Business Law IV: UCC Articles 5, 7, 9

Question 1

UCC Article 5

Answer 1

Letters of Credit

Question 2

Letter of Credit: Applicant

Answer 2

Person at whose request/on whose account letter of credit is issued

Question 3

Letter of Credit: Beneficiary

Answer 3

Person under letter of credit terms entitled to have letter honored

Question 4

Letter of Credit: Issuer

Answer 4

Bank/person that issues letter of credit

Question 5

Letter of Credit: Correspondent bank

Answer 5

Bank designated to handle payment under authorized letter of credit

Question 6

Letter of Credit: Nominated Person

Answer 6

Person/bank whom issuer designates/authorizes to pay, negotiate or give value under letter of credit

Question 7

Letter of Credit: Presentation

Answer 7

Delivery of document to issuer /nominated person to honor/give value to letter of credit

Question 8

Letter of Credit: Record

Answer 8

Letters of credit require record - tangible, electronic, other medium retrievable in perceivable form

Question 9

UCC Article 7

Answer 9

Documents of Title

Question 10

Document of Title

Answer 10

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

Question 11

Document of Title: Bill of Lading

Answer 11

document evidencing receipt of goods by carrier for shipment

Question 12

Parties to Document of Title

Answer 12

1. Issuer - bailee, issues document to bailor or third party
2. Delivery Order - order by bailor or third person for bailee to deliver goods
3. Consignor - person who delivers goods to carrier named in bill of lading
4. Consignee - person named in bill of lading to whom/whose order goods are to be delivered

Question 13

Document of Title: Common Carrier

Answer 13

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)

Question 14

Nonnegotiable Document of Title

Answer 14

Goods transferred by assignment. Assignee acquires only title/rights of assignor and is subject to all defenses/claims against assignor.

Question 15

Negotiable Document of Title

Answer 15

Holder can acquire better rights than transferor-assignor

1. Bearer documents require delivery only
2. Order documents require delivery plus indorsement

Question 16

Rights of Duly Negotiable Document

Answer 16

1. Holder acquires title to goods
2. Holder has right to delivery/possession of goods according to terms of contract
3. Indorser warrants negotiable document genuine
4. NO guaranty of performance under Article 7

Question 17

UCC Article 9

Answer 17

Secured Transactions

Question 18

Secured Party

Answer 18

Creditor who has security interest in debtor’s collateral.

Question 19

Security Interest

Answer 19

Interest in the collateral which secures payment/performance of an obligation

Question 20

Security Agreement

Answer 20

Agreement that creates/provides for a security interest

Question 21

Financing Statement (UCC-1 form)

Answer 21

Instrument usually filed to give public notice to third parties of secured parties security interest

Question 22

Describe the criteria necessary for a security interest attachment when the collateral is not in possession of the secured party.

Answer 22

1. Written or authenticated agreement describing collateral, signed or authenticated by the debtor;
2. Secured party must give debtor something of value;
3. Debtor must have rights in the collateral.

Question 23

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.

Answer 23

The security interest does not attach until the debtor has an interest in the goods; i.e., identification has occurred.

Question 24

Perfection

Answer 24

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

Question 25

Perfected Security Interests give priority to:

Answer 25

1. Unsecured creditors
2. Unperfected secured parties
3. Subsequent lien creditors
4. Trustees in bankruptcy
5. Most buyers

Question 26

What types of buyers take precedence over perfected secured interests?

Answer 26

Buyer in normal course of business

Question 27

Rights of Secured Parties/Debtors

Answer 27

1. Right to require debtor to assemble collateral and place at convenient location
2. Right to render unusable (break) the collateral
3. Right to pursue self0help remedy of repossession
4. Right to pursue judicial process
5. Right to dispose of/use repossessed collateral