Secured Transactions Bar Practice Exam 2025 - Free Practice Questions for Bar Exam Preparation

The Uniform Commercial Code (UCC) addresses the priority between conflicting security interests through the "first to perfect or attach" rule. This principle establishes that the timing of perfection — which can involve filing a financing statement or taking possession of the collateral — determines the priority among competing security interests in the same collateral.

In practical terms, when two or more creditors have security interests in the same type of collateral, the one who perfects their interest first generally obtains priority over the others. This promotes predictable outcomes in commercial transactions, providing a clear framework for creditors to understand their rights and prioritize claims to the collateral.

The other options do not accurately reflect how the UCC determines priority. Equal priority for all interests would lead to confusion and uncertainty in collections; prioritizing based on the amount of the loan does not consider the actual timing of interests being secured; a random priority system would undermine the predictability and reliability that creditors rely on when dealing with secured transactions. Thus, the 'first to perfect or attach' rule is fundamental for establishing orderly and equitable resolutions among competing claims.