1. Application of Article 9

Question 1

i What is a security interest?

Answer 1

A security interest arises when a party(debtor) uses certain property as collateral to secure repayment of funds to another party(secured party).

By using the property as collateral, if the debtor defaults on repayment of the funds, the creditor may take possession of the collateral and apply the collateral to the balance owed. The creditor’s interest in the collateral is called a security interest.

Question 2

Security interest analysis

Answer 2

(1) does UCC Article 9 apply?

(2) Security Interest attached?

(3) Security Interest Perfected?

(4) Multiple Claims Priority?

(5) Means of Security Interest Enforcement?

Question 3

UCC Article 9 applies to:

Answer 3

1. any transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract;
2. agricultural liens
3. sales of accounts receivable, chattel paper, negotiable instruments, promissory notes, and payment intangibles
4. consignments
5. certain lease-purchase agreements.

Question 4

Classify Collateral based on debtor’s principal use at the time of Security Interest. This affects attachment, perfection, and priority

Answer 4

Consumer Goods: personal/family uses.

Farm Product Goods: used/produced in farming (not equipment).

Inventory Goods: held for sale/lease/service use (not farm products).

Equipment Goods: other movable goods (eg, machinery).

Fixtures: attached to real prop.

Rts to Payment: commercial paper, chattel paper, business accts.

Deposit Accts: bank accounts.