STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ32—1ȱQUIZȱ
LegalȱConceptsȱ
Directions:ȱInȱtheȱAnswersȱcolumn,ȱwriteȱtheȱletterȱfromȱColumnȱ1ȱthatȱrepresentsȱ
theȱwordȱorȱphraseȱthatȱmatchesȱtheȱstatementȱinȱColumnȱ2.ȱ
ȱ
ȱColumnȱ1ȱȱColumnȱ2ȱAnswersȱ
ȱȱ 1.ȱPersonȱwhoȱhasȱaȱsecurityȱinterestȱinȱcolȬȱ 1. _______ ȱ
lateralȱownedȱbyȱtheȱdebtorȬbuyerȱ
ȱȱ 2.ȱDeviceȱthatȱgivesȱsellersȱaȱreassuringȱȱ 2. _______ ȱ
senseȱofȱsecurityȱorȱfreedomȱfromȱanxietyȱ
andȱfearȱofȱlossȱonȱtheȱsaleȱ
ȱȱ 3.ȱPartyȱtoȱwhomȱtheȱdebtȱisȱowedȱ3. _______ ȱ
ȱȱ 4.ȱClaimȱagainstȱtheȱdebtor’sȱproperty,ȱȱ 4. _______ ȱ
createdȱforȱtheȱpurposeȱofȱassuringȱpayȬ
mentȱofȱtheȱdebtȱ
ȱȱ 5.ȱSeller’sȱabilityȱtoȱtakeȱgoodsȱback,ȱresellȱȱ 5. _______ ȱ
them,ȱandȱuseȱtheȱnetȱproceedsȱtoȱpayȱtheȱ
balanceȱdueȱ
A.ȱdebtorȱ
B.ȱdebtȱ
C.ȱcreditorȱ
D.ȱsecuredȱpartyȱ
E.ȱrightȱofȱȱ
ȱrepossessionȱ
F.ȱsecurityȱinterestȱ
G.ȱsecuredȱȱ
ȱtransactionȱ
H.ȱcollateralȱ
ȱȱ 6.ȱPersonȱorȱaȱbusinessȱthatȱowesȱmoney,ȱȱ 6. _______ ȱ
goods,ȱorȱservicesȱtoȱanotherȱ
ȱȱ 7.ȱPropertyȱthatȱisȱsubjectȱtoȱtheȱsecurityȱȱ 7. _______ ȱ
interestȱofȱtheȱcreditorȱ
ȱȱ 8.ȱMoney,ȱgoods,ȱorȱservicesȱthatȱareȱowedȱtoȱȱ 8. _______ ȱ
anotherȱ
LegalȱApplicationsȱ
9.ȱJenniferȱmadeȱaȱ$2,000ȱdownȱpaymentȱonȱaȱnewȱcar.ȱSheȱfinancedȱtheȱremainingȱ
$8,500ȱthroughȱFirstȱNationalȱBank.ȱSheȱstoppedȱmakingȱpaymentsȱafterȱsheȱhadȱ
paidȱ$4,000.ȱFirstȱNationalȱrepossessedȱtheȱcarȱandȱsoldȱitȱforȱ$5,500.ȱCanȱtheȱ
bankȱkeepȱtheȱexcessȱofȱtheȱnetȱproceeds?ȱExplainȱyourȱanswer.ȱ
10.ȱFritzȱSchlotzȱwroteȱaȱ$500ȱcheckȱforȱaȱnewȱlargeȱscreenȱTV.ȱHeȱknewȱthatȱheȱhadȱ
onlyȱ$300ȱinȱhisȱcheckingȱaccount,ȱbutȱheȱthoughtȱheȱwouldȱbeȱmakingȱaȱ$250ȱ
depositȱtheȱnextȱday.ȱIfȱFritzȱfailsȱtoȱmakeȱtheȱdepositȱinȱtime,ȱcanȱheȱbeȱheldȱ
criminallyȱliable?ȱExplainȱyourȱanswer.ȱ
Chapter 32 Secured and Unsecured Credit Transactions
7-46ȱ
ȱ
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ32—1ȱPRACTICEȱACTIVITYȱ
Readȱtheȱfollowingȱcasesȱandȱanswerȱtheȱquestionsȱaboutȱthem.ȱAttachȱaȱpageȱifȱadditionalȱ
spaceȱisȱneededȱforȱanswers.ȱ
ȱ
1.ȱDunpheyȱwantedȱtoȱpurchaseȱaȱWysongȱshearȱ(aȱmetalȱcuttingȱmachine)ȱfromȱ
Shallcrossȱbutȱcouldȱnotȱaffordȱit.ȱShallcrossȱagreedȱtoȱgiveȱDunpheyȱtheȱshearȱ
setȱupȱaȱpriorityȱdisputeȱbetweenȱtwoȱcreditors.ȱTheȱbankȱfiledȱitsȱsecurityȱinterȬ
estȱfirst,ȱbutȱShallcrossȱarguedȱthatȱtheȱgeneralȱruleȱthatȱfirstȬinȬtimeȱcontrolsȱ
shouldȱnotȱapplyȱinȱthisȱcaseȱbecauseȱtheȱbankȱknewȱofȱhisȱinterestȱinȱtheȱshearȱ
beforeȱtheyȱfiled.ȱExplain.ȱ[Shallcrossȱv.ȱCommunityȱStateȱBankȱ&ȱTrust,ȱ434ȱA.ȱ2dȱ
671ȱ(N.J.ȱSup.ȱCt.ȱ1981)]ȱ
ȱ
ȱ
ȱ
ȱ
2.ȱEppsȱpurchasedȱanȱautomobileȱforȱ$1,989ȱandȱsignedȱaȱsecurityȱagreementȱforȱitsȱ
didȱnotȱmeetȱtheȱrequirementȱthatȱtheȱsaleȱbeȱ“commerciallyȱreasonable.”ȱDoesȱ
it?ȱExplain.ȱ[PeoplesȱAcceptanceȱCorp.ȱv.ȱVanȱEpps,ȱ395ȱN.E.ȱ2dȱ912ȱ(OhioȱCt.ȱApp.ȱ
1978)]ȱ
Chapter 32 Secured and Unsecured Credit Transactions 7-47
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ32—1ȱRETEACHȱ
ȱ
Directions:ȱThisȱgameȱisȱaȱvariationȱofȱ20ȱQuestions.ȱWriteȱeachȱtermȱorȱideaȱonȱaȱ
sheetȱofȱpaper.ȱChooseȱaȱvolunteerȱtoȱcomeȱtoȱtheȱfrontȱofȱtheȱclass.ȱEitherȱtapeȱtheȱ
wordȱtoȱtheȱstudent’sȱbackȱorȱshowȱtheȱtermȱtoȱtheȱclass.ȱDoȱnotȱallowȱtheȱvolunteerȱ
toȱseeȱtheȱword.ȱTheȱstudentȱvolunteerȱmayȱthenȱbeginȱtoȱaskȱtheȱclassȱasȱmanyȱasȱ
20ȱquestionsȱtoȱdetermineȱwhichȱtermȱhasȱbeenȱchosen.ȱEachȱquestionȱmustȱhaveȱaȱ
yesȱorȱnoȱanswer.ȱForȱexample,ȱanȱappropriateȱquestionȱrelatingȱtoȱtheȱwordȱdebtorȱ
wouldȱbe,ȱ“Isȱtheȱtermȱaȱkindȱofȱpersonȱorȱaȱbusiness?”ȱAnȱinappropriateȱquestionȱ
wouldȱbeȱ“Howȱmanyȱlettersȱareȱinȱtheȱterm?”ȱChooseȱaȱnewȱvolunteerȱtoȱguessȱ
eachȱterm.ȱTheȱfollowingȱisȱaȱsuggestedȱlistȱofȱtermsȱandȱaȱbriefȱdescriptionȱofȱeach:ȱ
ȱ
debtor Aȱpersonȱorȱaȱbusinessȱthatȱowesȱmoney,ȱgoods,ȱorȱservicesȱtoȱanotherȱ
debt Money,ȱgoods,ȱorȱservicesȱthatȱareȱowedȱtoȱanotherȱ
creditor Theȱpartyȱtoȱwhomȱtheȱdebtȱisȱowedȱ
Chapter 32 Secured and Unsecured Credit Transactions
7-48ȱ
ȱ
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ32—1ȱENRICHMENTȱ
Debtors,ȱcreditors,ȱandȱsecuredȱtransactionsȱwereȱtheȱfocusȱofȱthisȱlesson.ȱAȱdebtorȱ
isȱaȱpersonȱorȱaȱbusinessȱthatȱowesȱmoney,ȱgoods,ȱorȱservicesȱtoȱanother.ȱWhateverȱ
isȱowedȱisȱgenerallyȱcalledȱtheȱdebt.ȱTheȱcreditorȱisȱtheȱoneȱtoȱwhomȱtheȱdebtȱisȱ
owed.ȱInterviewȱaȱmanagerȱofȱaȱretailȱoperation—someoneȱwhoȱisȱlikelyȱtoȱbeȱtheȱ
debtorȱwhenȱpurchasingȱaȱshipmentȱofȱgoodsȱonȱcreditȱfromȱaȱwholesalerȱorȱmanuȬ
facturerȱandȱtheȱcreditorȱwhenȱsellingȱtheseȱgoodsȱtoȱcustomersȱonȱcredit.ȱUseȱtheȱ
statementsȱandȱquestionsȱbelowȱforȱaȱguidelineȱinȱyourȱinterviewȱaboutȱcreditȱ
transactions,ȱandȱprovideȱsomeȱdetailsȱofȱyourȱdiscussionȱinȱtheȱspacesȱgiven.ȱ
ȱ
ȱ
ȱ
ȱ
2.ȱGiveȱsomeȱexamplesȱofȱsituationsȱwhereȱyourȱintervieweeȱisȱtheȱcreditor.ȱ
ȱ
ȱ
ȱ
3.ȱDoesȱtheȱinterviewee’sȱretailȱoperationȱofferȱcustomersȱincentivesȱtoȱpurchaseȱ
withȱcredit—e.g.,ȱinterestȬfreeȱfinancingȱforȱaȱcertainȱtimeȱperiod,ȱanȱinstallmentȱ
planȱforȱpayingȱoffȱtheȱloan,ȱetc.?ȱExplain.ȱ
ȱ
ȱ
ȱ
4.ȱHasȱtheȱintervieweeȱeverȱexercisedȱtheȱlegalȱrightȱofȱrepossession?ȱ
Chapter 32 Secured and Unsecured Credit Transactions 7-49
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ32—2ȱQUIZȱ
Directions:ȱFillȱinȱtheȱblank(s)ȱwithȱtheȱmostȱappropriateȱtermȱorȱphraseȱtoȱcompleteȱ
theȱsentence.ȱ
ȱȱ Answersȱ
ȱȱ1.ȱA(n)ȱ___?_____ȱprotectsȱaȱseller’sȱsecurityȱinȬ
terestȱinȱconsumerȱgoods.ȱ
1._______________________ȱ
ȱȱ2.ȱȱ Underȱtheȱ____?____ȱaȱbuyerȱofȱconsumerȱ
goods,ȱwhoȱgivesȱvalueȱandȱdoesȱnotȱhaveȱacȬ
tualȱorȱconstructiveȱknowledgeȱofȱtheȱsecurityȱ
interest,ȱacquiresȱclearȱtitleȱifȱthereȱhasȱbeenȱnoȱ
filing.ȱȱȱ
2._______________________ȱ
ȱȱ3.ȱ____?____ȱrepresentsȱvalueȱinȱrightsȱtoȱmoney,ȱ
goods,ȱorȱpromisesȱtoȱperformȱspecifiedȱconȬ
tracts.ȱ
3._______________________ȱ
ȱȱ4.ȱȱ TheȱUCCȱspecifiesȱthatȱtheȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱȱȱcreditorȱ
toȱperfectȱaȱsecurityȱinterestȱhasȱpriorityȱoverȱ
allȱotherȱcreditors.ȱ
4._______________________ȱ
ȱȱ5.ȱA(n)ȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱȱȱexistsȱwhenȱtheȱsecuredȱpartyȱ
hasȱprovidedȱsufficientȱnoticeȱtoȱotherȱpotenȬ
tialȱcreditorsȱofȱtheȱexistenceȱofȱhisȱorȱherȱseȬ
curedȱpositionȱinȱcertainȱcollateral.ȱ
5._______________________ȱ
ȱȱ6.ȱ ȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱȱȱaloneȱisȱnoticeȱtoȱanyȱpossibleȱsubȬ
sequentȱbuyerȱorȱcreditorȱofȱtheȱdebtorȱthatȱaȱ
securityȱinterestȱmayȱexist.ȱ
6._______________________ȱ
ȱȱ7.ȱȱ A(n)ȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱȱȱisȱaȱbrief,ȱwrittenȱnoticeȱofȱtheȱ
existenceȱofȱaȱsecurityȱinterestȱinȱtheȱidentifiedȱ
propertyȱ
7._______________________ȱ
ȱȱ8.ȱA(n)ȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱȱȱisȱmadeȱwhenȱtheȱcreditorȱfilesȱ
anȱacknowledgmentȱofȱtheȱfullȱpayment.ȱ
8._______________________ȱ
ȱȱ9.ȱAȱdebtorȱcanȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱȱȱcollateralȱanyȱtimeȱbeȬ
9._______________________ȱ
© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
10.ȱFilingȱaȱfinancingȱstatementȱgivesȱȱȱȱȱȱȱȱȱ?ȱȱȱȱȱȱȱȱȱ
thatȱaȱsecurityȱinterestȱinȱspecificȱpropertyȱexȬ
ists.ȱ
10._______________________ȱ
ȱ
ȱ
ȱ
LegalȱApplicationȱ
11.ȱScottȱGoodmanȱpurchasedȱaȱportableȱconcreteȱmixerȱfromȱKnickerbockerȱ
Equipmentȱforȱ$1,650.ȱHeȱmadeȱaȱdownȱpaymentȱofȱ$200ȱandȱagreedȱtoȱpayȱtheȱ
remainingȱbalanceȱinȱfiveȱmonthlyȱinstallmentsȱofȱ$290ȱeach.ȱScottȱmadeȱtwoȱofȱ
theȱpaymentsȱandȱthenȱdefaulted.ȱCanȱKnickerbockerȱkeepȱtheȱmixerȱtoȱsatisfyȱ
theȱdebtȱwithoutȱScott’sȱwrittenȱconsent?ȱ
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ32—2ȱPRACTICEȱACTIVITYȱ
Readȱtheȱfollowingȱcasesȱandȱanswerȱtheȱquestionsȱaboutȱthem.ȱAttachȱaȱpageȱifȱadditionalȱ
spaceȱisȱneededȱforȱanswers.ȱ
ȱ
1.ȱPhillips,ȱaȱcomputerȱscienceȱschoolȱteacher,ȱownedȱaȱvarietyȱstore.ȱSheȱpurȬ
chasedȱaȱcomputerȱfromȱHoldren’sȱandȱfinancedȱitȱthroughȱaȱloanȱfromȱCreditȬ
way.ȱPhillipsȱtestifiedȱthatȱsheȱtoldȱtheȱsalespersonȱatȱtheȱtimeȱofȱtheȱpurchaseȱ
thatȱsheȱwantedȱtheȱcomputerȱforȱherȱprofessionalȱuseȱasȱaȱteacher,ȱbutȱsheȱalsoȱ
lipsȱforȱtheȱremainderȱofȱtheȱpayments,ȱcontendsȱthatȱaȱfilingȱstatementȱwasȱnotȱ
neededȱinȱthisȱcaseȱbecauseȱitȱinvolvedȱtheȱpurchaseȱofȱconsumerȱgoods,ȱandȱtheȱ
securityȱagreementȱitselfȱisȱadequateȱtoȱperfect.ȱPhillipsȱcontendsȱthatȱtheȱcomȬ
puterȱandȱsoftwareȱwereȱinventory,ȱandȱasȱsuch,ȱitȱwasȱnecessaryȱforȱCreditwayȱ
toȱfileȱinȱorderȱtoȱperfectȱitsȱinterests.ȱWillȱtheȱcourtȱholdȱforȱCreditwayȱorȱPhilȬ
lips?ȱExplain.ȱ[Phillipsȱv.ȱCreditway,ȱInc.,ȱ55ȱB.R.ȱ663ȱ(U.S.ȱBrptcy.ȱCt.ȱ1985)]ȱ
ȱ
ȱ
ȱ
2.ȱTheȱBellsȱpurchasedȱaȱvanȱforȱfamilyȱuse,ȱandȱthenȱtheyȱfiledȱbankruptcy.ȱTheyȱ
hadȱneverȱmissedȱaȱpaymentȱonȱtheirȱvan,ȱwhichȱwasȱsecuredȱbyȱaȱpurchaseȱ
amountȱ.ȱ.ȱ.ȱofȱtheȱ.ȱ.ȱ.ȱclaimȱ.ȱ.ȱ.ȱ.”ȱTheȱholdersȱofȱtheȱsecuredȱinterest,ȱGMAC,ȱ
suedȱtoȱhaveȱtheȱBellsȱredeemȱbyȱpayingȱtheȱfullȱamountȱowed.ȱMustȱtheyȱpayȱ
theȱfullȱprice?ȱExplain.ȱ[Bellȱv.ȱGeneralȱMotorsȱAcceptanceȱCorp.,ȱ700ȱF.ȱ2dȱ1053ȱ(6thȱ
Chapter 32 Secured and Unsecured Credit Transactions
7-52ȱ
ȱ
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ32—2ȱRETEACHȱ
ȱ
Directions:ȱUnscrambleȱtheȱlettersȱfollowingȱeachȱquestionȱandȱwriteȱtheȱanswerȱinȱ
theȱblankȱprovided.ȱ
ȱȱ Answersȱ
ȱȱ1.ȱWhatȱkindȱofȱnoticeȱisȱgivenȱbyȱfilingȱaȱfinancingȱ
ȱȱ1._____________________ȱ
ȱȱ2.ȱWhatȱkindȱofȱstatementȱisȱmadeȱwhenȱtheȱcrediȬ
torȱfilesȱanȱacknowledgmentȱofȱtheȱfullȱpayȬ
ȱȱ2._____________________ȱ
ȱȱ3.ȱWhatȱcanȱaȱdebtorȱdoȱwithȱcollateralȱbeforeȱtheȱ
ȱȱ3._____________________ȱ
ȱȱ4.ȱȱ Whatȱcodeȱmakesȱsecuredȱtransactionsȱtheȱonlyȱ
legalȱmeansȱofȱgivingȱaȱcreditorȱaȱsecurityȱinterȬ
ȱȱ4._____________________ȱ
ȱȱ5.ȱWhatȱkindȱofȱstatementȱisȱaȱbrief,ȱwrittenȱnoticeȱ
ofȱtheȱexistenceȱofȱaȱsecurityȱinterestȱinȱtheȱidenȬ
ȱȱ5._____________________ȱ
ȱȱ6.ȱWhatȱisȱaȱtypeȱofȱsecurityȱinterestȱinȱwhichȱnoȱ
filingȱisȱrequiredȱtoȱprotectȱtheȱseller’sȱinterestȱinȱ
ȱȱ6._____________________ȱ
ȱȱ7.ȱWhatȱisȱaȱtypeȱofȱpropertyȱthatȱrepresentsȱvalueȱ
inȱrightsȱtoȱmoney,ȱgoods,ȱorȱpromisesȱtoȱperȬ
ȱȱ7._____________________ȱ
ȱȱ8.ȱȱ Whatȱtypeȱofȱinterestȱexistsȱwhenȱtheȱsecurityȱ
interestȱisȱsuperiorȱtoȱallȱotherȱclaimsȱinȱtheȱcolȬ
ȱȱ8._____________________ȱ
ȱȱ9.ȱWhatȱactionȱgivesȱnoticeȱtoȱanyȱpossibleȱsubseȬ
quentȱbuyerȱorȱcreditorȱtoȱtheȱdebtorȱthatȱaȱsecuȬ
ȱȱ9._____________________ȱ
10.ȱȱ Classificationȱofȱcollateralȱthatȱrepresentsȱvalueȱ
inȱrightsȱtoȱmoney,ȱgoods,ȱorȱpromisesȱtoȱperȬ
10._____________________ȱ
Chapter 32 Secured and Unsecured Credit Transactions 7-53
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱLESSONȱ32—2ȱENRICHMENTȱ
Inȱthisȱlesson,ȱyouȱlearnedȱaboutȱsecurityȱinterests.ȱFinancingȱstatementsȱareȱnecesȬ
saryȱtoȱperfectȱtheȱcreditor’sȱinterestȱwhenȱtheȱdebtorȱhasȱtheȱgoods.ȱAȱfinancingȱ
statementȱisȱaȱbrief,ȱwrittenȱnoticeȱofȱtheȱexistenceȱofȱaȱsecurityȱinterestȱinȱtheȱidentiȬ
fiedȱproperty.ȱFilingȱaȱfinancingȱstatementȱgivesȱconstructiveȱnoticeȱthatȱaȱsecurityȱ
interestȱinȱspecificȱpropertyȱexists.ȱIfȱyouȱwereȱconcernedȱaboutȱthirdȬpartyȱinterestsȱ
toȱsomeȱsortȱofȱtangibleȱpropertyȱyouȱwereȱplanningȱtoȱbuy,ȱyouȱcouldȱgetȱactualȱ
noticeȱofȱaȱsecurityȱinterestȱbyȱcheckingȱtheȱpublicȱrecords.ȱCheckȱyourȱstate’sȱverȬ
sionȱofȱtheȱUniformȱCommercialȱCodeȱ(UCC)ȱorȱcheckȱwithȱtheȱofficesȱofȱtheȱsecreȬ
taryȱofȱstateȱand/orȱtheȱcountyȱclerkȱtoȱdetermineȱmoreȱspecificsȱaboutȱfilingȱaȱfiȬ
nancingȱstatementȱinȱyourȱstateȱorȱwhereȱtoȱlocateȱaȱparticularȱtypeȱofȱfinancingȱ
statement.ȱ
ȱ
1.ȱInȱgeneral,ȱisȱfilingȱrequiredȱcentrallyȱinȱtheȱofficeȱofȱtheȱsecretaryȱofȱstate,ȱorȱloȬ
callyȱinȱtheȱcountyȱclerk’sȱoffice,ȱorȱinȱbothȱlocations?ȱ
ȱ
ȱ
ȱ
ȱ
2.ȱIfȱyouȱwantedȱtoȱperfectȱaȱsecurityȱinterestȱinȱaȱmotorȱvehicle,ȱwouldȱyouȱgoȱtoȱaȱ
differentȱofficeȱandȱuseȱaȱspecialȱprocedure?ȱExplain.ȱ
ȱ
ȱ
ȱ
ȱ
3.ȱAreȱfinancingȱstatementsȱforȱfarmȱproductsȱtoȱbeȱfiledȱwithȱtheȱclerkȱatȱtheȱcourtȱ
houseȱofȱtheȱcountyȱwhereȱtheȱproductsȱareȱstored?ȱ
ȱ
ȱ
ȱ
ȱ
4.ȱWhatȱstateȱgovernmentȱofficeȱshouldȱyouȱapproachȱforȱperfectionȱofȱaȱsecurityȱ
interestȱinȱinventoryȱorȱequipment?ȱ
Chapter 32 Secured and Unsecured Credit Transactions
7-54ȱ
ȱ
STUDENT _______________________________________ CLASS _______________________ DATE _________
ȱ
ȱ
TESTȱ
CHAPTERȱ32
SECTION I—IDENTIFY LEGAL TERMS
Directions:ȱPlaceȱaȱTȱforȱTrueȱorȱanȱFȱforȱFalseȱinȱtheȱAnswersȱcolumnȱtoȱshowȱ
hetherȱeachȱofȱtheȱfollowingȱstatementsȱisȱtrueȱorȱfalse.ȱw
Answers
1.ȱTheȱdebtorȬcreditorȱrelationshipȱisȱmutuallyȱbeneficialȱbecauseȱtheȱ
2.ȱTheȱdebtȱisȱalwaysȱpaidȱinȱfullȱinȱaȱsecuredȱtransactionȱbecauseȱtheȱ
creditorȱhasȱcollateralȱandȱtheȱlegalȱrightȱofȱrepossession.ȱ
3.ȱIfȱaȱdebtorȱdeclaresȱbankruptcy,ȱtheȱunsecuredȱcreditorȱmayȱreceiveȱ
nothingȱorȱaȱfewȱcentsȱforȱeachȱdollarȱofȱtheȱunpaidȱdebt.ȱ
4.ȱAȱsecurityȱinterestȱunderȱtheȱUCCȱcanȱbeȱcreatedȱonlyȱwithȱanȱ
IOU.ȱ
5.ȱAȱsecuredȱtransactionȱwhereȱtheȱcreditorȱobtainsȱpossessionȱofȱtheȱ
collateralȱisȱcalledȱpledge.ȱ
6.ȱAȱsecurityȱinterestȱisȱvalidȱagainstȱaȱdebtorȱonlyȱifȱitȱhasȱbeenȱȱ
perfected.ȱ
7.ȱRecordsȱofȱsecuredȱtransactionsȱmayȱbeȱproperlyȱfiledȱcentrallyȱinȱ
theȱofficeȱofȱtheȱsecretaryȱofȱstateȱorȱlocallyȱinȱtheȱofficeȱofȱtheȱclerkȱ
inȱtheȱcountyȱwhereȱtheȱgoodsȱareȱlocated.ȱ
8.ȱDependingȱuponȱitsȱuseȱatȱtheȱtime,ȱanȱitemȱsuchȱasȱaȱtelevisionȱ
canȱbeȱclassifiedȱasȱaȱconsumerȱgood,ȱequipment,ȱorȱinventory.ȱ
9.ȱIfȱtheȱdebtorȱdefaults,ȱtheȱsecuredȱcreditorȱwhoȱdoesȱnotȱhaveȱposȬ
sessionȱofȱtheȱcollateralȱmayȱtakeȱpossessionȱofȱitȱbutȱonlyȱbyȱlegalȱ
proceedings.ȱ
10.ȱAttachmentȱisȱtheȱpointȱinȱtheȱprocessȱofȱcreatingȱaȱsecurityȱinterȬ
estȱwhenȱitȱbecomesȱlegallyȱeffectiveȱagainstȱtheȱownershipȱorȱposȬ
sessionȱrightsȱofȱtheȱdebtorȱinȱtheȱcollateral.ȱ
ȱ1.ȱȱ ȱ
ȱ
ȱ2.ȱȱ ȱ
ȱ
ȱ3.ȱȱ ȱ
ȱ
ȱ4.ȱȱ ȱ
ȱȱ
ȱ5.ȱȱ ȱ
ȱ
ȱ6.ȱȱ ȱ
ȱ
ȱ7.ȱȱ ȱ
ȱ
ȱ
ȱ8.ȱȱ ȱ
ȱ
ȱ9.ȱȱ ȱ
ȱ
ȱ
ȱȱȱȱȱ10.ȱȱ ȱ
Chapter 32 Secured and Unsecured Credit Transactions 7-55
SECTION II—THINK CRITICALLY ABOUT LEGAL CONCEPTS
Directions:ȱInȱtheȱAnswersȱcolumnȱatȱtheȱrightȱofȱeachȱstatement,ȱwriteȱtheȱletterȱthatȱ
representsȱtheȱword,ȱorȱgroupȱofȱwords,ȱthatȱcorrectlyȱcompletesȱtheȱstatement.ȱ
Answers
11.ȱAȱsecuredȱtransactionȱusuallyȱinvolvesȱ(a)ȱcollateral,ȱ(b)ȱrightȱofȱ
repossession,ȱ(c)ȱsecurityȱinterest,ȱ(d)ȱallȱofȱtheseȱ
11._______ȱ
12.ȱSecurityȱinterestȱisȱ(a)ȱinterestȱinȱcollateral,ȱ(b)ȱinterestȱonȱaȱfedȬ
erallyȱinsuredȱbankȱloan,ȱ(c)ȱinterestȱpaidȱonȱsocialȱsecurity,ȱȱȱȱȱ(d)ȱ
interestȱyouȱpayȱforȱsecurityȱprotectionȱ
12._______ȱ
13.ȱWhenȱnetȱproceedsȱfromȱrepossessed,ȱresoldȱgoodsȱareȱmoreȱ
thanȱtheȱbalanceȱdue,ȱtheȱexcessȱisȱ(a)ȱconsideredȱprofitȱforȱtheȱ
creditor,ȱ(b)ȱconsideredȱtaxesȱforȱtheȱstate,ȱ(c)ȱdividedȱbetweenȱ
theȱdebtorȱandȱcreditor,ȱ(d)ȱreturnedȱtoȱtheȱoriginalȱdebtorȱ
13._______ȱ
14.ȱWhenȱtheȱnetȱproceedsȱfromȱrepossessed,ȱresoldȱgoodsȱdoesȱnotȱ
coverȱtheȱbalanceȱdue,ȱtheȱcreditorȱ(a)ȱassumesȱtheȱdifferenceȱasȱaȱ
loss,ȱ(b)ȱmayȱclaimȱanotherȱpossessionȱofȱtheȱdebtorȱtoȱsell,ȱȱȱȱȱ(c)ȱ
mayȱsueȱtheȱdebtorȱtoȱcollectȱtheȱremainingȱbalance,ȱ(d)ȱmayȱturnȱ
theȱbalanceȱoverȱtoȱtheȱstateȱforȱtaxȱreductionȱ
14._______ȱ
15.ȱTheȱUniformȱCommercialȱCodeȱ(UCC)ȱprovisionsȱapplyȱtoȱȱȱȱȱȱȱ(a)ȱ
deeds,ȱ(b)ȱmortgages,ȱ(c)ȱpersonalȱproperty,ȱ(d)ȱcopyrightsȱ
15._______ȱ
16.ȱȱ Aȱsecurityȱinterestȱisȱcreatedȱwhenȱ(a)ȱanȱagreementȱbetweenȱtheȱ
debtorȱandȱcreditorȱgivesȱtheȱcreditorȱsecurityȱinterest,ȱ(b)ȱtheȱ
debtorȱhasȱrightsȱinȱtheȱcollateral,ȱ(c)ȱtheȱcreditorȱgivesȱvalue,ȱȱ(d)ȱ
allȱofȱtheseȱ
16._______ȱ
17.ȱAȱbriefȱwrittenȱnoticeȱofȱtheȱexistenceȱofȱaȱsecurityȱinterestȱinȱtheȱ
identifiedȱpropertyȱisȱaȱ(a)ȱconstructiveȱnotice,ȱ(b)ȱfinancingȱ
statement,ȱ(c)ȱterminationȱstatement,ȱ(d)ȱsecurityȱagreementȱ
17._______ȱ
18.ȱWhichȱofȱtheȱfollowingȱisȱnotȱconsideredȱaȱclassȱofȱgoodsȱforȱtanȬ
gibleȱpropertyȱusedȱasȱcollateral?ȱ(a)ȱequipment,ȱ(b)ȱfarmȱprodȬ
ucts,ȱ(c)ȱinventory,ȱ(d)ȱstockȱandȱbondsȱ
18._______ȱ
19.ȱTheȱacknowledgmentȱofȱtheȱfullȱpaymentȱinformingȱpotentialȱ
buyersȱandȱcreditorsȱthatȱtheȱpropertyȱisȱnoȱlongerȱcollateralȱisȱ
calledȱ(a)ȱaȱconstructiveȱnotice,ȱ(b)ȱaȱfinancingȱstatement,ȱ(c)ȱaȱ
terminationȱstatement,ȱ(d)ȱaȱsecurityȱagreementȱ
19._______ȱ
20.ȱUnlessȱtheȱconsumerȱagreesȱinȱwriting,ȱaȱcreditorȱmayȱnotȱkeepȱ
20._______ȱ
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SECTION III—APPLY LEGAL PRACTICES
21.ȱLeonȱborrowedȱmoneyȱtoȱpurchaseȱaȱcarȱagainstȱtheȱcertificateȱofȱdepositȱheȱhasȱ
inȱtheȱbank.ȱIsȱthisȱaȱsecuredȱtransaction?ȱIsȱtheȱcarȱhisȱcollateral?ȱExplainȱyourȱ
answer.ȱ
Chapter 32 Secured and Unsecured Credit Transactions 7-57
ANSWERS
Lessonȱ32—1ȱ
Quiz
ȱ
9.ȱAnyȱexcessȱthatȱremainsȱafterȱtheȱexpensesȱofȱtheȱrepossessionȱandȱresaleȱhaveȱ
Practice Activity
1.ȱAȱsecuredȱtransactionȱisȱoneȱinȱwhichȱtheȱdebtorȱgivesȱtheȱcreditorȱtheȱrightȱtoȱ
takeȱpropertyȱheȱorȱsheȱownsȱasȱcollateralȱtoȱsecureȱaȱloan.ȱIfȱtheȱloanȱisȱnotȱreȬ
paidȱasȱagreed,ȱtheȱcreditorȱcanȱtakeȱtheȱagreedȬuponȱpropertyȱtoȱhelpȱsatisfyȱ
2.ȱNo,ȱtheȱsaleȱdoesȱnotȱmeetȱtheȱstandardȱofȱcommercialȱreasonableness.ȱTheȱ
standardsȱtoȱbeȱusedȱtoȱdetermineȱaȱcommerciallyȱreasonableȱsaleȱareȱmattersȱofȱ
Reteach
Enrichment Activity
Chapter 32 Secured and Unsecured Credit Transactions
7-58ȱ
ȱ
Lessonȱ32—2ȱ
Quiz
4.ȱfirstȱ
mentȱ
ȱ
Practice Activity
1.ȱTheȱcourtȱwillȱholdȱforȱPhillips.ȱTheȱUCCȱdefinesȱconsumerȱgoodsȱasȱgoodsȱ
usedȱorȱboughtȱprimarilyȱforȱpersonal,ȱfamily,ȱorȱhouseholdȱpurposes,ȱandȱ
2.ȱInȱaccordanceȱwithȱtheȱrulesȱunderȱChapterȱ7,ȱtheȱcourtȱwasȱforcedȱtoȱrequireȱ
theȱBellsȱtoȱpayȱtheȱentireȱamountȱowedȱbeforeȱtheyȱcouldȱredeemȱtheirȱvan.ȱTheȱ
Reteach
Enrichment Activity
Chapter 32 Secured and Unsecured Credit Transactions 7-59
ANSWERS TO TEST QUESTIONS
ȱ
SECTIONȱIȱ
ȱ
SECTIONȱIIȱ
ȱ
SECTIONȱIIIȱ
ȱ