Secured Transactions Flashcards
Article 9 of the Uniform Commercial Code applies to what?
ANY transaction intended to create a security interest in personal property or fixtures.
Define
Collateral
The property in which a security interest is created
True or False
Security interests extend to identifiable proceeds?
True
Define
Goods
Goods are all things that are moveable when a security interest attaches
Define
Consumer Goods
Goods that are used mainly for personal, family or household purposes
Define
Inventory
Goods that kept by a person for sale or lease
Note: Does not include goods that are being held for repair
Define
Equipment
Catch all. Anything that is not inventory or consumer goods
Define
Accounts
Any right to payment of monetary obligation, whether or not earned by performance, for property that has been or is to be sold (i.e., accounts receivable)
Elements of Attachment
- There is a valid security agreement memorializing the security interest;
- The debtor possesses rights in the collateral; AND
- The creditor extends value to the debtor.
True or False
The debtor has to authenticate the security agreement?
True
What is the standard the description of the collateral must meet on the security agreement?
The debtor must authenticate the security agreement by providing the creditor with a reasonable description of the collateral in writing
What are some examples of acceptable authentication by the debtor?
- Signature
- Thumbprint
- Initials
- Mechanical reproductions
What is the standard of rights in collateral the debtor must meet?
The debtor must have rights in the collateral beyond mere possession
True or False
Interest can still perfect absent an appropriate attachment of the interest?
False
If the security interest does not attach, then it CANNOT be perfected no matter what the creditor does
What are the different methods in which a security interest may be perfected?
- Filing a Financing Statement
- Taking possession
- Automatically
What will invalidate a financing statement?
Minor errors will not invalidate the financing statement unless the error makes it seriously misleading
What must a filing statement contain?
- The debtor’s name;
- The secured party’s name
- An adequate description of the collateral; AND
- The filing fee
What name must the financing statement match if the debtor is a registered organization?
The name on the debtor’s public organic record
What instruments automatically perfect upon attachment?
- A purchase-money security interest in consumer goods; AND
- An assignment of accounts which does NOT by itself or in conjunction with other assignments to the same assignee transfer a significant part of the assignor’s outstanding accounts
What is the Hierarchy of Priorities?
- BICO (Buyer in the Ordinary Course of Business)
- PAC (Perfected Attached Creditor)
- LC (Lien Creditor)
- NOCB (Non-Ordinary Course Buyer)
- AUPC (Attached Unperfected Creditor)
- GUC (General Unsecured Creditor)
Who wins if its PAC v PAC
Whoever filed first
Define
Buyer in the Ordinary Course of Business
A person who:
- In good faith and without knowledge that the sale to him is in violation of the security interest of a third party;
- Buys in the ordinary course from a person in the business of selling goods of that kind.
Takes collateral free of the security interest created by the seller.
When is a transaction a PMSI?
When either:
- A security interest held by the seller of collateral to secure payment of all or part of the price; OR
- A security interest of a person that gives value to a debtor so that the debtor may acquire rights in or the use of collateral.
True or False
A consumer buying from another consumer takes free of the security interests
True