Privity of contract is not required in all states for a valid ...

[j.rubin]

Privity of contract is not required in all states for a valid mechanics' lien.
  Indicate whether the statement is true or false

Question 2

Morris made two purchases. He purchased his neighbor Cordelia's typewriter and a computer from Crazy Computers. Regarding the typewriter, Cordelia had bought it on credit from Jack's Typewriters. Cordelia had financed the purchase with Jack's and signed a promissory note and a security agreement covering the purchase. The creditor, Jack's, did not file a financing statement, relying on the concept of automatic perfection for purchase money security interests in consumer goods. Morris was unaware of the history of the typewriter. The computer was subject to a security interest in favor of Country Bank, which had perfected its security interest by filing. Morris, by coincidence, knew of this security interest when Morris purchased the computer. Unfortunately, neither Cordelia nor Crazy Computers paid the secured creditors who now seek to repossess the collateral from Morris. What will be the likely outcome of this case?

[tdewitt]

Answer to Question 1

TRUE

Answer to Question 2

Neither creditor will be successful. Regarding the typewriter, a purchase money security interest of consumer goods provides automatic perfection without filing a financing statement. However, if no filing statement is filed, resale to another consumer who does not know of the security interest will cause the interest to terminate. If Morris was buying as a consumer, the security interest has terminated. Morris will keep the computer free of the security interest of Country Bank because a buyer of inventory in the ordinary course of business is free from security interests placed on the goods by the seller, regardless of whether the buyer is aware of them.