Article 9 Flashcards
(108 cards)
1
Q
in general, what does article 9 cover
A
security interests
2
Q
definition of a lien
A
an interest in property that gives the holder of the lien a right to possession of some of a debtor’s property in the event that the debtor fails to perform it’s obligations
3
Q
definition of foreclosure
A
the process by which a creditor compels the value of the collateral to be applied to the payment of the debt when the DR does not make payments on the debt when due
4
Q
definition of a security interest
A
an interest in personal property (not real estate) that a secured party takes to secure the repayment of the debt or obligation owed by the DR
5
Q
what does a security interest allow the SCR to have?
A
a right in property that is contingent on the nonpayment of a debt
6
Q
definition of default
A
failure to pay
7
Q
definition of an unsecured creditor
A
a creditor that does not have a lien
8
Q
definition of a security agreement
A
a K b/t the DR and a secured party that grants or gives the secured party a security interest in certain personal property
9
Q
definition of secured party
A
the person/entity that has an ownership interest in the collateral
10
Q
definition of collateral
A
the property in which the secured party holds a security interest
11
Q
definition of debtor
A
a person who has an ownership interest in the collateral
12
Q
definition of obligor
A
person who owes the debt that is secured by the security interest (person who has to pay)
13
Q
definition of obligor
A
person who owes the debt that is secured by the security interest (person who has to pay)
14
Q
definition of a writ of execution
A
an order from the court to the sheriff to seize enough property of the defendant to satisfy the judgement
15
Q
definition of a levy
A
when the sheriff takes possession of property of the defendant
16
Q
definition of a levy
A
when the sheriff takes possession of property of the defendant
17
Q
what can serve as collateral?
A
almost anything
18
Q
what type of property should a potential SCR want as collateral?
A
useful property; usefulness depends on the value the SCR can get after default and how much leverage the SCR can get out of the collateral
19
Q
what is the intended security doctrine
A
regardless of the form in which the parties choose to cast their deal, it if is a security, the law will recast it as security
20
Q
what type of transactions does article 9 apply to?
A
transactions that create security interests
21
Q
what test determines if a transaction is a disguised sale vs. a true lease?
A
1-203(b) test
22
Q
does article 9 care about how the parties labeled the transaction?
A
no, will only look at the substance of the deal to determine if the transaction creates a security interest and therefore whether article 9 applies
23
Q
does article 9 care about how the parties labeled the transaction?
A
no, will only look at the substance of the deal to determine if the transaction creates a security interest and therefore whether article 9 applies
24
Q
what procedure operates on the ownership of the collateral?
A
foreclosure
25
how long does a DR have to raise a defense to a foreclosure proceeding?
usuallly 20 days
26
who executes the writ of execution
the sheriff
27
who has to do the discovery to tell the sheriff which property to seize and where that property is?
the CR
28
what is a debtor's exam?
where the creditor is doing discovery and examines the debtor about what property they have to that the CR can repossess to fulfill the judgment
29
what are the exemption statutes
statutes that prevent the sheriff from seizing certain property under a writ of execution
30
what are the exemption statutes
statutes that prevent the sheriff from seizing certain property under a writ of execution
31
where is default defined?
in the contract (SA) b/t SCR and DR
32
what is a universal default clause?
a clause in loan documents that says it's a default under this agreement if you default on any other outstanding loan you have w/ a SCR
33
T/F: the UCC defines default
false
34
does the SCR have to repo the collateral upon the DR's default?
no
35
what is the SCR entitled to do when the DR defaults?
1. can take possession immediately upon default
| 2. without removal, can render equipment unusable and dispose of the collateral on a DR's premises
36
what are the 2 ways an SCR can repo the collateral when the DR defaults?
1. judicial process
| 2. self-help repo
37
if an SCR uses a judicial process to repo, what must they obtain?
a write of replevin
38
to whom is a writ of replevin available to?
any party entitled to possession of tangible personal property
39
if SCR can show they are likely to win in a repo action, how can they get a temporary writ of replevin?
by posting a bond in case the DR wins the suit (will pay for DR's damages from loss of possession)
40
definition of a writ of replevin
sheriff seizes personal property of the DR where the CR has a security interest and the DR has defaulted
41
T/F: in most states, if the DR refuses the sheriff during a repo, the sheriff is authorized to use force
true
42
an SCR can use self-help repo so long as there is not
a breach of the peace
43
does the UCC define breach of peace
no
44
is the SCR's duty not to breach peace delegable?
no - 3Ps are liable
45
what is the purpose of not breaching the peace during a self-help repo
avoid dangerous confrontations
46
what are the consequences if an SCR breaches the peace during a self-help repo?
1. jail
2. compensatory and punitive damages
3. return collateral
4. if returned, have to use judicial process to get
47
can a DR waive a self-help repo that would be a breach of the peace?
no
48
can a DR define what constitutes a breach of the peace?
no
49
What may a DR waive in terms of a repo?
1. right to notification of disposition of the collateral
2. right to require the disposition of the collateral
3. except in consumer goods transaction, the right to redeem the collateral
50
what are the 2 ways an SCR can get account receivables as collateral?
1. SCR notifies account debtors to pay the SCR instead of the DR (notification)
2. SCR trusts DR to give SCR the money when SCR pays
51
what are the 2 ways an SCR can get account receivables as collateral?
1. SCR notifies account debtors to pay the SCR instead of the DR (notification)
2. SCR trusts DR to give SCR the money when SCR pays
52
if an account debtor receives notification that an SCR is using the DR's accounts as collateral, who does the ADR pay in order to discharge its duty?
the SCR (not DR)
53
if a DR grants a security interest in its accounts receivables, can an account DR request a proof of the assignment (in order to figure out to who to make payments)
yes
54
what is a lock box arrangement?
In terms of when a DR uses its accounts receivables as collateral for a loan
people get an address that they are supposed to send their payment to. Will still have the DR’s address but will be controlled by the SCR. SCR may release some funds for the DR to use (as per the arrangement). This way, the ADRs don’t know that they are paying the SCR instead of the DR
55
does a seller have the right to retake goods by self-help repo or file a replevin action if the seller is unpaid?
yes but only if the seller has an Article 9 security interest
56
when can an SCR hold a nonjudicial sale?
when the debtor is in default and there has been a valid repossession of the collateral
57
how is a nonjudicial sale beneficial for both SCR and DR?
SCR gets repayment and DR gets a reduction of debt
58
does the DR always have the right to have the repo'd collateral sold?
yes, regardless of whether it's in the K
59
after the SCR repos the collateral, what can the SCR do with it?
1. sell/lease/license or dispose of it in a commercially reasonable manner
2. keep it through acceptance
60
what is acceptance
where the SCR proposes to the DR that they will take the collateral and apply the fair market value of the collateral at that point in time against the debt (either in full or partial satisfaction of the debt)
61
does the DR have to accept the SCR's proposed acceptance?
no, the DR must give consent
62
is implied consent sufficient for the DR to accept the SCR's proposal of full acceptance?
yes
63
in terms of acceptance, when can the DR's consent be implied?
1. when the SCR sends the DR a proposal for retention of the collateral in full satisfaction of the debt AND
2. the SCR does not receive a notification of objection to the proposal w/in 20 days
64
is implied consent sufficient for the DR to accept the SCR's proposal of partial acceptance?
no, actual consent is required for partial acceptance (DR must agree to the SCR's proposal of partial acceptance in writing)
65
for consumer goods, must acceptance be full or in partial satisfaction of the debt?
Full. For consumer goods, acceptance is only OK if in full satisfaction
66
if SCR chooses to sell the collateral, what are the 2 requirements the SCR must follow?
1. give the DR notice of the sale
| 2. conduct sale in a commercially reasonable manner
67
does the SCR's failure to follow Article 9's requirement regarding a non judicial sale invalidate the sale?
no, but it can reduce the amount of the deficiency the SCR can recover or eliminate it all together
68
when does the SCR not have to send notification of a nonjudicial sale?
when the collateral is perishable, depreciates quickly, to is an item in a recognized market (stocks)
69
can the notice requirement for a non judicial sale be waived in a security agreement?
no
70
what is the right to redeem?
the DR's right to pay the full amount of the debt, after possession, including the SCR's attorneys fees and expenses of the sale
71
how long does the DR have to redeem after the collateral has been repo'd?
until the collateral has been sold to someone else (the moment the SCR enters in a K for the disposition of the collateral) or there has been acceptance
72
what is a deficiency?
the amount left over after collateral is sold and the value received from selling the collateral is applied to the DR's debt
73
during a deficiency action, when does the rebuttable presumption rule come up?
when the collateral is non consumer goods and the DR has put the SCR's compliance w/ Article 9 at issue
74
in a deficiency action and regarding a non judicial sale, what is the rebuttable presumption
the presumption that the amount of damages suffered by the DR as a result of a non commercially reasonable sale is equal to the amount of the deficiency
75
does the rebuttable presumption rule apply in a deficiency action for the sale of consumer goods?
maybe - it depends on what state law prescribes
76
in terms of a deficiency judgement and a non judicial sale, what is an absolute bar?
where some courts have determined that when an SCR failed to follow Article 9's rules on disposition of the collateral, then such secured party has forfeited all its rights to a deficiency
77
in terms of a deficiency judgement and a non judicial sale, what is an absolute bar?
where some courts have determined that when an SCR failed to follow Article 9's rules on disposition of the collateral, then such secured party has forfeited all its rights to a deficiency
78
what are the steps in creating and enforcing a security interest?
1. Creation/attachment
| 2. perfection
79
does a financing statement fit into the creation/attachment step or the perfection step?
perfection
80
definition of attachment
creating a property interest w/ respect to specific, identified collateral
81
when does a security interest become enforceable against the DR?
when the security interest attaches
82
what are the requirements for a security interest to attach to property of the DR?
1. value has been given
2. DR has rights in the collateral AND
3. Either authenticated document (security agreement) or SCR has possession
83
if a security interest attaches to the DR's property, what happens?
the security interest in that property becomes enforceable against the DR and if DR defaults, SCR can repo or sell the collateral
84
if the requirements for a security interest to attach are not met, what does the creditor become?
an unsecured creditor.
85
if the requirements for a security interest to attach are not met, what does the creditor become?
an unsecured creditor.
86
definition of a security interest
a right to apply the value of the collateral to the holder's debt
87
what does PMSI stand for
purchase money security interest
88
definition of a PMSI
where the DR is purchasing a new (to him) good and the debt that is secured is the purchase price
89
drag net clause
a clause that can be in the security agreement that says that any obligations (whether existing or future) are ALL going to be secured by a specific piece of collateral
90
who is an SA enforced against?
the SCR and DR. (only enforced against 3Ps if perfected)
91
when will a description of collateral be deemed sufficient in an SA?
when the description "reasonably identifies what is described"
92
can categories be used to describe collateral in an SA?
yes
93
is stating "all the DR's assets" as a description of collateral in the SA sufficient?
no b/c it does not reasonably identify the collateral
94
what is an after acquired property clause?
a clause that states that as soon as the DR gets rights in additional inventory or accounts, the security interest attaches to them
95
definition of a floating lien
where a particular DR is likely to be disposing of some items and acquiring others over time, so that it makes more sense to think of the collateral as the category rather than as the individual items w/in it at a ny given time (drag net + after acquired property clause)
96
on what type of collateral can an after acquired property clause not be used?
consumer goods that the DR acquires more than 10 days after the secured party gives value
97
on what type of collateral can an after acquired property clause not be used?
consumer goods that the DR acquires more than 10 days after the secured party gives value and commercial tort claims
98
what does the classification of the collateral determine?
where the financing statement needs to be filed
99
when is the classification of the collateral determined?
at the time the transaction occurs--> look at how the DR is using the collateral
100
what are the 2 main types of collateral classifications?
1. tangible
| 2. intangible
101
definition of goods
all things moveable at the time of the transaction
102
in order for proceeds to be traceable, what must they be?
identifiable
103
does a transferred of money take free of money when such money comes from a DR's account that contains proceeds (value tracing)
yes so long as the transferree is not acting in collusion w/ the DR in violating the rights of the SCR
104
what defines default
the security agreement
105
definition of default
the DR's failure to pay the debt when due or otherwise perform the agreement
106
what obligation does every contract or duty under the UCCC impose?
duty of good faith
107
what does an acceleration clause do
state that in the event of DR's default in any obligation under the repayment contract, the SCR may, at its option, declare all of the payments immediately due and payable
108
what happens if the DR defaults and the SCR doesn't immediately assert its rights?
DR may claim waiver or waiver by estoppel (defenses)
