MEE - Secured Transactions

Question 1

Security Interest

Answer 1

Article 9 of the UCC determines whether a security in personal property is enforceable. For the security interest to be enforceable against the debtor, three conditions must coexist: (i) value has been given by the secured party, (ii) the debtor has rights in the collateral, and (iii) the debtor has authenticated a security agreement that describes the collateral, or the secured party has possession or control of the collateral pursuant to a security agreement. Once these conditions are met, the security interest is said to have attached to the collateral and is enforceable against the debtor.

Question 2

Security Agreement - Authentication

Answer 2

To be enforceable, a security agreement must be authenticated, meaning that the debtor executed or adopted the signature or the symbol that is attached to or logically associated with the record with the present intention to do so.

Question 3

Security Agreement - Description

Answer 3

The security agreement must prove a sufficient description of the collateral that reasonably identifies the collateral. A description that identifies the collateral by the category or by the type of collateral reasonably identifies the collateral. A description of the collateral as “all the debtor’s assets” or “all the debtor’s personal property” does not reasonably identify the collateral under the UCC.

Question 4

Equipment - Definition

Answer 4

Equipment is a catch-all class of collateral that consists of goods that are not consumer goods, farm products, or inventory. It typically refers to goods that are used in a business.

Question 5

Perfection

Answer 5

Perfection is generally a necessary step for a secured party to have rights in collateral that are superior to rights claimed by other parties. A secured interest is perfected upon attachment and compliance with any one of the methods of perfection. A secured party can perfect a security interest by (1) filing a financing statement; (2) possessing the collateral; (3) exerting control over the collateral; and (4) automatic perfection (either temporary or permanent).

Question 6

Judicial Lien Creditor

Answer 6

A judicial lien creditor is a creditor who acquires a lien on the collateral by a judicial process, rather than by operation of law. A judicial lien creditor takes the collateral subject to an existing perfected security interest, but generally has priority over an unperfected security interest.