Secure Transactions

Question 1

what is a secured transaction?

Answer 1

an agreement between a debtor and a creditor that the debtor’s personal property will serve as collateral for a loan

Question 2

what is a security interest?

Answer 2

an interest in personal property or fixtures that secures payment or performance of an obligation

Question 3

what is a security agreement?

Answer 3

a contract that creates a security interest

Question 4

what is a secured party?

Answer 4

a creditor who obtains a security interest in the debtor’s property

the person in whose favor a security interest is created under the security agreement

Question 5

what is an obligor?

Answer 5

a party that must pay or perform the obligation that the collateral secures

Question 6

what is a debtor?

Answer 6

a party that has an interest, other than a security interest, in the collateral

Question 7

what is the scope of article 9

Answer 7

governs transactions, regardless of form, that create a security interest in personal property or fixtures by contract

Question 8

what is an agricultural lien?

Answer 8

an interest in farm products that secures payment of performance of an obligation for
- goods or services frunished with respect to farming operations, or
- rent on real proeprty in connection with a farming operation

Question 9

what is the purpose of sales of certain rights to payment?

Answer 9

to facilitate public notice that the sales have happened

Question 10

sales of which types of collateral are treated like secured transactions?

Answer 10

chattel paper
promissory notes
accounts
payment intangibles

Question 11

what is collateral?

Answer 11

property subject to a security interest

characterization of collateral can affect the validity of a security interest, the way it can be perfected, and the rights of a third party in the collateral

Question 12

what is a good?

Answer 12

anything moveable at the time a security interest attaches

Question 13

what are consumer goods?

Answer 13

goods acquired primarily for personal, family, or household purposes

Question 14

what are farm products?

Answer 14

goods - crops, livestock, supplies used or produced in farming operations

does NOT include farming equipment

Question 15

what is inventory?

Answer 15

goods that are not farm products that are held for sale or lease

includes goods that are furnished under a service contract, raw materials, works in progress or materials used or consumed in business

Question 16

what is equipment?

Answer 16

goods that don’t fit into any of the other definitions; usually refers to goods that are used or bought for use primarily in business

i.e. machinery, delivery vans, office equipment, and farm equipment

Question 17

what are fixtures?

Answer 17

goods that are attached to real property in a way that an interest arises in them under real property law

Question 18

when does a good become a fixture?

Answer 18

once the good is attached to the house, if you’re not going to take it with you when you move away, then it’s likely a fixture. it’s attached to the home in a way that is rather permanent

Question 19

what is a right to payment?

Answer 19

the right to be repaid money by a third party that the debtor then uses as collateral for a loanw

Question 20

what are the four types of rights to payment?

Answer 20

instrument
chattel paper
accounts
payment intangible

Question 21

what is an instrument?

Answer 21

examples: promissory notes, checks, and drafts under UCC art. 3

Question 22

what is a chattel paper

Answer 22

a record (paper or electronic) with two components:
1. a monetary obligation, and
2. a security interest or a lease

Question 23

what are accounts?

Answer 23

a right to payment of a monetary obligation for property that is sold, leased, or licensed, or for services rendered

Question 24

what is a payment intangible?

Answer 24

a catch-all of rights to payment

Question 25

what is investment property?

Answer 25

certified and uncertified securities i.e. stocks and bonds

Question 25

what are documents?

Answer 25

documents of title that generally give the holder ownership rights in goods held by a bailee

Question 26

what are deposit accounts?

Answer 26

bank accounts

Question 27

what are commercial tort claims?

Answer 27

claims possessed by an organization or an individual that arose in the course of the organization or individual's business doesn't include claims for personal injury or death

Question 28

what are letter of credit rights?

Answer 28

a right to payment or performance under a letter of credit

Question 29

waht are general intangibles?

Answer 29

a residual category for anything that doesnt fit into other categories of collateral

Question 30

what is an attachment?

Answer 30

an arrangement linking a debt to a particular piece of collateral

Question 31

what is required for attachment?

Answer 31

value given by a secured party the debtor must have rights in the collateral there must be a security agreement meeting one of two requirements 1. there is an authenticated security agreement that describes the collateral OR 2. the secured party has possession or control of the collateral pursuant to an oral or unauthenticated security agreement

Question 32

what is after-acquired property?

Answer 32

property acquired by the debtor after the security interest attaches BUT an after-acquired clause is not effective if the collateral is consumer goods, unless the debtor acquires them within 10 days of value

Question 33

what is accession?

Answer 33

goods that are physically united with other goods so that the identity of the original goods is not lost

Question 34

what are commingled goods

Answer 34

goods that are physically united with other goods to the point that their identity is lost in a product or mass

Question 35

what are proceeds?

Answer 35

whatever results when collateral is sold, leased, licensed, exchanged, or otherwise disposed of a security interest automatically attaches to identifiable proceeds

Question 36

what is a purchase money security interest?

Answer 36

special type of security interest subject to its own perfection and priority rules qualifies as a PMSI only if the collateral is goods or software two components: 1. the value given allows the debtor to acquire the goods or software; and 2. the goods or software acquired secure the loan

Question 37

what is lender PMSI?

Answer 37

the lender loans money to the debtor so that the debtor can acquire goods - value is actually used to acquire goods -lender takes a security interest in those same goods to secure the loan

Question 38

what is seller PMSI?

Answer 38

goods bought on credit

Question 39

when is a lease covered under Article 9?

Answer 39

when the transaction, although in the form of a lease, is in economic reality or substance as secured transaction

Question 40

how can value be given by the secured party?

Answer 40

by providing consideration sufficient to support a simple contract by extending credit, either immediately or under a binding commitment to do so by, as a buyer, accepting delivery under a preexisting contract in satisfaction of, or as security for, part of all of a preexisting claim

Question 41

what is the rule for debtor's rights in collateral?

Answer 41

for the security interest to attach, the debtor must generally have rights in the collateral. a security interest attaches only to the rights that the debtor has, and limited rights are sufficient

Question 42

what are the requirements of a security agreement?

Answer 42

must be in a record contain a description of the collateral be authenticated by the debtor

Question 43

what is perfection?

Answer 43

attachment of an interest and compliance with one of the methods of perfection necessary for the secured party to have rights in the collateral that are superior to any rights claimed by third parties

Question 44

what are the methods of perfection?

Answer 44

filing a financing statement possession of the collateral control over the collateral automatic perfection statute

Question 45

how do you perfect by filing a financing statement?

Answer 45

security interest in collateral thats not a deposit account, money, or letter of credit rights not supporting an obligation can be perfected by filing. primary objective is to give notice must contain - debtor's name, secured party's name, and collateral covered.

Question 46

how do you perfect by control?

Answer 46

can perfect by taking control of an investment property, deposit accounts, letter-of-credit rights, electronic chattel paper, or electronic documents. Remains perfected only while secured party is in control

Question 47

what is automatic perfection?

Answer 47

happens in PMSI in consumer goods. automatically perfects upon attachment

Question 48

how do proceeds of sale of collateral perfect?

Answer 48

if the security interest in collateral is perfected, the secured party has a perfected security interest in cash proceeds from sold collateral

Question 49

what is the timing of perfection?

Answer 49

perfected upon 1. attachment of the security interest and 2. compliance with one of the methods of perfection

Question 50

how do you determine priority?

Answer 50

identify status of each claimaint, then apply appropriate priority rule

Question 51

what is a general creditor?

Answer 51

a party who has claim, including a judgment, but who has no lien or security interest with respect to the property in question

Question 52

what is a judicial lien creditor?

Answer 52

creditor who acquires a lien on the collateral by a judicial process, rather than by operation of law

Question 53

what is a transferee?

Answer 53

people who obtain full title to the goods as a result if a transfer of the collateral from the debtor

Question 54

buyer in the ordinary course of business

Answer 54

takes goods free of a security interest that the seller gave to the creditor in the goods, even if the security interest is perfected and the buyer knows if its existence BIOCB is a person who - buys goods (not farm products) - in the ordinary course of business - from a merchant who is in the business of selling goods of that kind - in good faith - without knowledge that the sale violates the rights of another

Question 55

what is a consumer buyer?

Answer 55

takes free of a security interest, even if perfected, unless prior to the purchase, the secured party filed a financing statement covering the goods. a person who - buys consumer goods for value - for own personal, fmaily, or household use - from a consumer seller, and - without knowledge of the security interest

Question 56

perfected security interest vs. perfected security interest

Answer 56

first to file a financing statement or first to perfect, whichever comes first

Question 57

perfected security interest v. unperfected security interest

Answer 57

perfected always wins

Question 58

unperfected security interest v. unperfected security interest

Answer 58

first to attach their interest

Question 59

PMSI priorities?

Answer 59

generally, priority is given to a PMSI over a non-PMSI

Question 60

PMSI v. PMSI

Answer 60

first to file a financing statement or perfect

Question 61

what can the secured party do after default?

Answer 61

seek possession of the collateral and, in order to satisfy obligor's outstanding obligation, either: - sell the collateral; or - retain it in full or partial satisfaction of the obligation initiate judicial action subject to statutory limitations, pursue any course of action to which the debtor and obligor have agreed

Question 62

possession of collateral

Answer 62

after default, secured party is entitled to take possession. unless stated otherwise in agreement, secured party is not required to give notice of default

Question 63

disposition of collateral

Answer 63

after default, secured party can sell, lease, license, or otherwise dispose of collateral.

Question 64

what is the commercially reasonable standard for disposition?

Answer 64

all aspects must be done in a commercially reasonable manner - method, manner, time, and place