides a judgment and then foreclose on the heating system. Is this allowed?
NO
- Only one default remedy allowed (NOT foreclosure + judicial action)
- Y can only levy on collateral AFTER judgment is obtained (NOT before)
86
X borrowed a loan from Y in exchange for a security interest over X’s car for personal use and filed a financing statement. X was able to pay back half of the loan. However, Y is not certain that X can pay back the full loan in time. Thus Y wants to retain the car. Is this allowed?
Yes
- Consumer good (car for personal use)
- X has paid less than 60% of loan (50%)
87
X borrowed a loan from Y in exchange for a security interest over X’s car for personal use and filed a financing statement. X was able to pay back 75% of the loan. However, Y is not certain that X can pay back the full loan in time. Thus Y took the car and is considering selling it within six months. Is this allowed?
NO
- Consumer good (car for personal use)
- X has paid more than 60% of loan (75%)
- Y must retain + sell car within 3 months (NOT 6 months)
88
X borrowed a loan from Y in exchange for a security interest over X’s car for work and filed a financing statement. X was able to pay back 75% of the loan. However, Y is not certain that X can pay back the full loan in time. Thus Y wants to retain the car. Is this allowed?
Yes
- Non-consumer good (car for business)
- X has partially satisfied loan (75%)
- Y can retain + seek deficiency (25%) from X
89
X borrowed a loan from Y in exchange for a security interest over X’s present and future accounts. X was able to pay back 75% of the loan. However, Y is not certain that X can pay back the full loan in time. Thus Y wants to retain X’s accounts. Is this allowed?
NO
- Intangible (accounts receivable)
- X has NOT fully satisfied loan (75%) => NO retention allowed
90
X borrowed a loan from Y in exchange for a security interest over X’s present and future accounts. X was able to pay back 75% of the loan. However, Y is not certain that X can pay back the full loan in time. Thus Y wants to retain X’s accounts. Y sent a notice to X, but X refused to let Y do so. What should Y do?
Sell accounts receivables
- Intangible (accounts receivable)
- X has fully satisfied loan (100%)
- Y notified X re retention
- X did NOT consent => Y must sell
91
X borrowed a loan worth $60,000 from Y in exchange for a security interest over X’s car for personal use and filed a financing statement. X was able to pay back half of the loan. However, Y was not certain that X can pay back the full loan in time. Thus Y wanted to sell the car by breaking into X’s garage and taking it without giving him notice. Y found a buyer who was willing to pay $50,000 for the car, when its market value is actually $40,000. X found out Y sold the car. What are X’s rights?
Y breached Article 9
- Breach of the peace (Y took X's car without permission)
X's rights for consumer good
1) X can recover $5,000 (10% of purchase price)
2) X can recover interest on loan
3) X can apply either;
- Absolute bar rule (X does NOT have to pay $10,000 deficiency ($60,000 - $50,000))
- Setoff rule (X has to pay $10,000 deficiency + X can recover damages from Y's breach (breaking into garage))
- Rebuttable presumption rule (X does NOT have to pay $10,000 deficiency) (debt value is presumed to equal collateral value)
92
X borrowed a loan worth $60,000 from Y in exchange for a security interest over X’s car for work and filed a financing statement. X was able to pay back half of the loan. However, Y was not certain that X can pay back the full loan in time. Thus Y wanted to sell the car by breaking into X’s garage and taking it without giving him notice. Y found a buyer who was willing to pay $50,000 for the car, when its market value is actually $40,000. X found out Y sold the car. What are X’s rights?
Y breached Article 9
- Breach of the peace (Y took X's car without permission)
X's rights for consumer good
- Rebuttable presumption rule (X does NOT have to pay $10,000 deficiency) (debt value is presumed to equal collateral value)
93
X borrowed $100,000 from Y with a secured interest over X’s bike. X then borrowed $100,000 from Z under the same conditions. X was unable to pay Y in time. Y wanted to retain the bike, but Z insists on keeping X’s bike. What can Z do?
Reedem bike
- Z is junior creditor
- Z can pay Y's loan before foreclosure/retention => Z can redeem X's bike
