Pierce Electricians is a new company that contracts out for electrical work.Upon creating the company,they took out a loan from the Bank of Montreal with a perfected general security agreement as collateral.The agreement was registered on April 30.On June 1,Pierce realizes it needs to expand its fleet.In order to buy 15 new vans on credit,they create a PMSI with the dealer with the vans as collateral,which is registered on June 8.Which of the following statements is true?

Question

Quizplus · Accepted Answer

The PMSI has priority over the GSA for the collateral, which in this case is the vans. Therefore, if Pierce defaults, the PMSI must be settled first before the GSA. The fact that the PMSI was created after the GSA and was registered within 15 days means that it is valid. Choice A is incorrect because while the GSA is perfected, the priority of the security interests is determined by the timing of perfection and creation. Choice C is incorrect because the PMSI was registered within 15 days, which is within the required timeframe. Choice D is incorrect because the bank can still recover its interest in other collateral or through other means. Choice E is incorrect because PMSIs can be used for physical capital such as vehicles.

Pierce Electricians Is a New Company That Contracts Out for Electrical