An appliance store sells a television set to Adam for $750 on a conditional sales contract, reserving a security interest in the set until Adam has paid for it. The store does not file a financing statement but relies on attachment for perfection. Adam later borrows money from a credit union and gives it a security interest in the television set. The credit union does not perfect the security interest. Adam defaults on his loans and the credit union tries to claim the set. Under these circumstances, _____.
A) the credit union has a better claim to the set than does the appliance store
B) the appliance store cannot claim the set as they relied on attachment for perfection
C) the appliance store has a better claim to the set than the credit union
D) neither the appliance store nor the credit union can claim the set

Question

Quizplus · Accepted Answer

Under the given circumstances, when Adam defaults on his loans and the credit union tries to claim the set, the appliance store has a better claim to the set than does the credit union. The first to attach has priority if neither security interest is perfected. However, in this case, the appliance store has a perfected security interest. The appliance store has a PMSI (purchase money security interest) in a consumer good, which is automatically perfected. As the first to perfect, it has priority.

An Appliance Store Sells a Television Set to Adam for $750