Secured Transactions

Question 1

Under Article 9, a creditor must take 2 steps to gain the full protection of secured transactions law

Answer 1

attach a security interest to the collateral and
perfect the security interest

Question 2

Attachment

Answer 2

security agreement
possession
control
(rights visa vi the debtor)

Question 3

security agreement

Answer 3

a written agreement that certain personal property will serve as collateral
(1) describe collateral
(2) the party offering the collateral must have rights in it
(3) party exchanging security interest must give value in exchange

Question 4

Perfection

Answer 4

steps necessary to create a security interest effective against the world (creditor rights visa vi other creditors)

Question 5

consumer goods

Answer 5

goods used or bought for personal or household purposes

Question 6

inventory

Answer 6

goods held for sale or lease and supplies/materials quickly used up in business

Question 7

equipment

Answer 7

any physical goods other than consumer goods, inventory, or farm products

Question 8

accounts

Answer 8

a right to payment (accounts receivable)

Question 9

deposit accounts

Answer 9

a bank account

Question 10

PMSI

Answer 10

Purchase money security interest
* arises when the lender loans money to the borrower specifically for the buyer to purchase certain goods, and the lender takes a security interest in those goods.

Question 11

Seller-financed PMSI

Answer 11

secured party sells collateral on credit
retains security interest in collateral

Question 12

Financer-financed PMSI

Answer 12

loan to purchase collateral
load used to acquire that collateral
creditor takes security interest in that collateral

Question 13

after acquired property clause (provision in K)

Answer 13

gen rule - security interest only reaches collateral debtor had rights in at time of signing security agmt (want diff? - say it)

exception - collateral if of a type rapidly depleted and replenished (ex. inventory accts)

Question 14

future advance clause

Answer 14

grant of security agreement securing future loans with same collateral

Question 15

1 way to perfect?

Answer 15

filing a financing statement

Question 16

intangible property includes

Answer 16

accounts - right to payment for property sold or services rendered

Question 17

a secured sale disguised as a lease

Answer 17

lessor receives item (rental car) when still has some meaningful economic value
- reasonably likely lessor will get item back? if no, governed by art. 9

Question 18

Creation of security interest (attachment)

Answer 18

1. security agreement
   - can be oral if collateral in possession of secured party (pledge)
   
   1. record w/ intent to create a security interest (any language)
   2. authenticated by debtor (signed)
   3. describe collateral (reasonably identify, not super generic)
2. value given
3. debtor has rights in collateral

Question 19

How to perfect

Answer 19

1. Attached &
2. another method of perfection

Question 20

methods of perfection

Answer 20

A perfect cat naps frequently

1. automatic perfection
2. possession
3. control
4. notation on certificate of title
5. perfecting by filing a financing statement

Question 21

automatic perfection

Answer 21

ex. PMSI in consumer goods (auto perfection upon attachment)

Question 22

possession

Answer 22

ex. goods

$ - this is the only way

Question 23

control

Answer 23

non-consumer deposit accts - this is the only way

• automatic control
• putting deposit account in secured partys name
• control agmnt

Question 24

notation on certificate of title

Answer 24

ex. cars and trucks
- gov’t authority notes lien (only way for perfection here - title status)

exception - holding a car/truck as inventory

Question 25

perfecting by filing a financing statement

Answer 25

(UCC-1) - debtors name - mistakes in statement ok unless statements seriously misleading - not seriously misleading if SOS record would pull - name change ok for 4 months - describe collateral (super generic description ok here - does not have to state after acquired property - secured party's name - no signature required, however, must be authorized. - file w/ SOS - if real estate related - county clerk

Question 26

where to file financing statement

Answer 26

where debtor located corp - where incorporated LLP - place of business if debtor moves out of state - 4 months if collateral moves out of state - 12 months

Question 27

how long is a financing statement good for

Answer 27

5 years

Question 28

how can you continue financing statement

Answer 28

by filing a CONTINUATION STATEMENT 6 months before the 5 year mark.

Question 29

after creditor pays off

Answer 29

termination statement (20 days)

Question 30

priority rules

Answer 30

determined which creditor is 1st in line to get paid.

Question 31

perfected secured party v. perfected secured party

Answer 31

first to file or perfect (whatever is earlier)

Question 32

unperfected secured party v. unperfected secured party

Answer 32

first to perfect wins

Question 33

unperfected v. perfected

Answer 33

perfected wins

Question 34

PMSI in goods (priority)

Answer 34

not inventory or livestock....jumps to front of priority line if perfected immediatley or within 20 days

Question 35

superiority for PMSI in inventory/livestock

Answer 35

takes priority over conflicting security interest if before debtor receives possession - secured party perfects & - sends authenticated notice to other holders & - notice received within 5 years of debtor getting possession

Question 36

special priority rules for conflicting security interests in deposit accounts

Answer 36

deposit accts control best - co-owner next best - maintain acct. worst - control agmt

Question 37

Secured party v. buyer

Answer 37

secured party wins unless authorized sale

Question 38

BIOC rule

Answer 38

buyer in the ordinary course - takes free of a security interest - created by his/her seller BIOC means - buyer in good faith without knowledge of violations in ordinary course from seller of goods of that kind

Question 39

buyers not in ordinary course

Answer 39

take subject to perfected interests take free of unperfected security interests

Question 40

consumer to consumer special rule

Answer 40

buyer takes free of security interest if - no knowledge - value - personal use - no financing statement

Question 41

secured party v. judgment lienholder

Answer 41

judgment lienholder wins if lien arose before security interest was perfected

Question 42

secured party v. possessory (statutory) lien holder

Answer 42

statutory lienholder wins if they maintain possession of callateral

Question 43

replevin

Answer 43

ct. proceeding to repo collateral if equipment can render it unusable