Secured Transactions Flashcards
If Q asks whether Article 9 applies answer is usually?
YES - even if the parties do not call the action a “security interest”
Classification of Goods 4 Types
CONSUMER
INVENTORY
EQUIPMENT
FARM STOCK
Consumer Goods
used for personal, family or household purposes (computer in the hands of a consumer)
Inventory
goods other than farm products that are held by a person for sale or lease to be furnished under a K of service; or raw material used or consumed in business (computers sold by a store)
Equipment
computer used in business
When does attachment occur?
(1) VALUE must be given by the secured party to the debtor (loan)
(2) debtor must have RIGHTS in the collateral; and
(3) BINDING SECURITY AGREEMENT which requires AID
Binding Security Agreement AID
Authentication, Intent to create a security agreement, and a description of the collateral
*** can cover after-acquired property and does not need to specifically reference to be effective
Methods of Perfection
Filing a financing statement and automatic perfection (PMSI in consumer goods) or by possession or control
When 2 secured parties have an interest in the same to collateral, who has priority?
first to Perfect
if not perfect then first to attach has priority
Unperfected PMSI is always beat by
a perfected interest in collateral
Debtor Sells Collateral subject to a security interest
buyer in ordinary course of business, does not take subject to security interest BUT
buyer not in ordinary course of business ordinary does (unless interest was not perfected and he does not know about it)
Consumer Goods (garage sale exception)
buyer in ordinary course of business takes FREE of security interest even if perfected if he buys without knowledge for consumer goods purpose
unless prior there has been a financing statemebt
Lien Creditor
priority belongs to secured party, provided it perfects before the lien arises
if the interest was unsecured, then the lien creditor has priority
How to foreclose on collateral
Default occurs, lender can demand payment or use self-help to reclaim goods so long as he does not BREACH THE PEACE
Resale
Resale
secured party may sell or dispose of the collateral in a commercially reasonable way
security interest is discharged when this occurs but debtor liable for any deficiency
obligation owed to any junior liens is paid off (SENIOR LIENS REMAIN ON COLLATERAL)
Debtor’s defenses
Sale must be comercially reasonable
debtor must recieve written notdification of. the sale debtor and perfected security parties must know when the chance to redeem collateral is going to pass
Timeliness of notification
10 days or more before sale
Content of Notification
Consumer - notification must additionally contain a description of any liability for a deficiency, telephone number
Non-consumer - describe debtor and secured party and collateral, method of disposition, debtor liable for unpaid as well as charge for accounting
Remedies if secured party fails to comply with notification requirements
Damages (including consequential, debtor has duty to mitigate) Goods = statutory damages awarded
Sale (court may order sale)
Rebuttable Presumption
Non consumer if failure to comply then collateral worth the amount of the debt and debtor’s deficency is nothing
Consumer Transaction - absolute bar (creditor’s noncompliance bars ANY recovery of deficency)
Rebuttable Presumption (same as above)
Debtor has a right to
redeem prior to disposition by paying everything DUE AND OWING to the creditor
