TBE SEC TXN--Quick & Dirty Rules Flashcards
Scope of Article 9
What is covered by Article 9?
1) Collateralized Txns
2) Sales of receivables
3) Consignments
4) Agricultural liens
5) Lease-purchase Agreements
Scope of UCC 9
1) Collateralized transactions.
It is any transaction that is intended to create a security interest in personal property or fixtures.
The property used as collateral may be:
- -Already owned by the owner.
- -Acquired with loan.
For Example, with purchase money security interest.
And after-acquired.
2) Sales of receivables, including the outright sale of:
- -Accounts,
- -Chattel paper,
- -Payment intangibles,
- -And promissory notes.
3) Consignments.
A consignment is a bailment by the owner, bailor, or consignor under which the bailee or consignee has authority to sell.
A consignor MUST also COMPLY with UCC9 to protect its interest in consigned goods against creditors of the consignee IF:
a) Consigned goods are worth a total of $1,000 or more,
b) The consignor did not use the goods for personal, family or household purposes,
c) And there is a potentially deceptive consignee.
A potentially deceptive consigner:
Deals with goods of that kind under a name other than the consignor’s name,
And is not an auctioneer or generally known by the consignee’s creditors to be substantially engaged in consigned goods.
4) Agricultural liens created by statute are also within the scope of UCC9.
They are non-possessory liens on farm products such as crops and livestock created by state law in favor of a person who provides goods or services to a farmer.
5) Lease-purchase agreements are within the scope.
In a lease-purchase, the transaction is a credit sale, rather than a true lease, if the lessee cannot terminate the lease plus one of the following:
a) The lease transfers the economic life of the goods,
b) The lessee is bound by mandatory renewals or buyouts,
c) The lessee has option to renew the lease for remaining economic life for no or nominal additional consideration,
d) Or the lessee has option to become the owner of the goods for no
or nominal additional consideration.
Six things not covered by UCC 9?
Not Covered by UCC 9
1) Rights governed by federal law, such as ships, planes, and patents.
2) Real property.
Remember, fixtures are not a part of a real property.
3) Tort claims including commercial tort claims such as unfair competition.
4) Deposit accounts in consumer transactions.
5) Statutory lines.
For Example, the landlord and mechanics liens.
6) Wage assignments.
Classifying Collateral
1) Definition of GOODS?
2) Specific Inclusions (3)?
3) Specific exclusions (3)?
4) Four classifications of GOODS?
Goods
1) First, Goods are movable items and fixtures at the time security interest attaches.
2) Specific inclusions to goods include:
- -Standing timber.
- -Growing crops.
- -And unborn young of animals.
3) Whereas specific exclusions include:
- -Money.
- -Minerals before extraction are considered real property.
- -And collateral that fits other categories.
4) Also, there are four classifications of goods:
a) Consumer goods, which are goods used or bought primarily for personal, family, or household purposes.
b) Inventory, which are goods held for sale or lease.
c) Equipment, which are goods other than inventory or consumer goods. They must be moveable.
d) Farm products, which must be in possession of a farmer and un-manufactured.
Classifying Collateral
Semi-tangible & Intangible Property (7)?
Semi-Tangible & Intangible Property
1) Instruments, including promissory notes and checks.
2) Documents including:
- -Warehouse receipt, which are goods in storage.
- -And bill of lading, which are goods in transit.
3) Chattel paper, which are writing showing both a monetary obligation and a security interest in goods or lease of goods.
4) Account receivables, which is the right to payment for goods sold or leased or services rendered not shown on chattel paper.
5) Deposit account and bank accounts.
6) Investment property, which are stocks and bonds.
7) Commercial tort claims, which are business torts not involving personal injury.
Classifying Collateral
1) What are PROCEEDS?
2) How to get s/i in PROCEEDS?
3) Rights to PROCEEDS when?
4) PROCEEDS commingled?
Proceeds
1) Proceeds are whatever is received upon a sale, exchange, or other disposition of collateral.
2) A security interest in collateral automatically gives a secured party a security interest in the identifiable proceeds.
3) There is also right to proceeds after disposition, such as a sale and exchange.
–If collateral is sold or otherwise disposed of and the secured party AGREED to the disposition, then the secured party has a security interest ONLY IN the proceeds BUT NOT the collateral.
–Now, if collateral is sold or otherwise disposed of, but the secured party DID NOT AGREE to the disposition, then the secured party has a security interest in BOTH the collateral AND proceeds. However, the secured party can only get one satisfaction.
4) Nevertheless, when the proceeds are commingled with other property, the secured party only has rights to the proceeds if they are identifiable.
ATTACHMENT
Definition?
Attachment
1) Definition
Attachment is a process by which a security interest is created and becomes enforceable against the debtor so the creditor can repossess the collateral if the debtor does not pay.
ATTACHMENT
3 Elements of Valid Attachment?
RE: First Element: requirements w/respect to s/a (4 things (last thing has 4 also))?
3 Elements of Valid Attachment
1) Parties AGREE that s/i ATTACHES. (Debtor signs s/a or secured party has possession of collateral or takes control);
2) SECURED PARTY give VALUE; AND
3) DEBTOR has RIGHTS and ownership in
the collateral.
1) Either the debtor SIGNS a security agreement OR the secured party has POSSESSION OR TAKES CONTROL of the collateral.
Here, the security agreement must provide a REASONABLE DESCRIPTION of the collateral.
The description CAN be BROAD by category.
For Example, statement such as all my equipment or all my law books is a valid description.
Commercial tort claims and consumer goods MUST be SPECIFIC.
A SUPERGENERIC description, such as statements all of my assets or all of my personal property, is NOT valid.
Moreover, security agreement CAN be SATISFIED by CONTROL IF the collateral is:
a) Nonconsumer deposit account,
b) Electronic chattel paper,
c) Or investment property.
d) And the seller can get a security interest through an agreement that is much vaguer than a regular security agreement.
For Example, statements like “the seller keeps title” or “sale is with reservation” are valid agreement that allows the seller to get a security interest.
2) that the secured party gives value. Here, the creditor lends money or gives goods
on credit.
3) debtor has rights and ownership in
the collateral.
ATTACHMENT
1) When does s/i attach for After-Acquired Property?
2) Type of language that creates s/i in A.A. property (2)?
3) Restriction? S/p can’t create interest in (2)? Unless?
After-Acquired Property
1) Security interest attaches when debtor gets RIGHTS in the new property.
2) The language that can create a security interest in afteracquired property are statements such as:
a) All inventory
b) Or equipment now owned or hereafter acquired.
3) Restriction
a) However, a secured party CANNOT create an after-acquired interest in CONSUMER GOODS UNLESS the debtor gets consumer goods WITHIN 10 DAYS after the secured party GIVES VALUE.
b) The secured party also CANNOT create an after-acquired interest in COMMERCIAL TORT CLAIMS.
ATTACHMENT
Can s/a cover Future Advances?
Future Advances
A security agreement can expressly provide that collateral secures future advances regardless of whether the secured party
has made a commitment to make future advances.
Collateral secures not only the immediate loan, but other future advances, such as future loans.
PERFECTION
1) What is Perfection of a s/i? Definition?
2) How to Perfect?
- -What kind of acts can perfect (6)?
3) What does order of perfection mean/matter?
Perfection
1) Perfection of Security Interest
Perfection is a process by which the creditor protects the security interest from most other claimants to the same collateral.
2) To perfect a security interest, a creditor needs to finish ATTACHMENT and one of the following acts:
a) The creditor takes POSSESSION of collateral.
b) The creditor files FINANCING STATEMENT.
c) There is an AUTOMATIC perfection, such as a PMSI in CONSUMER GOODS.
d) There is an AUTOMATIC TEMPORARY perfection, such as PROCEEDS.
e) The creditor has the CONTROL over the collateral.
f) There is a notation of security interest on certificate of title.
3) There is an order of perfection.
This means that if a creditor files or takes possession BEFORE attachment, security interest is still NOT perfected UNTIL the attachment occurs because perfection cannot occur before attachment.
There are different ways to achieve perfection.
PERFECTION
KINDS OF PERFECTION
Perfection by Possession.
1) What type of collateral does Perfection by Possession NOT Apply (4)?
2) How can a creditor lose perfection if collateral is already perfected by possession?
Perfection by Possession
1) Perfection by Possession applies any kind of collateral except:
a) Accounts receivables.
b) Deposit accounts.
c) Nonnegotiable instruments.
d) And electronic chattel paper.
2) If collateral is already perfected by possession, a creditor can lose perfection once he LOSES POSSESSION of collateral UNLESS the collateral falls within the 20 day temporary automatic perfection.
PERFECTION
KINDS OF PERFECTION
Perfection by Filing a Financing Statement
1) What kind of collateral CANT be perfected by filing (1)?
2) Five things that must be on F/S?
Perfection by Filing a Financing Statement
1) On the other hand, anything can be perfected by filing except for DEPOSIT ACCOUNTS.
2) A financing statement must contain five things.
a) Names of the debtor and creditor.
b) Address of the debtor, secured party, or their representatives.
c) Description of collateral.
d) Description of land if it has timber, minerals, fixtures or crops.
e) The debtor’s authorization to file. A debtor can authorize the financing statement after filing.
PERFECTION
KINDS OF PERFECTION
Perfection by Filing a Financing Statement
a) Names of the debtor and creditor.
1) What if debtor there’s an error spelling debtor’s name on the f/s?
2) What if debtor changes name AFTER filing of the f/s?
- —Consequences?
a) Names of the debtor and creditor.
1) An error in the debtor’s name is acceptable UNLESS it is SERIOUSLY MISLEADING, which means it is so misleading that a search of records of filing office under debtor’s correct name would not disclose financing statement.
2) If the debtor makes a SERIOUSLY MISLEADING name change AFTER a financing statement is FILED, perfection CONTINUES for the collateral acquired by the debtor BEFORE the name change and WITHIN 4 MONTHS AFTER the name change.
- —Any collateral acquired AFTER 4 MONTHS is NOT perfected UNLESS secured party files under the debtor’s new name WITHIN the 4 months
PERFECTION
KINDS OF PERFECTION
Perfection by Filing a Financing Statement
b) Address of the debtor, secured party, or their representatives.
Must address these be on the f/s? Exception?
b) Address of the debtor, secured party, or their representatives.
These must be included in a financing statement UNLESS the financing statement is ACCEPTED by the filing office.
PERFECTION
KINDS OF PERFECTION
Perfection by Filing a Financing Statement
c) Description of collateral.
How broad can it be?
c) Description of collateral.
Here, the description CAN be SUPERGENERIC such as “all assets” or “all personal property.”
It DOES NOT need to include the statement “after acquired property”, BUT after acquired property NEEDS to be INCLUDED in security agreement.
PERFECTION
KINDS OF PERFECTION
Perfection by Filing a Financing Statement
d) Description of land in f/s when (4)?
d) Description of land in f/s if it has TIMBER, MINERAL, FIXTURES, OR CROPS
