Essay Info

Question 1

What is the purpose of Article 9 of the UCC?

Answer 1

It governs security interests and provides rules for their priority.

Question 2

What is attachment?

Answer 2

It gives the creditor rights against the debtor in the collateral

Question 3

3 requirements for a security interest to attach:

Answer 3

1. Either the debtor must authenticate a security agreement or the creditor must take possession or control of the collateral
2. The creditor must give value
3. The debtor must have rights in the collateral

Question 4

What must a secured party do to obtain rights over another claimant?

Answer 4

Perfect their security interest by either filing a financing statement in an authenticated record or take possession.

Question 5

What is a purchase money security interest?

Answer 5

Created when a creditor advances credit or provides the funds needed to make a purchase possible and take a secutiy interest in the goods purchased.

Question 6

What are consumer goods?

Answer 6

Goods that are used or bought primarily for personal, household, or family purposes.

Question 7

What is equipment?

Answer 7

Goods used for primarily business purposes.

Question 8

What is the original use test?

Answer 8

A debtor’s original intended use of collateral governs the collateral’s classification

Question 9

Who has priority between two competing perfect security interests?

Answer 9

The party who first files or perfects.

Question 10

What are accessions?

Answer 10

Goods that are physically united with other goods in such a manner that identity of the original goods is not lost.

Question 11

Who has priority in security interests of an accession and goods?

Answer 11

If the accension becomes part of the whole that is subject to a security interest perfected in compliance, the security interest in the whole has priority.

Question 12

When does PMSI have priority over conflicting security interests?

Answer 12

If the PMSI is perfected when the debtor receives possession of the goods or within 20 days thereafter.

Question 13

3 things a financing statement must contain:

Answer 13

1. The name and mailing address of the debtor
2. The name and address of the secured party
3. An indication of the collateral covered by the financing statement

Question 14

2 things to know regarding misleading errors in the financing statement:

Answer 14

1. Must not contain any misleading errors

2. If the debtor is a registered organization the name must match with the public organic record

Question 15

When may perfection occur automatically?

Answer 15

In the case of a security interest in a small-scale assignment or an account or payment intangible

Question 16

2 kinds of collateral that a security may not be perfected to:

Answer 16

1. Deposit accounts

2. Money

Question 17

3 ways a security interest in a nonconsumer deposit account can be perfected

Answer 17

1. Control
2. Putting the account in the secured party’s name
3. Agreeing in an authenticated record with the debtor and the bank that the bank will comply with the secured party’s orders.

Question 18

When is an incorrect filing name not misleading?

Answer 18

If the financing statement would be discovered in a filing office search under the correct name

Question 19

When does the creditor have a right to repossess collateral?

Answer 19

After the debtor has defaulted

Question 20

2 features of self-help under Article 9:

Answer 20

1. The secured party can use self-help to repossess after default
2. The secured party can use self-help to repossess only if it can do without a breach of the peace.

Question 21

What is a right to redeem?

Answer 21

Yes; a debtor has a right to redeem after default and this can only be waived after default.

Question 22

What is a secured party liable to the debtor for?

Answer 22

Any damages caused by a failure to follow any of its rules. and will be prohibited from collecting any deficiency if any of its default rules are broken unless the secured party can show that the breach did not cause the deficiency.

Question 23

Is a lease a security interest?

Answer 23

Yes if it is intended to have effect as security, the rental obligation is not terminable by the lessee, and at the end of the lease the lessee has an option to purchase the goods for no or nominal compensation.

Question 24

What happens if a secured party sells the collateral after default by a debtor?

Answer 24

The security interest and all subordinate security interests in the collateral that was sold are discharged, absent bad faith on the part of the purchaser.

Question 25

What does inventory include?

Answer 25

Supplies used in manufacturing

Question 26

What happens when a security agreement contains an after-acquired property clause?

Answer 26

The security interest will attach to the specified collateral when the debtor acquires an interest in it.

Question 27

2 ways a security interest in security may be perfected:

Answer 27

1. By filing a financing statement

2. The secured party’s possession of the collateral.

Question 28

What is a BIOC?

Answer 28

A buyer in the ordinary course of business who buys from a seller engages in the business of selling goods of that kind

Question 29

What does a BIOC take free of?

Answer 29

A nonpossessory interest created by the seller unless he knows the sale violates a security agreement.

Question 30

When is a PMSI in consumer goods perfected?

Answer 30

As soon as it attaches to collateral