CBAD 345 EXAM 3: Chapter 21 & 22
questions with complete solutions
Secured Party - correct answer ✔✔THE CREDITOR IN SECURED TRANSACTIONS; A creditor who has a
security interest in the debtor's collateral, including a seller, lender, cosigner, or buyer of accounts or
chattel paper (a record of monetary obligation & secured interest)
Debtor - correct answer ✔✔THE PARTY WHO OWES MONEY TO A CREDITOR; and has given the creditor
an interest in his property to secure the payment of the debt
Security Interest - correct answer ✔✔the legal term for the rights that a secured creditor has in the
Debtor's property (collateral) that secures payment
Security Agreement - correct answer ✔✔THE MOST CRITICAL DOCUMENT IN A SECURED TRANSACTION;
A document in which the debtor gives the creditor an interest in its property (collateral) to secure the
loan; provides for a security interest in which a debtor agrees to give a creditor the right to take his or
her property in the event of default (failure to uphold agreement/payment)
collateral - correct answer ✔✔the specific property or subject of the security interest that the debtor
used to secure the loan
Security Agreement Requirements (by law) - correct answer ✔✔1. must be in WRITING to be valid
2. must be have a SIGNATURE by the debtor
3. must DESCRIBE the exact property used as collateral
4. must be clear INTENT in language of writing
Security Agreement Requirements: Writing - correct answer ✔✔the security agreement must be in
writing to be valid; an electronic writing is sufficient & common - only exception: the "pledge"
Security Agreement Requirements: Signature - correct answer ✔✔the debtor must sign the security
agreement; an electronic signature is called an authentication
, Security Agreement Requirements: Property Description - correct answer ✔✔the exact property of the
debtor which is being used as collateral must be described in the agreement: 2 types of description -
General or Specific
Specific Description v. General Description (collateral) - correct answer ✔✔Specific: if the collateral is a
vehicle, for example, describes exact make, model, and VIN # of specific car is sufficient
General: "All inventory of ABC Auto Parts located at 20 Main Street, Conway, South Carolina"
Security Agreement Requirements: Intent - correct answer ✔✔there must be language in the agreement
clearly showing the debtor's intent to grant a security interest to the creditor; most common is "Debtor
hereby grants to Creditor, a security interest in the following described property"
Security Agreement: Additional Terms - correct answer ✔✔NOT legally required, but common; many
security agreements will have numerous other terms & conditions
If the any of the security agreement requirements are missing, then? - correct answer ✔✔omission of
one of the terms/requirements renders the agreement INVALID & results in the creditor having NO
interest in the collateral
What Article of the UCC governs SECURED transactions in personal property? - correct answer
✔✔ARTICLE 9; governs DEBTOR-CREDITOR RELATIONSHIPS - where the creditor has an INTEREST in some
property of the debtor to SECURE payment of the debt (UNLESS the property is real estate)
SCENARIO: A customer goes to the bank to borrow $5,000 for 6 months. He is a good customer with
good credit. The bank loans the $5,000 in exchange for a promissory note. No collateral or security
interest is required. This is? - correct answer ✔✔An unsecured loan - not governed by the UCC, but
instead STATE CONTRACT LAW (loan guaranteed only by a promise to repay it)
SCENARIO: A customer goes to the bank to apply for a $30,000 loan to buy a new car. He is a good
customer with good credit. The bank loans him $30,000. He signs a promissory note and a security
agreement giving the bank an interest in the new car. If the customer defaults, the bank takes the car,
sells it, and pays off the loan. This is? - correct answer ✔✔A secured transaction - governed by ARTICLE 9
of the UCC
questions with complete solutions
Secured Party - correct answer ✔✔THE CREDITOR IN SECURED TRANSACTIONS; A creditor who has a
security interest in the debtor's collateral, including a seller, lender, cosigner, or buyer of accounts or
chattel paper (a record of monetary obligation & secured interest)
Debtor - correct answer ✔✔THE PARTY WHO OWES MONEY TO A CREDITOR; and has given the creditor
an interest in his property to secure the payment of the debt
Security Interest - correct answer ✔✔the legal term for the rights that a secured creditor has in the
Debtor's property (collateral) that secures payment
Security Agreement - correct answer ✔✔THE MOST CRITICAL DOCUMENT IN A SECURED TRANSACTION;
A document in which the debtor gives the creditor an interest in its property (collateral) to secure the
loan; provides for a security interest in which a debtor agrees to give a creditor the right to take his or
her property in the event of default (failure to uphold agreement/payment)
collateral - correct answer ✔✔the specific property or subject of the security interest that the debtor
used to secure the loan
Security Agreement Requirements (by law) - correct answer ✔✔1. must be in WRITING to be valid
2. must be have a SIGNATURE by the debtor
3. must DESCRIBE the exact property used as collateral
4. must be clear INTENT in language of writing
Security Agreement Requirements: Writing - correct answer ✔✔the security agreement must be in
writing to be valid; an electronic writing is sufficient & common - only exception: the "pledge"
Security Agreement Requirements: Signature - correct answer ✔✔the debtor must sign the security
agreement; an electronic signature is called an authentication
, Security Agreement Requirements: Property Description - correct answer ✔✔the exact property of the
debtor which is being used as collateral must be described in the agreement: 2 types of description -
General or Specific
Specific Description v. General Description (collateral) - correct answer ✔✔Specific: if the collateral is a
vehicle, for example, describes exact make, model, and VIN # of specific car is sufficient
General: "All inventory of ABC Auto Parts located at 20 Main Street, Conway, South Carolina"
Security Agreement Requirements: Intent - correct answer ✔✔there must be language in the agreement
clearly showing the debtor's intent to grant a security interest to the creditor; most common is "Debtor
hereby grants to Creditor, a security interest in the following described property"
Security Agreement: Additional Terms - correct answer ✔✔NOT legally required, but common; many
security agreements will have numerous other terms & conditions
If the any of the security agreement requirements are missing, then? - correct answer ✔✔omission of
one of the terms/requirements renders the agreement INVALID & results in the creditor having NO
interest in the collateral
What Article of the UCC governs SECURED transactions in personal property? - correct answer
✔✔ARTICLE 9; governs DEBTOR-CREDITOR RELATIONSHIPS - where the creditor has an INTEREST in some
property of the debtor to SECURE payment of the debt (UNLESS the property is real estate)
SCENARIO: A customer goes to the bank to borrow $5,000 for 6 months. He is a good customer with
good credit. The bank loans the $5,000 in exchange for a promissory note. No collateral or security
interest is required. This is? - correct answer ✔✔An unsecured loan - not governed by the UCC, but
instead STATE CONTRACT LAW (loan guaranteed only by a promise to repay it)
SCENARIO: A customer goes to the bank to apply for a $30,000 loan to buy a new car. He is a good
customer with good credit. The bank loans him $30,000. He signs a promissory note and a security
agreement giving the bank an interest in the new car. If the customer defaults, the bank takes the car,
sells it, and pays off the loan. This is? - correct answer ✔✔A secured transaction - governed by ARTICLE 9
of the UCC
