Attachment of Security Interest

Question 1

What are accessions and co-mingled goods?

Answer 1

Accessions
- Goods that are physically united with other goods, and original goods not lost. Security interest continues.

Co-Mingled Goods
- Same as above, but original good is lost. Security interest attaches to larger product, but not to original good.

Question 2

What is the rule for after acquired collateral?

Answer 2

• Security interest may apply if stated in agreement. Majority of courts have rebuttable presumption it is included.
• Exception for consumer goods, unless debtor acquires them within 10 days after secured party gives value.

Question 3

What duties does a secured party have for possession and control of collateral?

Answer 3

• Act with reasonable care
• Keep collateral identifiable.
• Must relinquish collateral once debt is satisfied.

Question 4

What rights and risks does a secured party have for possession and control of collateral?

Answer 4

• May charge for reasonable expenses in storing and maintaining collateral.
• Risk of loss and damage is on the debtor.

Question 5

What are the two classic PMSI fact patterns?

Answer 5

Lender PSMI
- Value is actually used to acquire goods, and lender takes interest in same goods.

Seller PSMI
- Good bought on credit.

Question 6

What is a PSMI?

Answer 6

• A special type of security interest with special perfection and priority rules.
• Only when collateral is goods or software.

Question 7

What are the two components of a PSMI?

Answer 7

• Value given allows debtor to acquire goods.

- Goods/software secure loan.

Question 8

What are the requirements for an authenticated record?

Answer 8

• Be in a record (need not be written).
• Description of collateral. Must not be super generic. needs to reasonably identify. (although generic ok for perfection). Consumer goods and tort claims need more specificity

Question 9

Does a security interest in collateral automatically attach to proceed?

Answer 9

Yes.

Question 10

What are the three requirements for attatchment?

Answer 10

• Value given by secured party.
• Debtor has rights in collateral
• Debtor has authenticated a security agreement or has possession or control pursuant to security agreement.

Question 11

What is the dual status rule?

Answer 11

For non-consumer goods transactions (business transactions), partial PMSI’s are permitted.

• UCC does not forbid or allow, so courts either apply rule, or conclude there is no PMSI.

Question 12

What is the result of attachment?

Answer 12

Security interest becomes enforceable against debtor.