CPA Quiz: Ucc Article 9 Secured Transaction Rules
20 questions · exam conditions
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Ucc Article 9 Secured Transaction RulesQuestion 1 of 20

A files before B; B files before the security agreement is signed; A then advances. Who wins?

Priority starts at attachment
B wins; A had no attachment
A and B each share pro rata
A wins from its filing date
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CPA Quiz: Ucc Article 9 Secured Transaction Rules

Practice Ucc Article 9 Secured Transaction Rules in CPA with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Ucc Article 9 Secured Transaction Rules, giving you a quick way to practice the rules, question types, and explanations that matter most for CPA.

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

All questions

Question 1

A files before B; B files before the security agreement is signed; A then advances. Who wins?

  1. Priority starts at attachment
  2. B wins; A had no attachment
  3. A and B each share pro rata
  4. A wins from its filing date (correct answer)
Explanation: Priority under Article 9 goes to the first to file, not the first to attach. A filed before B, so A's earlier filing controls even though A's security agreement was signed and value advanced later. The tempting error is thinking B wins because A had no attachment yet, but attachment is not the priority event.

Question 2

Lender files only a financing statement to perfect its interest in debtor's deposit account.

  1. Filing perfects the interest
  2. Control is needed to perfect (correct answer)
  3. Giving bank notice is enough
  4. Attachment alone is enough
Explanation: Perfection of a security interest in a deposit account requires control, such as an authenticated control agreement with the bank. Filing a financing statement cannot perfect a deposit account, so the tempting answer that filing perfects the interest is wrong. Bank notice and attachment alone also fall short of control.

Question 3

A perfected inventory lender's debtor sells in ordinary course under loan terms; buyer knows of the lien.

  1. Free despite knowing lien (correct answer)
  2. Subject because it knew lien
  3. Free only if lender consents
  4. Subject unless buyer resells
Explanation: A buyer in ordinary course of business takes inventory free of a perfected security interest created by the seller, even if the buyer knows the lien exists. Because the sale complies with the loan terms, knowledge of the lien alone does not subject the goods. The tempting error is treating notice of the lien as enough; it isn't unless the buyer knows the sale violates the lender's terms.

Question 4

Bank perfects its equipment PMSI 25 days after delivery. Prior perfected blanket lien exists.

  1. Unperfected; prior lien wins
  2. Perfected; PMSI has priority
  3. Perfected; prior lien wins (correct answer)
  4. Filing late voids the PMSI
Explanation: For an equipment PMSI, perfection comes from filing, but priority over an earlier blanket lien depends on filing within 20 days after delivery. At 25 days, the PMSI is perfected yet subordinate to the prior perfected lien. The tempting wrong answer treats the missed 20-day deadline as making the PMSI unperfected; it doesn't - it just costs priority.

Question 5

No filing on a PMSI in consumer goods; a consumer sells for value to a buyer for consumer use with no knowledge.

  1. Stays perfected on the goods
  2. Is cut off by consumer buyer (correct answer)
  3. Unperfected; buyer takes free
  4. Filing is needed to bind buyer
Explanation: A PMSI in consumer goods is perfected automatically without filing, but that perfection doesn't protect against a later consumer buyer who buys for value and has no knowledge of the security interest. That buyer takes the goods free, cutting off the secured party's interest. The tempting 'stays perfected' answer confuses perfection with priority; perfection alone does not defeat this buyer.

Question 6

Under UCC Article 9, the primary method of perfection for most types of collateral is filing a financing statement. Which of the following correctly describes what information must be included in a financing statement?

  1. The financing statement must contain the full text of the security agreement.
  2. The financing statement must identify the specific collateral with the same description used in the security agreement.
  3. The financing statement must include the debtor's name (accurate and complete), the secured party's name, and a description of the collateral. (correct answer)
  4. The financing statement must be signed by both the debtor and secured party.
Explanation: Under UCC Section 9-502, a financing statement is sufficient if it: (1) provides the name of the debtor (accurate and complete - errors in the debtor's name can make the financing statement ineffective); (2) provides the name of the secured party or their representative; and (3) indicates the collateral covered by the financing statement. The collateral description in the financing statement may be broader than in the security agreement (e.g., 'all assets' is acceptable in a financing statement but may not be in some security agreements). Answer A is incorrect because the financing statement need not contain the security agreement. Answer B is incorrect because the financing statement may use a broader description than the security agreement. Answer D is incorrect because only the debtor's signature (authentication) is needed for the security agreement; the financing statement requires authorization from the debtor but not necessarily their signature on the statement.

Question 7

Under UCC Section 9-610, what are the secured party's rights and obligations when a debtor defaults and the secured party repossesses the collateral?

  1. The secured party must immediately sell the collateral at the highest available price.
  2. The secured party may retain the collateral as full satisfaction without selling it in all cases.
  3. The secured party may sell, lease, license, or otherwise dispose of the collateral in a commercially reasonable manner; the secured party must provide reasonable authenticated notification to the debtor and other interested parties before disposal. (correct answer)
  4. The secured party must seek court approval before selling the repossessed collateral.
Explanation: Under UCC Section 9-610(a), after default, a secured party may sell, lease, license, or otherwise dispose of collateral. Under Section 9-614, the secured party must send reasonable authenticated notification of the planned sale to the debtor (and certain other parties) a reasonable time before the sale. Under Section 9-610(b), all aspects of the disposition must be commercially reasonable (method, manner, time, place, and terms). Failure to comply with these requirements may result in the secured party losing the right to collect a deficiency from the debtor. Answer A is incorrect because there is no requirement to maximize the sale price, only commercial reasonableness. Answer B describes strict foreclosure (Section 9-620), which has additional requirements. Answer D is incorrect because court approval is generally not required.

Question 8

Under UCC Article 9, what are the three requirements for a security interest to 'attach' to collateral, making it enforceable against the debtor?

  1. Value must have been given by the secured party, the debtor must have rights in the collateral (or power to transfer rights), and the debtor must have authenticated a security agreement describing the collateral (or the secured party must have taken possession or control). (correct answer)
  2. The secured party must file a financing statement, give value, and obtain the debtor's signature.
  3. The debtor must consent in writing, the creditor must notify all other creditors, and the collateral must be appraised.
  4. The secured party must take physical possession of the collateral and file with the county recorder.
Explanation: Under UCC Section 9-203, attachment occurs when: (1) value has been given by the secured party (such as extending a loan); (2) the debtor has rights in the collateral or the power to transfer rights to a secured party; and (3) the debtor has authenticated a security agreement that describes the collateral, or the secured party has possession or control of the collateral. All three conditions must be met for attachment. Attachment makes the security interest enforceable against the debtor. Answer B is incorrect because filing a financing statement is for perfection, not attachment. Answer C adds irrelevant requirements. Answer D is incorrect because physical possession is only one alternative method for the third requirement.

Question 9

Under UCC Article 9, what is 'perfection' of a security interest and why is it important?

  1. Perfection makes the security interest enforceable against the debtor.
  2. Perfection makes the security interest enforceable against third parties (such as other creditors, lien creditors, and a bankruptcy trustee) by putting the world on notice of the secured party's interest; it establishes priority over competing claims. (correct answer)
  3. Perfection is automatic when a security agreement is signed.
  4. Perfection is required only for collateral valued over $10,000.
Explanation: Perfection under UCC Article 9 is the process by which a secured party makes its security interest effective against third parties. An attached security interest is enforceable against the debtor, but without perfection, the secured party may lose to competing creditors, lien creditors, or a bankruptcy trustee. Perfection methods include filing a financing statement, taking possession of collateral, or taking control of certain types of collateral. Perfection establishes priority in case of the debtor's default, bankruptcy, or competing claims. Answer A incorrectly conflates perfection with attachment (which makes the interest enforceable against the debtor). Answer C is incorrect because perfection requires additional steps beyond signing. Answer D is incorrect because there is no dollar threshold.

Question 10

Under UCC Section 9-308, when does a security interest become perfected?

  1. When the security agreement is signed.
  2. When the loan is funded by the secured party.
  3. When the debtor takes possession of the collateral.
  4. When the security interest has attached and any applicable perfection requirement (such as filing or possession) has been satisfied; if both attachment and the perfection step occur simultaneously, perfection occurs at that moment. (correct answer)
Explanation: Under UCC Section 9-308(a), a security interest is perfected if it has attached and all applicable requirements for perfection have been satisfied. Perfection requires both attachment and the completion of the required perfection step (filing, possession, control, or automatic perfection for certain collateral). If attachment and perfection occur at the same time (such as when a PMSI is perfected on the day of sale), perfection occurs at that moment. Answer A (signing) triggers attachment if all conditions are met but may not complete perfection. Answer B (funding) gives value, completing one attachment requirement but not perfection. Answer C (debtor possession) is irrelevant to the timing of perfection.

Question 11

Under UCC Section 9-317, an unperfected security interest is subordinate to which of the following competing interests?

  1. Any creditor who knew about the security interest.
  2. A person who becomes a lien creditor (such as a judgment creditor who levies on the collateral) before the security interest is perfected, and a trustee in bankruptcy. (correct answer)
  3. Only secured creditors who subsequently perfect in the same collateral.
  4. Only creditors who gave more value than the unperfected secured party.
Explanation: Under UCC Section 9-317(a), an unperfected security interest is subordinate to: (1) a person who becomes a lien creditor before the interest is perfected (such as a judgment creditor who obtains a levy, or a bankruptcy trustee using strong-arm powers under 11 U.S.C. Section 544); and (2) under certain conditions, buyers of collateral who give value without knowledge of the security interest. This rule creates strong incentives to promptly perfect security interests. Answer A is incorrect because knowledge of an unperfected interest does not protect it against lien creditors. Answer C is incorrect because the unperfected interest also loses to lien creditors, not just other secured parties. Answer D is incorrect because the amount of value is irrelevant to this priority rule.

Question 12

Under UCC Section 9-324, what additional requirement applies to a PMSI in inventory (as compared to a PMSI in other goods) to obtain super-priority?

  1. A PMSI in inventory must be perfected before the debtor receives the inventory AND the PMSI holder must send an authenticated notification to prior secured parties with a conflicting interest in the same inventory before the debtor receives the inventory. (correct answer)
  2. A PMSI in inventory requires perfection within 20 days after the debtor receives the inventory.
  3. A PMSI in inventory automatically has priority over all other interests without any additional requirements.
  4. A PMSI in inventory requires a court order to obtain super-priority.
Explanation: Under UCC Section 9-324(b), a PMSI in inventory achieves super-priority only if: (1) the PMSI is perfected before the debtor receives possession of the inventory; AND (2) the PMSI holder gives authenticated notification to any holder of a conflicting security interest in the same inventory before the debtor receives possession. The notification must state that the PMSI holder has or expects to acquire a PMSI in described inventory. This requirement protects existing accounts receivable lenders who rely on inventory as collateral - they are warned about new inventory financing. Answer B describes the rule for non-inventory goods, not inventory. Answer C is incorrect because additional requirements apply. Answer D is incorrect because no court order is required.

Question 13

Under UCC Article 9, when collateral is sold, what happens to the security interest, and what are 'proceeds'?

  1. When collateral is sold, the security interest is automatically extinguished.
  2. When collateral is sold, the security interest follows only cash received from the sale.
  3. The security interest continues in whatever the debtor receives from the disposition of collateral (proceeds); the security interest in proceeds is automatically perfected for 20 days; after 20 days, perfection continues without a new filing if (1) the filed financing statement covers the original collateral and the proceeds are collateral that can be perfected by filing in the same office, or (2) the proceeds are identifiable cash proceeds. (correct answer)
  4. When collateral is sold to a buyer for value, the security interest is terminated and does not follow the proceeds.
Explanation: Under UCC Section 9-315, when collateral is disposed of, the security interest continues in identifiable proceeds. Proceeds include whatever is received upon the sale, exchange, collection, or other disposition of collateral - cash, checks, accounts, other property. Under Section 9-315(d), the security interest in proceeds is automatically perfected for 20 days. After 20 days, perfection continues without a new filing if: (1) a filed financing statement covers the original collateral and the proceeds are collateral in which a security interest may be perfected by filing in the same office; or (2) the proceeds are identifiable cash proceeds. Answer A is incorrect because the interest continues in proceeds. Answer B too narrowly limits proceeds to cash. Answer D describes what happens to a buyer who takes free of the security interest under Section 9-320, which is a different rule.

Question 14

Under UCC Section 9-320, a buyer in the ordinary course of business (BOCB) takes goods free of a security interest created by the seller. Which of the following correctly describes a BOCB?

  1. Any buyer who pays cash for goods takes free of security interests.
  2. A buyer at a bankruptcy auction qualifies as a BOCB.
  3. A buyer who purchases from another buyer (not the original debtor) qualifies as a BOCB.
  4. A person who buys goods in good faith, without knowledge that the sale violates a third party's security interest, from a seller who deals in goods of that kind in the ordinary course of the seller's business. (correct answer)
Explanation: Under UCC Section 9-320(a), a buyer in the ordinary course of business takes free of a security interest created by the seller, even if the security interest is perfected and the buyer knows of its existence, as long as the buyer does not know that the purchase violates the security agreement. A BOCB must: (1) buy from a seller who is in the business of selling goods of that kind; (2) buy in good faith; and (3) not know that the sale violates the security interest. This rule protects retail customers who buy from merchants (protecting the normal flow of commerce). Answer A is incorrect because cash payment alone is insufficient. Answer B is incorrect because bankruptcy auctions are not in the ordinary course. Answer C is incorrect because the seller must be the debtor who created the security interest.

Question 15

Under UCC Article 9, how is a security interest in investment property (such as shares of stock) perfected?

  1. A security interest in investment property may be perfected by filing a financing statement or by the secured party taking control of the investment property; control is the superior method and defeats a security interest perfected only by filing. (correct answer)
  2. A security interest in investment property is automatically perfected when the security agreement is signed.
  3. A security interest in investment property must be perfected by filing with the SEC.
  4. A security interest in investment property is perfected by delivery of a stock certificate to the secured party.
Explanation: Under UCC Sections 9-312 and 9-314, a security interest in investment property may be perfected by: (1) filing a financing statement; or (2) taking control (which for certificated securities means taking possession with proper endorsement; for uncertificated securities means registering the secured party's interest; for securities accounts means an agreement with the securities intermediary). Control is the superior method - under Section 9-328, a security interest perfected by control has priority over one perfected only by filing. Answer B is incorrect because investment property is not automatically perfected. Answer C is incorrect because SEC filing is not an Article 9 perfection method. Answer D is partially correct (delivery is one form of control for certificated securities) but delivery alone without proper endorsement may be insufficient for control.

Question 16

Under UCC Article 9, how long is a filed financing statement effective, and what must the secured party do to maintain perfection?

  1. A financing statement is effective for five years and may not be renewed.
  2. A financing statement is effective for five years from the date of filing; before expiration, the secured party must file a continuation statement to maintain perfection for an additional five-year period. (correct answer)
  3. A financing statement is effective until the debtor pays off the loan.
  4. A financing statement is effective indefinitely unless the debtor files a termination statement.
Explanation: Under UCC Section 9-515, a financing statement is effective for five years from the date of filing. To continue perfection beyond five years, the secured party must file a continuation statement within the six-month period before the expiration. A timely continuation statement extends perfection for another five years from the original expiration date. If the secured party fails to file a continuation statement, perfection lapses and the security interest becomes unperfected. Answer A is incorrect because a five-year renewal is available. Answer C is incorrect because the filing's effectiveness is based on time, not debt repayment. Answer D is incorrect because termination statements are filed after the debt is paid to clear the record.

Question 17

Under UCC Article 9, which of the following types of collateral may be perfected by possession?

  1. Tangible collateral such as goods, instruments (promissory notes), negotiable documents, and certificated securities may be perfected by the secured party taking possession of the collateral. (correct answer)
  2. Only real estate mortgages may be perfected by possession.
  3. Electronic chattel paper and deposit accounts may be perfected by possession.
  4. Accounts receivable and general intangibles may be perfected by possession.
Explanation: Under UCC Section 9-313, a security interest in tangible collateral may be perfected by possession. Types of collateral that can be perfected by possession include: goods, instruments (including promissory notes), negotiable documents of title, and certificated securities. For some collateral types (such as instruments), possession is actually a preferred method over filing because of the priority rules. Answer B is incorrect because Article 9 does not apply to real estate mortgages. Answer C is incorrect because electronic chattel paper is perfected by control, not possession; deposit accounts are also perfected by control. Answer D is incorrect because accounts receivable and general intangibles are intangible property that cannot be possessed; they are typically perfected by filing.

Question 18

Under UCC Article 9, what is a 'security agreement' and what must it contain to be effective?

  1. A security agreement is a financing statement filed with the state.
  2. A security agreement is automatically created when a debtor signs a promissory note.
  3. A security agreement is an authenticated agreement that creates or provides for a security interest; it must contain a description of the collateral sufficient to reasonably identify it. (correct answer)
  4. A security agreement must be notarized and recorded with the county clerk to be effective.
Explanation: Under UCC Section 9-203, the security agreement is the contract between the debtor and secured party that creates the security interest. To be effective, it must be: (1) authenticated by the debtor (signed or electronic authentication); and (2) contain a description of the collateral. The description must reasonably identify the collateral - specific descriptions ('the 2023 John Deere tractor') or generic descriptions ('all inventory') may be sufficient depending on the collateral type. Answer A confuses the security agreement with a financing statement (they are different documents). Answer B is incorrect because a promissory note alone does not create a security interest in collateral. Answer D is incorrect because notarization and county recording are not required for an Article 9 security agreement.

Question 19

Under UCC Article 9, certain security interests are automatically perfected without filing or taking possession. Which of the following is an example of automatic perfection?

  1. A purchase money security interest (PMSI) in consumer goods is automatically perfected upon attachment without any filing requirement. (correct answer)
  2. All security interests are automatically perfected when the security agreement is signed.
  3. Security interests in accounts receivable are automatically perfected.
  4. Security interests created by large banks are automatically perfected.
Explanation: Under UCC Section 9-309(1), a PMSI in consumer goods is automatically perfected upon attachment without any filing or possession requirement. Consumer goods are goods used or bought for use primarily for personal, family, or household purposes. The rationale is that it would be impractical to require all retail installment sales of consumer goods to be filed. However, this automatic perfection does not protect against a subsequent buyer of consumer goods without knowledge of the security interest. Answer B is incorrect because attachment alone does not perfect most security interests. Answer C is incorrect because security interests in accounts receivable must generally be perfected by filing. Answer D is incorrect because the identity of the secured party does not affect perfection requirements.

Question 20

Under UCC Section 9-625, what are the consequences for a secured party who fails to comply with the Article 9 rules regarding disposition of collateral after default?

  1. The security interest is void and the secured party loses all rights in the collateral.
  2. The debtor may recover actual damages from the secured party; in a consumer-goods transaction, the debtor is entitled to a minimum statutory damages award of the credit service charge plus 10% of the principal, even without proving actual damages. (correct answer)
  3. The secured party is automatically prohibited from obtaining a deficiency judgment.
  4. The secured party must return the collateral to the debtor.
Explanation: Under UCC Section 9-625, if a secured party fails to comply with the provisions of Part 6 of Article 9 (which governs default and enforcement), the debtor or obligor may recover damages for any loss caused by the non-compliance, including loss resulting from the debtor's inability to obtain, or increased costs of, alternative financing. In a consumer-goods transaction (one where an individual incurs the obligation primarily for personal, family, or household purposes and the collateral is consumer goods), Section 9-625(c)(2) provides minimum statutory damages even without proof of actual loss. Answer B is correct. Answer A is overly harsh; the security interest is not voided by non-compliance. Answer C is incorrect because automatic deficiency prohibition is a state-law variation, not the uniform Article 9 rule. Answer D is incorrect because returning collateral is not the standard remedy for non-compliance.