Commercial Paper/Security Devices Flashcards
(138 cards)
Security interest?
Secured party’s [creditor] interest in collateral
to secure repayment of funds
to another party [debtor].
Collateral?
prop a secured party may take possession of
& apply toward balance owed on debt;
PROPERTY SUBJECT TO A SECURITY INTEREST
UCC Article 9 catagories?
- certain lease-purchase agreements;
- consignments;
- sales of accounts receivable, chattel paper, negotiable instruments, promissory notes, & payment intangibles;
- agricultural liens; &
- any transaction that creates a security interest in personal prop or fixtures by K.
Goods?
Movables at time security interest attaches &
fixtures
if movable when fixture filing covering them is made.
Types:
- consumer goods:
- inventory;
- farm products; &
- equipment
Consumer goods?
goods used for primarily
personal, family or household purposes.
Inventory?
Goods, other than farm products, that are:
- Held for sale or lease;
- Goods furnished or to be furnished under contract of service; or
- Raw mat’l, work in progress or mat’ls used or consumed in a business.
Farm products?
crops, livestock, unmanufactured products of livestock,
& supplies
used or produced in farming operations i
f in the possession of the farmer
Equipment?
goods that are
NOT
consumer goods,
farm products,
or
inventory
Fixtures?
Goods so related
to a particular real estate
that an interest in those goods
arise under real prop law.
[good incorp. into real property]
Accession?
Perfection re: same?
Priority re: same?
Good physically united w/ another good
where the identity of original good is NOT LOST.
[good incorporated into another good]
- Perfection doesn’t matter if it is before or after its attachment
- Priority determined in same manner as in any other collateral, except: security interest in an accession subordinate to a security interest in whole that is perfected by compliance w/ the requirements of a certificate of title statute [e.g., motor vehicle]
Tangible Intangibles?
tangible items that represent an intangible
- instruments: negotiable instrument or writing evidencing right to payment of monetary obligation.Ex. promissory note, collateral mortgage note, or CD.
- documents: doc of title that represent right to receive goods Ex. Bill of lading
- chattel paper: record(s) evidencing both:
- Monetary obligations &
- Security interest in or lease of specific goods, excluding charter of vessel.
- Electronic chattel paper: chattel paper stored in electronic instead of tangible form
Investment Property?
Stocks, bonds, mutual funds
(not collateral mortgage note)
Proceeds?
Types?
what is received upon sale, lease, exchanged, license, collection, or other disposition of collateral or proceeds
- Types: cash or noncash
- Can go through several transformations (Bank has security interest in debtor’s car. Debtor trades car for truck. The truck is a proceed. Debtor trades pickup for boat. Boat is still a proceed of the original collateral (car) (*2nd generational proceed)
- Claims arising out of loss of, defects in or damage to collateral are proceeds
Security Agreement?
agreement creating/providing for
security interest in certain collateral
Security interest MUST be in writing and:
- contain a granting clause [e.g., state that it is creating a security interest];
- contain a description of the collateral; &
- be authenticated by debtor.
Collateral description in the security agreement is sufficient if it reasonably identifies?
the collateral
- Security agreement must I.D. collateral by using collateral categories such as inventory, equipment, general intangibles, but not consumer goods
- Consumer goods: must denominate such specifically [e.g., my flat screen or my foreman grill.]
- Super generic description: insufficient [Ex: “All debtor’s prop.”]
- Security interest attaches to whatever debtor received for OR on account of collateral (proceeds), like money or another thing, if proceeds are identifiable/linked to original collateral.
Validity?
security agreement binding b/w parties,
against purchasers of collateral, and against creditors
Attachment?
Security interest attaches to collateral
when it becomes enforceable
against Borrower w/ respect to collateral.
- VALUE must have been given by secured party [creditor];
- Debtor has RIGHTS in collateral; &
- Parties must AGREE create security agreement.
How is ATTACHMENT evidenced?
- Creditor takes POSSESSION of collateral
- creditor must use reasonable care in storing & preserving
- Right to reimbursement
- Risk of lost or damage is on the debtor
- Must accnt for collateral profits(except money that must be given to debtor)
- Right to replege (must not impair debtor’s right of redemption)
- AUTHENTICATED SECURITY AGREEMENT: writing (1) contain granting clauses; (2) description of the collateral; & (3) authenticated by debtor.
- Creditor CONTROLs collateral
- Deposit account
- Electronic chattel paper/docs (needs authoritative copy)
- Investment property
- Creditor must account for profits
- Right to replege (can’t impair debtor’s right of redemption)
After-acquired collateral?
valid security agreement may create security interest in prop to be acquired in future that will attach to prop as soon as Debtor acquires interest in prop.
(Must specifically include in agreement an after-acquired property clause: “this security agreement is secured by debtor’s equipment now owned or acquired in the future”).
After-acquired collateral:
Inventory and accounts receivable?
Security interest in constantly depleted & replenished, automatically attaches to the new individual items
After-acquired collateral:
Consumer goods?
After acquired property clause
ineffective re: consumer goods,
UNLESS, debtor acquires rights in goods w/in 10-days after creditor gives value.
After-acquired collateral:
Future advances?
Security agreement can cover future advances on present or future collateral;
New security agreement is NOT needed
w/ respect to the future advances/loans.
Does a securirty agreement need
to provide for proceeds?
NO
security interest attaches to identifiable proceeds of collateral whether OR not security agreement specifically provides for it
A secured party’s security interest in collateral will continue regardless of whether the collateral is ________.
SOLD
Secured party ends up w/ both: a security interest in the original item and the proceeds of the sale, BUT may only chose one to satisfy the debt