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Question 1
Stella held a security interest in Stew's stereo, for money that she loaned him to purchase his car. Stew was 18 months behind on his payment, was constantly refusing to take Stella's calls and would not come to the door when she went to his house to collect the stereo. On one such trip to Stew's house, Stella knocked on the door and got no response. She then went around the back of the house and saw that the back door was completely open. Seeing no one inside, Stella walked into the house, found the stereo, disconnected it from the wall and took it. Stella:
Correct
Incorrect!
Correct In limited circumstances, creditors are allowed to use 'self-help' in order to reclaim their rights in property. However, if a creditor might 'breach the peace' in effecting her rights, she will likely be guilty of committing a crime, and in many jurisdictions, will be subject to significant fines and damage awards. In this situation, though Stella used no actual force, the mere fact that she trespassed on Stew's property and entered his house constitutes a breach of the peace.
Incorrect! In limited circumstances, creditors are allowed to use 'self-help' in order to reclaim their rights in property. However, if a creditor might 'breach the peace' in effecting her rights, she will likely be guilty of committing a crime, and in many jurisdictions, will be subject to significant fines and damage awards. In this situation, though Stella used no actual force, the mere fact that she trespassed on Stew's property and entered his house constitutes a breach of the peace.
Correct
Incorrect!
Correct
Incorrect!
Question 2
NewCo, Inc. and OldCo, Inc. have entered into a transaction where OldCo. has taken a security interest in NewCo's operating machinery. However, unbeknownst to OldCo, another company OtherCo already had a perfected security interest in the machinery. In a foreclosure proceeding, who will take the asset?
Correct
Incorrect!
Correct
Incorrect!
Correct This is simply a straight-up question to illustrate the fact that foreclosure proceedings work on the principle that 'first in time is first in right.' In other words, whatever party got its security interest in place and perfected first will take the security.
Incorrect! This is simply a straight-up question to illustrate the fact that foreclosure proceedings work on the principle that 'first in time is first in right.' In other words, whatever party got its security interest in place and perfected first will take the security.
Correct
Incorrect!
Question 3
Gladys buys a dress from DressItUp, Inc. She purchased the dress off the rack, not knowing that ClothersCo had an inventory-based security interest, with an "after acquired" clause in all the clothing on DressItUp's retail floor. If ClothersCo subsequently forecloses on its note to DressItUp, Gladys will have to:
Correct A 'buyer in the ordinary course' of business takes an item free and clear from any other outstanding obligations on that item. In other words, because Gladys bought the dress off the rack, and DressItUp normally operates in the business line of selling clothes, she takes the dress free and clear of any obligations the seller had to creditors.
Incorrect! A 'buyer in the ordinary course' of business takes an item free and clear from any other outstanding obligations on that item. In other words, because Gladys bought the dress off the rack, and DressItUp normally operates in the business line of selling clothes, she takes the dress free and clear of any obligations the seller had to creditors.