Secured Transactions Flashcards
(21 cards)
Agricultural lien
non possessory liens on farm products (such as crops and livestock). Article 9 governs their perfection and priority. The rules for perfection and priority of agricultural liens generally are the same as those for security interests.
Perfected vs unperfected
a perfected security interest with a financing statement is superior to one without one
right to redeem
Until the secured party has sold the collateral or has discharged the debt by retention of the collateral, a debtor, unless he has otherwise agreed after default, may redeem the collateral by paying all obligations secured by the collateral plus the reasonable expenses incurred by the secured party in relation to the repossession, including reasonable attorneys’ fees.
notice for sale
Notice must be sent within a reasonable time before the sale. In Virginia, notice is deemed to be sent within a reasonable time if it is sent 10 days or more before the time of sale.
attachment
Attachment establishes the secured party’s rights to the collateral, and a security interest is not enforceable unless it has attached to the item of collateral involved. There are three requirements for attachment, which must coexist: (i) the parties must agree to the creation of a security interest in the collateral - evidenced by the secured parts possession or control of the collateral, or by a signed written agreement that describes the collateral. the description must be sufficient to reasonably identify the collateral; (ii) value must be given by the secured party; and (iii) the debtor must have rights in the collateral. An ownership interest in or the right to obtain possession of the collateral qualifies as rights in the collateral.
equipment
durable goods used in a business that are not inventory or raw goods used in manufacture.
Priority
first to either file or perfect—whichever is earlier. Thus, if both parties perfected by filing, the one who filed first has priority, even if perfection was not complete upon filing.
PMSI
A PMSI has priority over all other security interests in the same goods if certain requirements are met. A PMSI arises when a (1) creditor sells the goods to the debtor on credit and retains a security interest in the goods for all or part of the purchase price (creditor and seller are the same person); (2) or when a creditor advances funds that are used by the debtor to purchase the collateral (creditor and seller are different persons). Here, ESC sold the field kit, categorized as equipment, to Edgar on credit and retained a security interest in the kit
PMSI in equipment
A PMSI in equipment must be filed to be valid. One who has a PMSI in equipment has priority over conflicting security interests in the same equipment only if the interest is perfected before or within 20 days after the debtor receives possession of the goods.
rule of construction to resolve inconsistency
Under Virginia law, ambiguities in a contract are construed against the party preparing the contract, absent evidence of the intention of the parties. This is particularly true when there is no evidence of fraud, mutual mistake, duress, or knowledge by one party of unilateral mistake, and when the drafter is a commercial seller and the buyer is not.
Right to repossess
When a creditor has a security interest in collateral and there is a default in the agreement, the secured party will have a right to repossess the collateral in a peaceful manner. The UCC does not define events of default, but rather leaves that for the parties to decide.
When there has been a default under a security agreement, the secured party may take posses-sion of the collateral by self-help without judicial process if it can do so without a breach of the peace.
perfection
Perfection maximizes a creditor’s rights in collateral and puts others on notice of the security interest. Methods of perfection include filing and the secured party’s possession or control of the collateral. In some cases, perfection occurs automatically. T
deposit accounts
cannot be perfected through a financing statement. control would be the other way.
security interest in a fixture
may be perfected only by making a fixture filing describing the real property to which the fixture is affixed. While financing statements generally must be filed with the State Corporation Commission (“SCC”), a fixture filing must be filed in the local office where a mortgage on real property would be filed.
PMSI in consumer goods
automatically perfected upon attachment. does not apply to other collateral
vehicles in virginia
notation on the certificate of title, except on tractors
perfection with possession
called a pledge
PMSI in inventory
There is a limitation on the priority of a PMSI in inventory—additional steps that must be taken for the party with a PMSI to have the benefit of PMSI superpriority: (1) the PMSI must be perfected at the time the debtor gets possession of the inventory, and (2) any secured party who has filed a security interest in the same inventory must be given notice of the PMSI before the debtor receives possession of the inventory
PMSI in consumer goods
A PMSI in consumer goods is perfected as soon as it attaches, no filing is required. Consumer goods are goods for personal, family, or household use, which John’s vacuum would qualify as. An after-acquired property clause is ineffective as to consumer goods when given as additional security, unless the debtor acquires rights in the goods within 10 days after the creditor gives value.
buyer in ordinary course of business
As a general rule, a perfected security interest in goods prevails against subsequent buyers of the goods subject to the security interest. However, there is an exception to this rule for buyers in the ordinary course of business (“BIOCs”). A buyer who buys goods in good faith and in the ordinary course of business from a seller who is engaged in the business of selling goods of the kind purchased, generally takes free of a nonpossessory perfected security interest created by the seller of the inventory, even if the buyer knows of the interest, unless the buyer also knows that the sale is in violation of the terms of the security agreement.
GIFTs are NOT in the ordinary course of business.
holder in due course
Under U.C.C. Article 3, a holder of a promissory note who takes it in good faith, for value, and without notice of any claim or defenses, is an HDC. Under U.C.C. Article 9, an HDC prevails over secured parties claiming an interest in the promissory note. Ben bought the note as a “good faith purchaser for value.” As long as Ben did not have knowl-edge of the security interest or of any claims or defenses, and he received proper delivery of the promissory note (i.e., he was a holder), he will have a priority as to the note.
