Secure Transactions MEE Rules

Question 1

When Art. 9 applies

Answer 1

To all security interests in personal property or fixtures by contract.

Question 2

Consumer goods

Answer 2

Goods that are bought for us primarily for personal, family, or household purposes.

Question 3

Inventory

Answer 3

Goods, other than farm products, that are held by a person for sale or lease.

Materials used or consumed by a business over a short period of time (ex: pens, etc.)

Question 4

Equipment

Answer 4

Goods, other than inventory, farm products, or consumer goods.

Catch-all for tangible collateral.

Question 5

Farm products

Answer 5

Crops, livestock, supplies produced in a farming operation or products of crops or livestock in their unmanufactured state.

Question 6

Attachment requirements

Answer 6

(1) value must be given by secured party to debtor, (2) debtor must have rights in the collateral, and (3) there must be a binding security agreement.

Question 7

Valid security agreement

Answer 7

(1) authentication (signed), (2) intent to create a security agreement, and (3) description of the collateral.

Question 8

After-acquired property

Answer 8

A security agreement can cover after-acquired property and does not need to specifically reference it to be effective.

Question 9

Methods of perfection

Answer 9

-Filing a financing statement
-Automatic
-Possession
-Control

Question 10

Chattel paper

Answer 10

Records which evidence monetary obligation + security interest in or a lease of a specific good.

Electronic = electronic chattel paper

Question 11

Instruments

Answer 11

Pieces of paper representing the right to be paid money (ex: promissory notes, checks, etc.)

Question 12

Documents

Answer 12

Document representing right to be paid goods (ex: warehouse receipt)

Question 13

Perfection

Answer 13

Public notice of a security interest, must have attachment + one of the methods of perfection

Question 14

Accounts

Answer 14

Includes a right to payment for property sold of services rendered.

Question 15

Perfection

Answer 15

Public notice of a security interest, must have attachment + one of the methods of perfection

Question 15

Goods (tangible collateral)

Answer 15

All things which are movable at the time security interest attaches.

Includes: consumer goods, inventory, equipment, and farm products.

Question 16

Perfection by control

Answer 16

Security interest in investment property, non consumer deposit accounts, and electronic chattel paper may be perfected by control.

Question 17

Investment property

Answer 17

Items such as stocks, bonds, mutual funds, and brokerage accounts containing such items.

Question 18

Evidence of intent to enter into a security agreement

Answer 18

(1) creditor taking possession of collateral, (2) authentication, or (3) creditor taking control of nonconsumer deposit account, elec. chattel paper, and investment property.

Question 19

Priority between unperfected secured parties

Answer 19

First to attach has priority

Question 20

Deposit account

Answer 20

An account maintained with a bank.

Art. 9 only applies to security interests in nonconsumer deposit accounts.

Question 21

General intangibles

Answer 21

Any personal property not w/in the scope of the other definitions (ex: patent and trademark rights, copyrights, etc.)

Catch-all for intangible collateral

Question 22

Purchase money security interest (PMSI)

Answer 22

Arises when a secured party sells goods to debtor on credit (seller-financed) or loans funds to enable creditor to buy collateral (financer-financed). Creditor then retains a security interest in the collateral.

Question 23

Automatic perfection

Answer 23

PMSI in consumer goods perfects as soon as an interest attaches.

Except motorized vehicles - only perfected by notation on the cert. of title

Question 24

Perfection by filing

Answer 24

Filing a financing statement that contains (1) debtor's name and address, (2) secured party's name and address, and (3) description of collateral.

Question 25

Priority between unperfected and perfected secured parties

Answer 25

Perfected security interest generally prevails

Question 26

PMSI superiority

Answer 26

PMSIs are superior to prior perfected security interests in the same collateral of goods or their proceeds.

Question 27

PMSI superiority - equipment

Answer 27

PMSI has superiority if perfected when debtor gets possession.

Question 28

Accessions

Answer 28

Goods physically united with other goods such that the identity is not lost.

Question 29

Buyer in ordinary course of business

Answer 29

Generally takes free of any security interest created by buyer's seller.

Question 30

A buyer not in ordinary course of business

Answer 30

Takes collateral subject to a perfected interest. Does not take subject to an unperfected interest if value given and buyer did not know about interest.

Question 31

Consumer to consumer goods (garage sale exception)

Answer 31

A buyer not in the ordinary course of business takes free of security interest, even perfected, if he buys w/o knowledge, for value, and for personal/family/household use. UNLESS secured party filed a financing statement covering the goods.

Question 32

Priority between secured party and a lien creditor

Answer 32

Secured party takes priority if perfected before lien arises.

Question 33

Breach of peace

Answer 33

Considers whether repossession took place at debtor's premises and whether debtor objected.

Question 34

Debtors means of protection

Answer 34

(1) sale must be commercially reasonable, and (2) debtor must receive written notice of sale (10 days+ prior to w/adequate description)

Question 35

Remedies

Answer 35

(1) damages, (2) ct may order sale, (3) rebuttable presumption that collateral is worth the amount of the debt (no deficiency) or deficiency is barred.

Question 36

Evidence of intent to enter into a security agreement

Answer 36

(1) creditor taking possession of collateral, (2) authentication, or (3) creditor taking control of nonconsumer deposit account, elec. chattel paper, and inventory property.

Question 36

Perfection

Answer 36

Public notice of a security interest, must have attachment + one of the methods of perfection