MEE Secured Transactions rule statements Flashcards

1
Q

Article 9 applies to

A

Article 9 applies to all security interests in personal property or fixtures by contract. Article 9 also applies to lease agreements that are not true leases (but instead, security interests).

Note: The words “security agreement” do not have to be specifically stated for one to exist.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are 4 main classifications of goods?

A

equipment, inventory, consumer goods, and farm products.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Consumer goods:

A

Consumer goods: goods that are bought for use primarily for personal, family, or household
purposes (e.g., a computer in the hands of a consumer)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Inventory:

A

goods, other than farm products, that are held by a person for sale or lease to be furnished under a contract of service; or raw materials, work in process, or materials used or consumed in a business (e.g., computers sold by a computer store)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Equipment:

A

Equipment: goods, other than inventory, farm products, or consumer goods (e.g., a computer used in a business).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Farm products:

A

Farm products: crops, livestock, supplies produced in a farming operation or products of crops or livestock in their unmanufactured state in possession of debtor who is engaged in a farming operation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Requirements of attachment of a Security Interest:

A

(1) value must be given by the secured party to the debtor (e.g., a loan);
(2) the debtor must have rights in the collateral; and
(3) there must be a binding security agreement which requires (mnemonic=AID): authentication, intent to create a security agreement, and a description of the collateral

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

a binding security agreement which requires (mnemonic=AID):

A

Authentication,

Intent to create a security agreement, and a Description of the collateral

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

After-acquired property:

A

the general rule is that a security agreement can cover after-acquired property and does not need to specifically reference it to be effective.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

A buyer in the ordinary course of business:

A

A buyer in the ordinary course of business generally takes free of any security interest created by the buyer’s seller, even if the security interest is perfected and the buyer knows of its existence.

(Note that the buyer is not in the ordinary course of business if he knows that the sale is in violation of a term in the security agreement.)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

A buyer NOT in the ordinary course of business: takes collateral ?

perfected SI?

unperfected SI?

A

A buyer not in the ordinary course of business takes collateral subject to a perfected interest.

Generally, he does not take subject to an unperfected interest if he gives value and does not know about the interest.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Consumer to consumer goods (garage sale) exception:

A buyer not in the ordinary course of business takes free of a security interest even though perfected, if

A

(1) he buys without knowledge of the security interest;
(2)for value; and
for his own personal, family, or household purposes unless, prior to the purchase, the secured party has filed a financing statement covering the goods. The goods must be consumer goods both when the seller has them and when the buyer buys them for this to apply.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

When a lien creditor is involved:

SP v. Lien creditor priority

A

The general rule is that, as between a secured party and a lien creditor, priority belongs to the secured party, as long as it perfects before the lien arises. If the interest was unsecured or only perfected after the lien creditor served the writ, then the lien creditor has priority.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Default:

A

if a default occurs, the lender can demand payment or use self-help to reclaim the goods so long as it does not breach the peace.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Breach of peace: There are several factors to examine to determine if the lender has breached the peace, including:

A

whether the repossession took place at the debtor’s premises and
whether the debtor objected.

Some courts also look at whether trickery was used. Some courts say that any objection (even if slight and even if only verbal) amounts to a breach of the peace

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Resale:

A

The secured party may sell or dispose of the collateral in a commercially reasonable way.
The security interest is discharged when this occurs, but the debtor is liable for any deficiency.
The obligation owed to the disposing secured party and any junior liens are paid off. (Senior liens remain on the collateral.)

17
Q

debtor’s means of protecting itself

A

Debtor’s means of protection #1: the sale must be commercially reasonable.

• Debtor’s means of protection #2: The debtor must receive written notification of the sale.

The debtor and perfected secured parties (or secured parties who have notified the secured party of their interest) must know when the chance to redeem the collateral is going to pass. (This is not necessary if the collateral threatens to decline rapidly.)

18
Q

Timeliness of notification:

A

this is generally a question of fact, but in a nonconsumer transaction, a notification sent 10 days or more before the disposition (sale) is considered reasonable.

19
Q

Content of notification: In nonconsumer transactions,

A

In nonconsumer transactions, the notification of disposition should
describe the debtor and the secured party and the collateral,
state the method of disposition, and
state that the debtor is liable for unpaid indebtedness as well as a charge for accounting.

20
Q

Content of Notification: In consumer transactions,

A

In consumer transactions, the notification must additionally contain
a description of any liability for a deficiency,
a telephone number that the consumer can call to discover the amount owed, and
a telephone number or mailing address from which the consumer can get additional information about the disposition and the obligation.

21
Q

Remedies if secured party fails to comply with above requirements

A

Remedy #1: Damages

Remedy#2:Sale. A court may order a sale.(July2006)

Remedy#3: Rebuttable presumption:

22
Q

Remedy damages if SP does not comply with requirements

A

Damages (including consequential damages, but the debtor has a duty to mitigate). If the collateral constitutes consumer goods, statutory damages are awarded.

23
Q

Remedy#3:Rebuttable presumption:

Non consumer transaction: Non consumer transaction: if there is a failure to comply with these requirements and the secured party fails to show that the sale was commercially reasonable, then there is a rebuttable presumption that?

Consumer transaction: 2 approaches

A

• a rebuttable presumption that the collateral is worth the amount of the debt and the debtor’s deficiency is nothing.

• Consumer transaction: There are two approaches that courts follow:
the absolute bar rule (the creditor’s noncompliance bars any recovery of deficiency) or
the rebuttable presumption rule (same as previous bullet point)

24
Q

Debtor’s right to redeem:

A

the debtor can redeem prior to the disposition of the collateral by paying everything due and owing to the creditor.