MEE Secured Transactions Flashcards
When is a security agreement perfected? (General answer)
A security interest is perfected upon attachment of that interest and compliance with one of the methods of perfection.
What are the requirements for a security interest to attach?
(value given by secured party + debtor has rights in collateral + debtor authenticated security agreement that describes the collateral OR secured party has possession or control of collateral pursuant to security agreement)
In order to attach, three conditions must coexist: (i) value has been given by the secured party; (ii) the debtor has rights in the collateral, and (iii) 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.
What must a financing statement contain?
The financing statement must contain the debtor’s name, the name of the secured party, and the collateral covered by the financing statement.
Typically, a security interest attaches and is then perfected. But…
Typically, a security interest attaches and is then perfected. But if the necessary steps for perfection are taken prior to attachment, then the security interest is perfected upon attachment.
Who has priority in collateral when there are two or more secured parties with perfected security interest?
When there are two or more secured parties with perfected security interests in the same collateral, the first to file or perfect has priority. In other words, if both security interests are perfected, then priority is determined by the time of filing or perfection, whichever occurs first.
What happens when a buyer purchases collateral that is subject to a perfected security interest?
A buyer of collateral subject to a perfected security interest generally takes the collateral subject to that interest, unless the secured party has authorized its sale free of the security interest.
What is the buyer in the ordinary course of business (BOBC) exception?
A buyer in a BOCB if he: (i) buys goods, (ii) in the ordinary course of business, (iii) from a seller who is in the business of selling goods of that kind, (iv) in good faith, and (v) without knowledge that the sale violates the rights of another in the same goods.
Generally, when is a security interest enforceable against the debtor?
Generally, a security interest that is enforceable against the debtor is said to have “attached” to the collateral.
What is “inventory”?
Inventory includes goods, other than farm products, that are held for sale or lease.
What is generally necessary for the secured party to have rights in the collateral that are superior to any rights claimed by third parties?
Perfection of a security interest is generally necessary for the secured party to have rights in the collateral that are superior to any rights claimed by third parties.
How can a security interest in goods be perfected?
A security interest in goods can be perfected by properly filing a financing statement.
Can a buyer in the ordinary course of business (BOCB) take free of a security interest created by the buyer’s seller?
A buyer in the ordinary course of business (BOCB) 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.
A BOCB is a person who: (i) buys goods, (ii) in the ordinary course of business, (iii) from a merchant who is in the business of selling goods of that kind, (iv) in good faith, and (v) without knowledge that the sale violates the rights of another in the same goods.
*In order to qualify as a buyer, the purchaser must give new value, with in addition to paying cash for the goods includes purchasing the goods on credit.
If a buyer obtains goods under the BOCB exception free of the security interest in the goods created by the buyer’s seller, may the buyer sell the goods to a second buyer? Do they take subject to the security interest?
If a buyer obtains goods under the BOCB exception free of the security interest in the goods created buy the buyer’s seller, the buyer may, in turn, sell the goods to a second buyer who also takes the goods free of that security interest.
The second buyer is not required to qualify as a BOCB.
Does Article 9 apply regardless of the substance of the transaction?
If the substance of the transaction is the creation of a security interest, then Article 9 applies regardless of the form of the transaction.
*The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer is limited in its effect to a reservation of a security interest.
When does a PMSI in goods exist?
A PMSI in goods exists when a secured party sold goods to the debtor, and the debtor incurs an obligation to pay the secured party all or party of the purchase price.
