Business Law IV: UCC Articles 5, 7, 9 Flashcards
UCC Article 5
Letters of Credit
Letter of Credit: Applicant
Person at whose request/on whose account letter of credit is issued
Letter of Credit: Beneficiary
Person under letter of credit terms entitled to have letter honored
Letter of Credit: Issuer
Bank/person that issues letter of credit
Letter of Credit: Correspondent bank
Bank designated to handle payment under authorized letter of credit
Letter of Credit: Nominated Person
Person/bank whom issuer designates/authorizes to pay, negotiate or give value under letter of credit
Letter of Credit: Presentation
Delivery of document to issuer /nominated person to honor/give value to letter of credit
Letter of Credit: Record
Letters of credit require record - tangible, electronic, other medium retrievable in perceivable form
UCC Article 7
Documents of Title
Document of Title
any document that proves the person in possession has title to and is entitled to receive goods
offers a means for transferring title to goods without physically moving goods
Document of Title: Bill of Lading
document evidencing receipt of goods by carrier for shipment
Parties to Document of Title
- Issuer - bailee, issues document to bailor or third party
- Delivery Order - order by bailor or third person for bailee to deliver goods
- Consignor - person who delivers goods to carrier named in bill of lading
- Consignee - person named in bill of lading to whom/whose order goods are to be delivered
Document of Title: Common Carrier
Have absolute/strict liability for loss/damage to goods except when:
- act of god
- act of public enemy/authority
- act of shipper
- inherent nature of goods (spoil)
Nonnegotiable Document of Title
Goods transferred by assignment. Assignee acquires only title/rights of assignor and is subject to all defenses/claims against assignor.
Negotiable Document of Title
Holder can acquire better rights than transferor-assignor
- Bearer documents require delivery only
- Order documents require delivery plus indorsement
Rights of Duly Negotiable Document
- Holder acquires title to goods
- Holder has right to delivery/possession of goods according to terms of contract
- Indorser warrants negotiable document genuine
- NO guaranty of performance under Article 7
UCC Article 9
Secured Transactions
Secured Party
Creditor who has security interest in debtor’s collateral.
Security Interest
Interest in the collateral which secures payment/performance of an obligation
Security Agreement
Agreement that creates/provides for a security interest
Financing Statement (UCC-1 form)
Instrument usually filed to give public notice to third parties of secured parties security interest
Describe the criteria necessary for a security interest attachment when the collateral is not in possession of the secured party.
- Written or authenticated agreement describing collateral, signed or authenticated by the debtor;
- Secured party must give debtor something of value;
- Debtor must have rights in the collateral.
Describe what happens to a security interest when a debtor has signed and executed a security agreement, but the collateral has not been shipped to the debtor from the seller.
The security interest does not attach until the debtor has an interest in the goods; i.e., identification has occurred.
Perfection
Means by which secured party gains priority to a debtor’s collateral over other 3rd parties who also claim interest in same collateral
- filing
- possession - control
- automatic
- temporary
Perfected Security Interests give priority to:
- Unsecured creditors
- Unperfected secured parties
- Subsequent lien creditors
- Trustees in bankruptcy
- Most buyers
What types of buyers take precedence over perfected secured interests?
Buyer in normal course of business
Rights of Secured Parties/Debtors
- Right to require debtor to assemble collateral and place at convenient location
- Right to render unusable (break) the collateral
- Right to pursue self0help remedy of repossession
- Right to pursue judicial process
- Right to dispose of/use repossessed collateral
