Question 1

Use this fact situation to answer the related questions that follow. A purchases a video business from B,who takes back a chattel mortgage on the inventory,which is composed of DVDs.The chattel mortgage states that it covers after-acquired property.B then registers this mortgage under the provincial PPSA.A few months later,A needs to purchase more DVDs and goes to his bank to borrow the money for the purchase.In turn,the bank takes a chattel mortgage for the amount of its loan,registers its chattel mortgage,and gives A the money.A then buys the DVDs.
In this case,under PPSA legislation,the bank has

Accepted Answer

The bank has a purchase money security interest because it lent money to A specifically for the purchase of the DVDs, which makes it a priority creditor over B's prior chattel mortgage on the inventory.

Question 2

A decides to purchase B's office,which consists of an industrial condominium unit and inventory and equipment.However,A only has enough money for the deposit and B agrees to help him.In this case,to help A finance the purchase,

Accepted Answer

C

Question 3

B,a car dealership,sells A a car on terms that provide that A will have possession of the car for a period of three years,during which A will make monthly payments;however,ownership in the car remains with the dealership until A makes the last payment.In this case,A and the dealership have effected

Accepted Answer

A conditional sale is a transaction where ownership of the goods remains with the seller until the buyer meets certain conditions, such as making all the required payments. In this case, B has sold the car to A on the condition that ownership remains with the dealership until the final payment is made. A chattel lease would involve the dealership leasing the car to A for a period of time, but ownership would not be transferred. Consignment and floating charges are not applicable in this scenario, and a chattel mortgage involves using the car as collateral for a loan, which is not the case here.

Question 4

Use the fact situation in Q6 to answer the related question that follows. Also in this case,B's security interest is perfected

Accepted Answer

B's security interest is perfected immediately on registration by B of a financing statement, according to the Uniform Commercial Code. The other options are not sufficient for perfection of a security interest.

Question 5

Some provinces have provided relief to conditional buyers by

Accepted Answer

The answer of Some provinces have provided relief to conditional...

Question 6

A purchases a chattel from B under a conditional sales agreement.A few days later and unknown to B,A sells the chattel to C,who believes A is the owner.At common law,B

Accepted Answer

Under the common law, a seller who has reserved title in a chattel sold subject to a conditional sales agreement has the right to retake possession of the chattel from the buyer who is in wrongful possession. Therefore, B can retake possession of the chattel from C, even though C is an innocent purchaser who was unaware of the conditional sales agreement between A and B.

Question 7

What is the difference between a chattel mortgage and a conditional sale contract?

Accepted Answer

The answer of What is the difference between a chattel...

Question 8

Use the fact situation in Q8 to answer the related question that follows. Also in this case,as between B and the bank,

Accepted Answer

The bank's security interest has priority over B's because typically, a bank's security interest is perfected and has priority over unperfected interests, unless specific circumstances or agreements dictate otherwise.

Question 9

Each of the following may create consensual security interests EXCEPT

Accepted Answer

Liens do not require consent from the debtor, whereas guarantees, leases, consignments, and accounts receivable do require the debtor's consent for the creation of a security interest. Therefore, liens are the only option that does not create a consensual security interest.

Question 10

The Hendersons have purchased their new riding lawnmower on a conditional sale contract.They have just been notified that the contract was assigned to a finance company.The Hendersons may now

Accepted Answer

When a contract is assigned to a finance company, the assignee (finance company) steps into the shoes of the assignor (original retailer) and can only enforce the contract subject to the same rights and defences that were available to the original retailer. Therefore, the Hendersons can expect to have the same defences they had against the retailer.

Question 11

Use the fact situation in Q2 to answer the related question that follows. In this situation,if B takes back a chattel mortgage on the inventory,title to the inventory

Accepted Answer

The answer of Use the fact situation in Q2 to...

Question 12

Where security devices are agreed to in advance as terms in the contract,they are often called

Accepted Answer

When security devices are agreed to in advance as terms in the contract, they are known as consensual security interests. This means that the security interest is created by the consent of both parties (creditor and debtor) and is spelled out in the contract or agreement. Collateral security is also a term used to refer to the assets pledged as security for a loan or debt, but it doesn't necessarily require the agreement of both parties in advance. Non-consensual security interests and the pledge of assets both typically refer to security interests that are imposed by law rather than agreed to in advance. The creditor back-up system is not a commonly used term in the context of security interests.

Question 13

Regarding the remedies of a conditional seller,she or he

Accepted Answer

The answer of Regarding the remedies of a conditional seller,she...

Question 14

Phillip,who has a loan on his car at the bank,has placed his car on consignment at the local used car lot.His law professor tells Phillip that consignments can amount to a secured type of credit.If this is true,who is the creditor?

Accepted Answer

The answer of Phillip,who has a loan on his car...

Question 15

Use this fact situation to answer the related questions that follow. A enters into a conditional sales agreement with B,a truck dealership,for the purchase of a truck that B has ordered from the manufacturer but will not receive for another month,during which time A must make his first payment.
In this case,under PPSA legislation,attachment occurs

Accepted Answer

Under PPSA legislation, attachment occurs when the agreement is signed and the truck is delivered to A.

Question 16

Bill owns a small factory which manufactures seatbelt parts for the automobile industry.Although business has steadily increased for the last two years,the company still owes the bank a significant amount of money.In fact,to secure start up monies,the company was required to provide a chattel mortgage to the bank including an after acquired property clause.Bill becomes aware that a machine used to manufacture seatbelt parts has become available from a local businesswoman.However,Bill's company cannot pay cash for the machine and cannot provide the businesswoman with any security in relation to its existing assets.A special priority can in fact arise if the businesswoman reserves a security interest in the seatbelt making machine itself.This interest is known as
a)a perfected security interest.
b)a purchase-money security interest (PMSI).
c)an attachment or performance of agreement.
d)an unperfected security interest.
e)a trust deed.

Accepted Answer

The answer of Bill owns a small factory which manufactures...

Question 17

Jack and Reba purchased some furniture on a conditional sale contract.This couple carries no insurance on their household goods.The furniture is stolen one Sunday afternoon.Who will most likely take the loss?

Accepted Answer

In a conditional sale contract, the buyer takes possession of the items but the seller retains legal ownership until the full purchase price is paid. If the goods are stolen before the contract is fully paid off and the buyer does not have insurance, the buyer (in this case, the couple) is typically responsible for the loss. This is because the risk of loss generally passes to the buyer upon taking possession of the goods, unless the contract specifies otherwise.

Question 18

A,a manufacturer,enters into a conditional sales agreement with B,a retail seller of goods,under which A supplies 100 amplifiers to B.The manufacturer registers the agreement under provincial PPSA legislation.B now sells one amplifier to C and a few days later defaults on the conditional sales agreement.In this case,the manufacturer

Accepted Answer

The manufacturer's rights are against B, the retail seller, under the conditional sales agreement and the security interest registered under the PPSA. The manufacturer cannot directly pursue C, the end consumer, for the value of the amplifier or retake possession of it from C, as C was not a party to the original agreement or security interest.

Question 19

Use this fact situation to answer the related questions that follow. A is buying a video business including the inventory of DVDs,which is valued at half the worth of the business,but A only has half the purchase price,so B agrees to help A out.
In this case,to help A buy the business,B will

Accepted Answer

The best option for B to help A buy the business would be to take back a chattel mortgage on the inventory. This would provide security for B's investment and allow A to use the inventory to generate revenue to pay back the loan. A chattel mortgage is a type of loan that is secured against movable property, such as inventory, and allows the borrower to retain possession of the property while still committing to repay the loan.

Question 20

Which one of the following requires permission from the security holder before the item(s)used as collateral can be sold?

Accepted Answer

The answer of Which one of the following requires permission...

Quiz 28: Secured Transactions