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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Business Law
Satisfied Customers: 111540
Experience:  All corporate law, including non-profits and charitable fraternal organizations.
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1. Josey borrowed money from First Bank to purchase a ski boat.

Resolved Question:

1. Josey borrowed money from First Bank to purchase a ski
boat. First Bank perfected a security interest in the ski boat.
Ten days before First Bank perfected its security interest in
the ski boat, Josey went to Local Finance Company and borrowed
money there, listing the ski boat as collateral. Local
Finance Company perfected a security interest in the ski boat
on the same day. Josey defaulted on both loans. According to
the law, what should happen to the ski boat?
A. First Bank will take the ski boat because it was the
first to perfect.
B. Local Finance Company will take the ski boat because it
was the first to perfect.
C. First Bank will take the ski boat because it has a
purchase-money security interest.
D. Local Finance Company will take the ski boat because it
has a purchase-money security interest.

2. Buddy agreed to loan Mario money to purchase some vacant land. Mario signed an
agreement stating that Buddy possessed a security interest in the land, and describing
where the land is located. Buddy loans Mario $10,000, and Mario purchases the land.
Which of the following is true about this set of facts?
A. Buddy does not have a security interest in the land because a valid security
agreement wasn’t signed by Mario.
B. Buddy created a valid security interest in the land because all of the requirements
for creating such an interest were met.
C. Buddy does not have a security interest in the land because the debtor must have
rights in the collateral.
D. Buddy created a valid security interest in the land because merely loaning Mario
the purchase money for the land created a security interest.
3. Liza borrows money from First Finance Company for miscellaneous expenses. Liza and
First Finance agree that Liza’s diamond ring shall serve as collateral for the loan. Two
weeks later, Liza takes a loan from Second Finance Company listing the same diamond
ring as collateral. Neither First Finance nor Second Finance take any additional steps.
Liza defaults on both loans. Second Finance attaches (seeks to enforce an item’s
security interest) the diamond ring. One day later, First Finance seeks attachment of
the diamond ring. Which of the following is true about this set of facts?
A. First Finance Company possesses the priority claim because it loaned the money to
Liza before Second Finance.
B. Second Finance Company possesses the priority claim because it attached the
diamond ring first.
C. Neither finance company possesses a valid security interest in the diamond ring,
and neither possesses any remedy due to the failure to file a security interest.
D. Both First Finance and Second Finance possess equal rights in the diamond ring
and must equally divide any proceeds from the sale of the ring.
4. Billy borrowed money from First Bank, and he entered an agreement listing his scooter
as collateral. First Bank took all necessary steps to properly perfect its security in the
scooter on the day of the loan. The next day, Billy borrowed money from Second Bank,
and he entered an agreement listing the same scooter as collateral. Second Bank also
took all necessary steps to properly perfect its security in the scooter on the day of the
loan. Billy defaults on both loans, defaulting on Second Bank and then on First Bank.
Which of the following is true about this set of facts?
A. First Bank possesses the priority claim because it was the first to perfect its
security interest.
B. Second Bank possesses the priority claim because Billy defaulted on Second Bank
first.
C. Neither bank possesses a right to repossess the scooter because Billy listed it as
collateral with both banks.
D. First Bank possesses the priority claim because it was the first bank to make the
loan that listed the scooter as collateral.
5. Larry borrowed $10,000 from Jack. At the time of the loan, Larry signed an agreement
promising to pay back the $10,000 in full within one year. After two years, Larry still
hasn’t paid Jack back. To seek repayment of the debt, Jack should first seek a/an
A. artisan’s lien. C. writ of execution.
B. mechanic’s lien. D. judicial lien.
6. Billy works as a freelance writer for Big Books. Billy works in his own home, and has
very little contact with Big Books, except to receive and return writing projects. Which
of the following is true about this set of facts?
A. Billy is an employee and agent of Big Books.
B. Billy is a fiduciary to Big Books.
C. Billy is neither an employee nor an independent contractor for Big Books.
D. Billy is an independent contractor for Big Books.
Submitted: 5 years ago.
Category: Business Law
Expert:  Law Educator, Esq. replied 5 years ago.
1) B

2) B

3) A

4) A

5) D

6) D


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