Flashcards in FL Secured Transactions Deck (48)
In order for a UCC Article 9 security interest to be created, there must be __________.
a consensual security agreement
List the methods of perfecting a security interest in collateral
Filing, control, possession, and automatic perfection
List the types of collateral that can be perfected by possession
goods, negotiable documents, tangible chattel paper, instruments, money.
As a general rule, the buyer of collateral subject to a perfected security interest takes the collateral __________.
subject to the security interest, unless the secured party authorizes the sale free and clear of the security interest.
Rights of unsecured creditors
1. An unsecured creditor does not have a claim to particular property owned by the debtor.
2. An unsecured creditor can obtain rights in the property of the debtor by obtaining a security interest or a lien in the property.
3. An unsecured creditor with a judicial lien can levy or execute on the particular property of the debtor, making the unsecured creditor a lien creditor.
After collateral is sold or otherwise disposed of, the secured party has an automatically perfected security interest in the proceeds for __________ days.
Determining whether a lease is a secured transaction
1. Leases are only covered under Article 9 when the transaction, although in the form of a lease, is in economic reality or substance, a secured transaction.
2. A transaction in the form of a lease is more likely to be treated as creating a security interest if the lessor does not get something of value back at the end of the lease.
3. The determination of whether a lease is actually a secured transaction is made on a case-by-case basis.
Priority rules for PMSI (Purchase Money Secured Interests)
1. A PMSI in goods other than inventory will prevail over all other security interests in the collateral if the secured party perfects within 20 days of the debtor receiving possession of the collateral.
2. If there are two or more competing PMSIs, the first to file or perfect rule generally governs priority.
3. A PMSI in consumer goods takes priority over all other security interests, no matter when they are perfected.
What are the requirements in order for a buyer of collateral to take the collateral free of an unperfected security interest for which the secured party has not authorized the sale free and clear of the security interest?
1. The buyer must give value for the collateral.
2. The buyer must purchase the collateral without knowledge of the existing security interest.
3. The buyer must receive delivery of the collateral.
What sources do we turn to in order to determine whether a default has occurred?
The parties’ security agreement and contract law
What is a security interest?
A security interest is an interest in personal property or fixtures that secures payment or performance of an obligation.
Who are the parties to a secured transaction?
1. Secured Party: The person who has the SI created under the security agreement.
2. Obligor: The person who is obligated to pay or perform under the security agreement.
3. Debtor: The person who has interest, other than the SI or other lien, in the collateral at issue (typically the owner of the collateral).
Note that in most cases, the obligor and the debtor are the same person.
What are the four main types of property are considered collateral subject to the security interest?
1. Farm Products
3. Consumer Goods
List the other types of collateral other than the 4 main ones (typically intangible goods)
Chattel paper, documents, instruments, investment property, accounts, commercial tort claims, deposit accounts, letter-of-credit rights, and other general intangibles (miscellaneous/other)
Requirements of attachment
1. VALUE must be given by the secured party (e.g. line of credit or money)
2. the debtor has RIGHTS in the collateral
3. the debtor has authenticated a SECURITY AGREEMENT that describes the collateral
4. The secured party has POSSESSION or CONTROL of the collateral
1. Must satisfy the Statute of Frauds
2. Authenticated record
3. Possession and/or Control of collateral
General rule and exceptions to the security interests of after-acquired collateral
General Rule: The SI may cover collateral owned when the security is granted and also collateral that the debtor acquires after the SI is given
Exceptions: An after-acquired clause is not effective for consumer goods, unless the debtor acquires them within 10 days after the secured party gives value, or a commercial tort claim
Rights and Duties of the Secured Party arising from possession or control of the collateral
1. Duty of care
2. Duty to keep collateral identifiable
3. Duty to relinquish control or possession of collateral
4. Right to charge for reasonable maintenance expenses
When does a PMSI in goods exist?
A PMSI (Purchase Money Security Interest) exists when a SECURED PARTY gave value to the debtor and the DEBTOR used the value to incur an obligation that enabled the debtor to acquired good; OR:
A secured party sold goods to the debtor, and the debtor incurred an obligation to pay the secured party all or part of the purchase price
What is an accession?
Goods that are physically united with other goods such that the identity of the original goods is NOT lost (opposite of commingled goods)
What are commingled goods?
Goods that are physically united with other goods such that their identity is lost in a product or mass (opposite of an accession)
List the methods of perfection
Filing, control, possession, and automatic perfection
Filing as a method of perfection
gives interested parties NOTICE of the existence of the SI. Filing is a method of perfection for any SI except a deposit account, money, or letter-of-credit rights
Requirements of a financing statement
1. The debtor's name
2. The secured party's name
3. Description of the collateral at issue
Buyer in the Ordinary Course of Business (BOCB)
1. buys goods (not farm products) by giving value
2. in the ordinary course
3. from a seller in the business of selling goods of that kind
4. in good faith
5. without actual knowledge that the sale violates another's rights in the goods
As a result, BOCB takes free of any SI in goods given by buyer's seller
Priorities among secured parties
1. Perfected SI vs. Perfected SI: The 1st to file or perfect has priority
2. Perfected SI vs. Unperfected SI: A perfected SI has priority over an unperfected SI
3. Unperfected SI vs. Unperfected SI: The 1st to attach has priority
(first in time, first in right)
Who has priority? PMSI vs non-PMSI:
PMSI has priority
Who has priority? PMSI in goods other than the inventory or livestock vs. Any SI:
A PMSI has priority if perfected before or within 20 days after the debtor receives possession of collateral
Who has priority? PMSI in livestock vs. Any SI:
A PMSI has priority if perfected by the time the debtor receives possession of the collateral, and the purchase-money secured party sends an authenticated notice of the PMSI to the holder of any conflicting SI before the debtor receives possession of the collateral (notification is required only when the SI was perfected by filing).