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July Exam - Secured Transactions > Introduction > Flashcards

Introduction Flashcards

1
Q

Secured Transaction - Definition

A
  • a transaction intended to create a security interest in personal property or fixtures
  • generally involves a sale on credit or a loan in which the seller or the lender obtains a lien on some or all of the debtor’s property as a security for payment
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2
Q

Security Transaction - What to Look For

A
  • a credit transaction (sale on credit or a loan) AND
  • an agreement that creates a lien in favor of the creditor in the debtor’s personal property to secure the debt
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3
Q

Debtor - Definition

A
  • the person who owes payment or performance of the obligation performed
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4
Q

Secured Party - Definition

A
  • aka creditor
  • a lender, seller or other person in whose favor there is a security interest
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5
Q

Security Agreement

A
  • the agreement between the debtor + the secured party that creates the security interest
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6
Q

Security Interest - General Concept

A
  • an interest in personal property or fixtures that secures payment or performance of an obligation
  • a contingent property interest in the debtor’s collateral that the debtor grants to the creditor
    -> when the contingency (default) occurs, the property interest springs to life + creditor has rights in the collateral
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7
Q

Collateral - General Concept

A
  • the property subject to a security interest
  • property that the secured party can repossess upon default to ensure that the debt is paid
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8
Q

Purchase Money Security Interest

A
  • a special type of security interest in goods

PMSI can arise in two ways:
- secured party sells the goods to the debtor on credit + retains a security interest in the goods sold
- a creditor loans the funds to the debtor to enable the debtor to buy specific collateral, those funds are used by the debtor to acquire the specific collateral, + the creditor takes a security interest in that collateral
-> in creditor-financed PMSI, the PMSI secures whatever portion of the purchase price still has to be paid

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9
Q

After-Acquired Property Clause

A
  • clause allowing secured party to obtain a security interest in property that the debtor will obtain in the future (in addition to present property)
  • typically included in security agreements
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10
Q

Future Advance Clause

A
  • clause included in a security agreement so the secured party can make future loans to the debtor that would be secured n the same original security agreement
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11
Q

Attachment

A
  • deals w/ the steps legally necessary to give the secured party a security interest in the collateral that is effective as against the debtor
  • once security interest attaches, it’s effective against the debtor + the creditor has all of the rights of a secured creditor under Article 9
  • creditor is not a secured creditor until attachment
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12
Q

Perfection

A
  • deals w/ the steps legally required to give the secured party an interest in the collateral that is effective against the world
  • generally, the process of giving public notice of the security interest to the world
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13
Q

Financing Statement

A
  • the document generally used to provide public notice of the security interest, + so to perfect the security interest
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14
Q

Types of Collateral - Broad Categories

A
  • goods
  • intangible or semi-intangible collateral
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15
Q

Goods

A
  • tangible collateral
  • include all things which are moveable at the time the security interest attaches
  • also includes fixtures
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16
Q

Types of Goods

A
  • consumer goods
  • equipment
  • farm products
  • inventory

OFTEN IN Q’s - MEMORIZE THESE

17
Q

Consumer Goods

A
  • goods used or bought primarily for personal, family or household purposes
18
Q

Equipment

A
  • goods that are used or bought for use in a business
  • also the default category for goods though
    -> if the collateral is a good + it doesn’t fit the definition of consumer goods, inventory, or farm products, it gets classified as equipment
19
Q

Farm Products

A
  • crops or livestock
  • supplies used or produced in farming operations
  • products of crops or livestock in their unmanufactured states
  • IF they’re in the possession of a debtor engaged in farming operations
20
Q

Inventory

A
  • goods held for sale or lease, goods that are to be furnished under service contracts, + materials used or consumed in a business in a short period of time
21
Q

Types of Intangible or Semi-Intangible Collateral

A
  • instruments
  • documents
  • chattel paper
  • investment property
  • accounts
  • deposit accounts
  • commercial tort claims
  • general intangibles
22
Q

Instruments

A
  • pieces of paper representing the right to be paid money, like promissory notes, drafts (ex: checks), and certificates of deposit
23
Q

Documents

A
  • a document that represents the right to receive goods (ex: bill of lading, warehouse receipt)
24
Q

Chattel Paper

A

A record or records which evidence both:
1) a monetary obligation AND
2) a security interest in or a lease of specific goods

  • can be stored in either a tangible medium or an intangible medium
25
Q

Investment Property

A
  • includes items such as stocks, bonds, mutual funds, + brokerage accounts containing such items
26
Q

Accounts

A
  • includes a right to payment (that is not evidenced by an instrument or chattel paper) for property sold or services rendered
  • note though that a contractual obligation arising from a loan of money is not an account, it’s a general intangible
27
Q

Deposit Accounts

A
  • an account maintained w/ a bank
  • in general, Article 9 only applies to security interests in nonconsumer deposit accounts + account monies that are claimed as proceeds of other collateral
28
Q

Commercial Tort Claims

A

Tort claim where:
1) the claimant is an organization (ex: partnership or corporation) OR
2) claimant is an individual, the claim arose out of the claimant’s business or profession, and the claim does not include damages for personal injury or the death of an individual

-> Article 9 also applies to noncommercial tort claims that are claimed as proceeds of other collateral

29
Q

General Intangibles

A
  • any personal property not coming w/in the scope of the other definitions, such as patent + trademark rights, copyrights + goodwill
30
Q

Scope of Article 9

A

Applies to the following transactions:
- a transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract
- a seller’s retention of title
- agricultural liens
- sales of accounts, chattel paper, payment intangibles, and promissory notes
- certain commercial consignments of goods
- secured sale of disguised as a lease

31
Q

Seller’s Retention of Title

A
  • if a seller + buyer of goods agree that the seller will retain title to the goods after they are delivered until the buyer has paid for them, the agreement will be treated as the seller’s retention of a security interest
32
Q

Agricultural Liens

A
  • nonpossessory liens on farm products that are created by state statute in favor of persons providing goods, services, or rental land to farmers (only the perfection + priority of agricultural liens are governed by Article 9; creation + enforcement of the liens are governed by state statutes)
33
Q

Commercial Consignment of Goods Covered by Article 9

A
  • commercial consignment of goods = where the consignor didn’t use the goods for personal, family or household purposes
  • covered when they’re worth a total of $1,000 or more to persons who:
    1) deal in goods of that kind under a name other than the consignor’s
    2) aren’t auctioneers AND
    3) are not generally known by their creditors to be substantially engaged in selling the goods of others
34
Q

Secured Sale Disguised as a Lease

A
  • leases that are intended to serve as security arrangements (but not true leases)
  • AND a lease where the rental obligation is not terminable by the lessee and either:
    1) the lease term is equal to or greater than the remaining econ life of goods
    2) the lessee is bound to purchase the goods at the end of the lease or to renew the lease for the remaining economic life of the goods OR
    3) at the end of the lease, the lessee has an option to purchase the goods or renew the lease for the remaining economic life of the goods for no or nominal consideration

July Exam - Secured Transactions (10 decks)

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