Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

MEE ST > Drills > Flashcards

Drills Flashcards

1
Q

Four classes of tangible collateral (goods)

A

Consumer goods
Farm products
Inventory
Equipment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Classification of check or promissory note

A

Instrument

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Classification of a check plus a security agreement

A

Chattel paper

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Classification of right to be paid for a service rendered

A

Accounts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Classification for a savings account at a bank

A

Deposit account

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Difference between accounts and deposit accounts

A

Deposit accounts include savings, passbook, time, or demand accounts maintained with a bank

Accounts are the right to payment for property sold, leased, licensed, or for service rendered. Also includes rights to payment under insurance policies, amounts on credit cards, and a company’s accounts receivable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What happens when parties leave out after-acquired language in situations that suggest they intended to include it?

A

General rule: If there is no reference to after-acquired property, the security interest attaches only to the collateral that exists at the time that the security agreement is executed

Exception: In most states, if the security agreement describes inventory or accounts, there is a rebuttable presumption that the description includes after-acquired inventory and accounts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

How consignors and consigned property are treated under Article 9

A

Consignor is treated as the secured party and must perfect its security interest in the consigned inventory

Security interest in consigned goods is treated as a PMSI in inventory

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What kind of collateral can a PMSI exist in?

A

A security interest only qualifies as a PMSI if the collateral is goods (including fixtures) and software

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What four requirements are required for a consignment to be subject to Article 9?

A
  1. Consignor must deliver goods to a merchant (consignee) to sell
  2. The merchant (consignee) must deal in goods of the kind, not operate under the name of the consignor, not be generally known by its creditors to be substantially engaged in the business of selling goods of others, and not be an auctioneer
  3. The value of the goods must be at least $1,000
  4. The goods must not be consumer goods immediately before delivery
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

When does a buyer take goods free of an unperfected security interest?

A

A buyer, other than a secured party, of collateral that is goods, takes free of an unperfected security interest in the same collateral if the buyer
1. Gives value
2. Receives delivery of the collateral
3. Without knowledge of the existing security interest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What is the most common method of perfection, and what is its objective?

A

Filing is the most common method of perfection

By filing, the secured party is giving notice that they have an interest in the debtor’s personal property

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

An after-acquried clause is not effective if the collateral is consumer goods, unless…?

A

Unless the debtor acquires them within 10 days after the secured party gives value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Even if a parties label their transaction as a lease to avoid Article 9, it will be governed by Article 9 if the following conditions are present:

A
  1. The original lease term is equal to (or greater than) the good’s remaining economic life
  2. The lessee is bound to renew the lease for the good’s remaining economic life
  3. The lessee has the option to renew the lease for the good’s remaining economic life for nominal or no additional consideration
  4. The lessee has the option to become the owner of the goods upon completion of the lease for nominal or no additional consideration
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What happens to perfection when the debtor moves to another state?

A

If the debtor moves, a perfected security interest will remain perfected for four months, unless the financing statement lapses earlier.

This four month grace period also covers collateral the debtor acquires after they move

Secured party must re-file in new state within four month window to remain continuously perfected

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What happens to perfection when collateral is transferred to a person in another state who takes the collateral subject to the security interest?

A

If the collateral is transferred to a new debtor in a different state, the secured party has one year to file a new financing statement listing the new debtor

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

How and when does tangible collateral (goods) get classified, and does this method apply to other types of collateral?

A

To properly classify tangible collateral (goods), look to the debtor’s principal use when the security interest attaches

Classification of other collateral does not turn on the manner in which the debtor uses the property, so this method does not apply to things besides tangible goods

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Proceeds are…

A

Proceeds are whatever results when collateral is sold, leased, licensed, exchanged, or otherwise disposed of

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

If a security interest was attached to collateral, how does the security interest then attach to the proceeds of that original collateral upon its sale or disposition?

A

A security interest in collateral attaches automatically to identifiable proceeds

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What are the “non-movable” goods

A

Unborn animals, fixtures, standing timber, growing/unharvested crops, manufactured homes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What are goods?

A

Goods are anything that is movable at the time a security interest attaches

21
Q

When can a PMSI exist in goods?

A
  1. When the value given (e.g., a loan) allows the debtor to acquire the goods or software; or
  2. When the goods or software acquired is the collateral that secures the loan (e.g., goods bought on credit)
22
Q

Upon default, what happens when a secured party has priority in a fixture

A

The secured party may remove the fixture from real estate, but will be liable for the cost of repairing any physical damage to the real estate. However, they won’t be liable for any reduction in value of the real property due to the removal

23
Q

How must collateral be described in a financing statement?

A

The financing statement must contain a description of the collateral that sufficiently indicates what the collateral is (such as one that meets the requirements for creating a security agreement)

When the security interest covers all the debtor’s personal property or assets, the description can contain a supergeneric statement to that effect (but that’s not allowed in a security agreement)

23
Q

What is chattel paper?

A

Chattel paper (either physical or electronic) is a record that evidences both
1. A monetary obligation
2. A security interest in specific goods (a security agreement) or a lease of specific goods

24
Q

For a security interest to be enforceable against a debtor, what three conditions must be met?

A

A security interest is enforceable against a debtor once it has attached, which occurs when
1. Value has been given by the secured party
2. The debtor has rights in the collateral; and
3. The debtor has authenticated a security agreement describing the collateral, or the secured party has possession or control of the collateral

25
Q

General rule about a buyer taking subject to a perfected security interest

A

In general, unless the secured party authorizes the sale free and clear of its security interest, a buyer takes subject to a perfected security interest

26
Q

Buyer in the ordinary course of business

A

A buyer in the ordinary course of business is a person who
1. Buys goods (not farm products) in the ordinary course of business
2. From a merchant in the business of selling goods of that kind (and is NOT a pawnbroker)
3. In good faith; and
4. Without notice that the sale violates the rights of another in the same goods

27
Q

Difference between accessions and commingled goods

A

Accessions are goods that are physically united with other goods so that the identity of the original goods is not lost

Commingled goods are goods that are physically united with other goods to the point that their identity is lost

27
Q

What happens to a security interest attached to accession?

A

The security interest in the accession continues in the accession (e.g., a security interest in a car radio that is installed in a car continues even once its been installed)

28
Q

What happens to a security interest attached to commingled goods?

A

The security interest in the goods does not continue, but it will attach to the larger product (e.g., a security interest in eggs used to make a cake is lost once the eggs are mixed with other ingredients, but the interest attaches to the cake)

29
Q

What is the minimum information a financing statement must contain?

A
  1. The debtor’s name
  2. The name of the secured party or one of their representatives
  3. The collateral covered by the financing statement
30
Q

What is the BIOCB exception

A

A BIOCB takes free of a security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence

31
Q

Lien claimaint vs. a perfected creditor

A

A statutory lien claimant has priority over a perfected secured creditor, provided that:
1. The lienholder has possession of the goods; and
2. The lien secures payment or performance of an obligation for services or materials furnished in the ordinary course of the person’s business (like a mechanic’s lien)

32
Q

When is a secured party not required to give authenticated notice of disposition?

A
  1. When the collateral is perishable or threatens to decline speedily in value
  2. When the collateral is customarily sold on a recognized market (like the NYSE); or
  3. When notice is waived by an authenticated agreement after default
33
Q

Where must filing statements be filed?

A

Typically in the Sec. of State’s office of the state of the debtor’s location

34
Q

What is the only way of perfecting a security interest in money?

A

Possession

35
Q

What is the only way of perfecting a security interest in a deposit account?

A

Possession

36
Q

Under what circumstances does the same office rule extend temporary perfection?

A

Temporary perfection in proceeds may continue indefinitely if:
1. A filed financing statement covers the original collateral
2. The proceeds are collateral in which a security interest may be perfected by filing in the same office as the original financing statement; and
3. The proceeds are not acquired with cash proceeds

37
Q

Secured party vs. Judicial lien creditor

A

Judicial lien creditor takes collateral subject to an existing perfected security interest, but generally has priority over an unperfected security interest

38
Q

In what collateral does a PMSI automatically perfect?

A

A PMSI in consumer goods automatically perfects upon attachment

39
Q

Once there has been a default, how can the secured party repossess collateral?

A
  1. Use of the judicial process; or
  2. Self help
40
Q

What is the general rule for a security interest in fixtures vs. a real property interest to which it’s associated?

A

The general rule is that a security interest in fixtures is subordinate to a conflicting interest of an owner of the related real property (other than the debtor)

41
Q

In order for a security interest in a fixture to have priority over an interest in real property, what must happen?

A

The secured party must file a fixture filing before the real property interest is recorded

It must be filed in the office designated for the recording of a mortgage on the real property

42
Q

Priority between unperfected security interests in the same collateral

A

First to attach takes priority

43
Q

What self help methods are generally deemed acceptable?

A

Trespass with respect to the collateral itself, or the debtor’s land are generally deemed acceptable

44
Q

In the absence of agreement, when does default occur?

A

When the obligor fails to make timely payments to the secured party

45
Q

Upon default, what happens what a secured party has priority in an accession?

A

They may remove the accession from other goods. They must reimburse the holder of a security interest or the owner of the whole for physical injury to the whole or other goods

BUT NOTE: a security interest in something like a car radio is subordinate to a security interest in the car perfected by notation of the security interest on the title to the car

45
Q

What is a secured party’s options upon default

A
  1. Seek repossession and either sell it or retain it in satisfaction of the obligation owed
  2. Initiate a judicial action to obtain a judgment against the debtor or obligor; or
  3. Pursue other courses of action to which the debtor and secured party have agreed
46
Q

When is a disposition commercially reasonable?

A

When the collateral is:
1. Sold in the usual manner in a recognized market that has standardized prices for fungible goods
2. Sold at the price current in a recognized market; or
3. Disposed of in conformity with reasonable commercial practices among dealers of that type of collateral.

47
Q

What order are cash proceeds of a disposition distributed in?

A
  1. Pay reasonable expenses for collection and enforcement
  2. Pay off the debt to the foreclosing secured party
  3. Pay subordinate security interests, provided the subordinated party makes a formal demand prior to distribution of the proceeds
  4. Any surplus returned to the debtor
48
Q
A

MEE ST (1 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions