Other MEE Rules Flashcards
What is consignment, and what are the requirements for a transaction to be considered a consignment?
A consignment is a transaction in which a person delivers goods to a merchant for the purpose of sale. The requirements are that:
(1) The merchant:
(a) Deals in goods of that kind under a name other than the name of the person making delivery;
(b) Is NOT an auctioneer; AND
(c) Is NOT generally known by its creditors to be substantially engaged in selling the goods of others.
(2) The aggregate value of the goods is $1,000 or more at the time of each delivery;
(3) The goods are NOT consumer goods immediately before delivery; AND
(4) The transaction does NOT create a security interest that secures an obligation.
How are the rights and title to consigned goods distributed between consignee and consignor?
Article 9 provides that in order to determine the rights of a consignee’s creditor, the consignee (the debtor) has rights and title to the goods identical to those of the consignor. Under a consignment, the consignee possesses the full ownership interest of the consignor in the goods, such that as the security interest of the consignee’s creditor will attach to them.
What may a security agreement provide about future advances?
A security agreement may provide that collateral secures future advances, whether or not the advances are mandatory, so long as the security agreement explicitly includes a future advances clause.
What are three types of specification clauses?
a) Default. The parties may specifically define what constitutes a default. If left undefined, non-payment generally constitutes a default.
b) Acceleration. The parties may provide for the acceleration of payments upon the happening of a specified event (e.g., full balance becomes due if payment is 7 days late).
c) Covenants. The parties may covenant certain things to each other regarding the collateral (e.g., the secured party may require the debtor to maintain insurance covering the collateral property).
What are a secured party’s obligations with respect to collateral in the secured party’s possession?
A secured party must use reasonable care in the custody and preservation of collateral in the secured party’s possession.
What is an accession?
An accession is collateral that does NOT lose its identity when physically united with other goods (e.g., a jet engine serving as collateral does not lose its identity when it is installed into a jet). A security interest may be created in the property that does not lose its identity and continues in the accession collateral. (Contrast: Commingled goods)
What is a commingled good?
A commingled good is collateral that loses its identity when physically united with other goods (e.g., 100 pounds of flour serving as collateral loses its identity when physically united with other ingredients to form cake products). If collateral becomes commingled with other goods, a security interest attaches to the product that results. (Contrast: accession)
