MEE Secured Transactions Flashcards
What are the different types of tangible collateral (goods)?
- Consumer Goods—goods used or bought primarily for personal, family, or household purposes.
- Equipment—goods that are used or bought for use in a business. Note: This is also the default category for goods. In other words, if the collateral is a good, and it doesn’t fit the definition of consumer goods, inventory, or farm products, it gets classified as equipment.
- Farm Products—crops or livestock or supplies used or produced in farming operations or products of crops or livestock in their unmanufactured states (such as ginned cotton, wool-clip, maple syrup, milk, and eggs) if they are in the possession of a debtor engaged in farming operations.
- Inventory—goods held for sale or lease, goods that are to be furnished under service contracts, and materials used or consumed in a business in a short period of time.
What are the different types of semi-intangible/intangible collateral?
- Instruments—Pieces of paper representing the right to be paid money, like promissory notes, drafts (for example, checks), and certificates of deposit.
- Documents—A document that represents the right to receive goods (for example, a bill of lading, a warehouse receipt).
- Chattel Paper—A record or records which evidence both (1) a monetary obligation, and (2) a security interest in or a lease of specific goods. A “record” is information that is stored in either a tangible medium (for example, written on paper), or an intangible medium (for example, electronically stored).
- Investment Property—Includes items such as stocks, bonds, mutual funds, and brokerage accounts containing such items.
- Accounts—Includes a right to payment (that is not evidenced by an instrument or chattel paper) for property sold or services rendered. Note: A contractual obligation arising from a loan of money is not an account—it is a general intangible.
*Deposit Accounts—An account maintained with a bank. Note: In general, Article 9 only applies to security interests in nonconsumer deposit accounts and account monies that are claimed as proceeds of other collateral. - Commercial Tort Claims—A tort claim where (1) the claimant is an organization (for example, a partnership or corporation), or (2) the 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 (note that Article 9 also applies to noncommercial tort claims that are claimed as proceeds of other collateral).
- General Intangibles—Any personal property not coming within the scope of the other definitions, such as patent and trademark rights, copyrights, and goodwill. A general intangible under which the account debtor’s principal obligation is a monetary obligation is a payment intangible.
What is a fixture?
Fixtures are goods that have become so related to real property that an interest in them arises under real property law. In general, personal property attached to real estate with the intent that it become a permanent part of the real estate is a fixture.
What are the requirements for attachment by security agreement?
(1) Evidenced by a Record
(2) Agreement Must Be Signed by Debtor
(3) Description of Collateral (Reasonably Identify)
What is a purchase money security interest (PMSI)? How is it created? What does a PMSI secure?
(1) The secured party sells the goods to the debtor on credit and retains a security interest in the goods sold; OR
(2) The 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, and the creditor takes a security interest in that collateral.
The PMSI secures whatever portion of the purchase price still has to be paid.
What is an after aquired property clause?
A secured party often will want to obtain a security interest not only in debtor’s present property, but also in property that the debtor will obtain in the future. This is permissible.
How does a seller’s retention of title create a security interest?
If a seller and 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.
What is a future advance clause?
A secured party often contemplates making future loans to the debtor and wants to secure these future advances in the present security agreement. This is permissible.
A new security agreement is not needed when a future advance is made.
How can a security interest be disguised as a lease (Article 9 still applies)?
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 economic life of the 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.
How can a security interest be disguised as a consignment of goods (Article 9 still applies)?
Commercial consignments of goods (that is, where the consignor did not use the goods for personal, fami‐
ly, or household purposes) 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) Are not auctioneers, and
(3) Are not generally known by their creditors to be substantially engaged in selling the goods of others.
What is attachment by possession?
Security interests in most types of collateral can be perfected simply by taking possession of the collateral.
What is “Attachment” in general?
Attachment deals with those steps legally required to give the secured party a security interest in the collateral that is effective as against the debtor. Once a security interest attaches, it is effective against the debtor and the creditor has all of the rights of a secured creditor under Article 9.
A creditor is not a secured creditor until attachment.
What are the five methods of perfection?
(1) Filing (A Financing Statement);
(2) Taking possession of the collateral;
(3) Control;
(4) Automatic Perfection; and
(5) Temporary Perfection.
What is perfection by filing? How does it work? What must it include?
A secured party may perfect their security interest by filing (either in writing or electronically) a financing
statement.
The financing statement must include:
* The debtor’s name and mailing address,
* The secured party’s name and mailing address, and
* A description of the collateral covered by the financing statement.
What is perfection by taking posession? How does it work?
Security interests in most types of collateral can be perfected simply by taking possession of the collateral. Typically not very common, as the buyer will want possession of the secured collateral.
