Fact Pattern 20-1 General Leasing Company (GLC) Buys Equipment for Use as Inventory

question 19

Multiple Choice

Fact Pattern 20-1
General Leasing Company (GLC) buys equipment for use as inventory, borrow¬ing $1 million from Helpful Finance Corporation for a security in¬terest in the equipment. The next day, GLC borrows $500,000 from Interstate Bank, also for a security interest in the equipment. GLC defaults on the loans.


-Refer to Fact Pattern 20-1. Suppose that Helpful perfects its security interest when GLC takes possession of the equipment. In that circumstance, the party with priority to the collateral on GLC's default would be

• A) GLC.
• B) Helpful and Interstate proportionately.
• C) Helpful only.
• D) Interstate only.

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Definitions:

UCC

The Uniform Commercial Code, a set of laws that govern commercial transactions in the United States.

Simple Delivery Contract

An agreement where goods are transferred directly from the seller to the buyer without any special conditions or requirements.

Comprehensive Sales Contract

A legal document that outlines the complete terms of a sale, including details of the transaction, responsibilities of the buyer and seller, and procedures for resolving disputes.

Good-faith Purchaser

A good-faith purchaser is an individual or entity that buys property without knowledge of any existing claims or defects against it, thereby gaining legal protection.