Essay Writing Workshop Flashcards
Secured Transaction
A secured transaction under UCC Article 9 involves a loan or purchase that is secured by collateral.
Security Interest
A security interest is an interest in personal property or fixtures that secures payment or performance of an obligation.
Secured Party
A secured party is the person in whose favor a security interest is created under the security agreement.
Obligor
An obligor is the person who must pay (or otherwise perform) with respect to the obligation that is secured by a security interest in the collateral.
Debtor
A debtor is a person who has an interest, other than a security interest or other lien, in the collateral, such as the sole owner of the collateral.
Collateral
Property subject to a security interest.
Tangible Collateral: Goods
“Goods” encompass anything that is “moveable at the time that a security interest attaches.”
Consumer goods
“Consumer goods” are those acquired primarily for personal, family, or household purposes.
Farm products
“Farm products” are goods that are crops or livestock and include supplies that are used or produced in farming.
Inventory
“Inventory” includes goods, other than farm products, that are held for sale or lease; are furnished under a service contract; or consist of raw materials, works in process, or materials used or consumed in a business.
Equipment
“Equipment,” a catchall class, consists of goods that are not consumer goods, farm products, or inventory.
Accounts
(Intangible Collateral)
“Accounts” include the right to payment for goods sold, property licensed, or services rendered.
Deposit account
(Intangible Collateral)
Includes a savings, passbook, time, or demand account maintained with a bank.
Leases
“A transaction in the form of a lease creates a security interest if the lease payments must be made for the full term of the lease and are not subject to termination and the lessee has an option to become the owner of the goods for nominal consideration at the conclusion of the lease agreement.”
Consignments
Treated as a PMSI if:
1. A person must deliver goods to a merchant for the merchant to sell;
2. The merchant must:
(a) Deal in goods of that kind,
(b) Not operate under the name of the consignor,
(c) Not be generally known by its creditors to be substantially engaged in selling the goods of others, and
(d) Not be an auctioneer;
3. WIth respect to each delivery, the value of the goods must be at least $1,000 at the time of delivery; and
4. The goods must not be consumer goods immediately before the delivery.
Attachment
- Value has been given by the secured party;
- The debtor has rights in the collateral; and
- The debtor has authenticated a security agreement that describes the collateral, or the secured party has possession or control of the collateral pursuant to a security agreement.
Value Given
- By providing consideration sufficient to support a simple contract;
- By extending credit, either immediately or under a binding commitment to do so;
- By accepting delivery under a preexisting contract
Debtor’s Rights in Collateral
A security interest attaches only to the rights that the debtor has.
After-acquired collateral
A security interest may apply not only to the collateral that the debtor owns at the time the security is granted, but also to collateral that the debtor acquires in the future.
Exception: An after-acquired clause is not effective if the collateral is consumer goods, unless the debtor acquires them within 10 days after the secured party gives value.
Proceeds from Collateral
A security interest in collateral automatically attaches to identifiable proceeds from the sale, exchange, or other disposition of the collateral.
Accessions
Accessions are goods that are physically united with other goods in such a manner that the identity of the original goods is not lost. A security interest is not lost due to it becoming an accession.
Security Agreement requirements
- It must be in a record, such as a written or typed document;
- Contain a description of the collateral; and
- Be authenticated by the debtor.
Purchase Money Security Interest
A PMSI gives lenders a security interest in goods that have been purchased with funds borrowed from them or purchased on credit from them. It may only exist in goods (including fixtures) and software.
Perfection of a Security Interest
“Perfection” is generally necessary for the secured party to have rights in the collateral that are superior to any rights claimed by third parties. A security interest is “perfected” upon attachment of that interest and compliance with one of the methods of perfection.
