Secured Transactions Flashcards
(21 cards)
Doctrine of Derivative TItle
- In a voluntary transaction, the transferee gets the rights of the transferor (or less; just not more)
- A person to whom property rights are transferred voluntarily acquires the property rights of the transferor and no more.
- Codified in §2-403(1): “A purchaser of goods acquires all title which his transferor had or had power to transfer except that a purchaser of a limited interest acquires rights only to the extent of the interest purchased.”
Doctrine of Apparent Authority
- An owner, having clothed an agent with indicia of ownership, has so participated in misleading a bona fide purchaser into believing that the agent could rightfully transfer title that the purchaser acquired good title notwithstanding the agent’s lack of actual authority.
- One exception to Doctrine of Derivative Title.
Exceptions to Doctrine of Derivative Title
- Apparent authority (protects all good-faith purchasers for value)
- Voidable title (protects all good-faith purchasers for value)
- Entrustment (only protects buyers in the ordinary course of business)
- Secured party fails to perfect; debtor can transfer more title than it actually has
Equitable Doctrine of Voidable TItle
- A fraudulent buyer gets voidable title, which is the power to transfer good title to a good-faith purchaser for value.
- Owner can rescind the transaction and recover the goods from the fraudulent buyer, but its rights in the goods will be cut off if they are transferred to a good-faith purchaser for value.
- Owner clothed buyer with indicia of ownership. Estoppel.
- There must be fraud at the time of contract formation.
- Thief’s title is void, not voidable. Owner didn’t clothe.
- Partially codified in §2-403(1)
Replevin
- An action at law to recover possession of specific goods.
- An action to recover possession of goods by a person claiming a greater right to possession.
Conversion
- An intentional exercise of dominion or control over a chattel which so interferes with the rights of another to control it that the actor may justly be required to pay the owed the full value of the chattel.
- This can happen even if the person is acting in good faith.
Replevin
An action to recover possession of goods by a person claiming a greater right to possession.
Conversion
An intentional exercise of dominion or control over a chattel which so interferes with the rights of another to control it that the actor may justly be required to pay the owed the full value of the chattel. This can happen even if the person is acting in good faith.
Doctrine of Derivative TItle
- A person to whom property rights are transferred voluntarily acquires the property rights of the transferor and no more.
- Codified in §2-403(1): “A purchaser of goods acquires all title which his transferor had or had power to transfer except that a purchaser of a limited interest acquires rights only to the extent of the interest purchased.”
Entrustment Doctrine
- Entrusting: Any delivery of goods to a bailee and any aquiescence in retention of possession by the bailee. See §2-403(3).
- Delivery: Volunary transfer of possession
- Repairing, storing, transferring, etc.
- Owner/entrustor’s rights are cut off if entrustee/bailee sells them to a buyer in the ordinary course of business
- Owner always wins unless buyer in the ordinary course of business comes along
- §2-403(2): Any entrusting of possession of goods (bailment) to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in the ordinary course of business.
Buyer in the ordinary course of business
- A person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind. (§-201(9))
- NOT a secured party; a secured party is a purchaser, but not a “buyer”
Purchase
Taking by
- sale
- lease
- discount
- negotiation
- mortgage
- pledge
- lien
- security interest
- issue or reissue
- **gift (NOT purchaser for value!) **
- or any other voluntary transaction creating an interest in property.
§1-201(29)
NOT a bailee; takes possession, but does not take a property interest.
Shelter principle
- A person who is not a good-faith purchaser for value in his/her own right nevertheless takes goods free of a remote owner’s claim if the person acquires the goods from (directly or indirectly) a person that has acquired good title.
- e.g. Child recieves gift from good-faith purchaser for value; child is not a purchaser for value, but still gets good title because the person he/she got it from was.
Warranty of Title
- Innocent buyer’s action against seller of goods without good title…
- §2-312(a): There is in a contract for sale a warranty by the seller that the title conveyed shall be good…
Value
Consideration sufficient to support a simple contract (§1-201(29))
E.g. money, credit, etc.
Security Agreement
An agreement that creates or provides for a security interest
Secured party
A person in whose favor a security interest is created
Debtor
A person having a property interest, other than a security interest or other lien, in the collateral
Obligor
- A person that, with respect to an obligation secured by a security interest in the collateral, owes payment or other performance of the obligation
- The person who owes the payment/obligation for which the secured party has a security interest s
Security interest
An interest in personal property or fixtures that secures payment or performance of an obligation
Requirements for Attachment (enforceability)
- Value
- Debtor has rights in the collateral or power to transfer rights in the collateral to a secured party
- Security agreement
- Signed (authenticated)
- Description
§9-203(b)
