Outline Flashcards
Consumer Goods
bought for primarily personal, family, or household purposes
Inventory
Goods other than farm products
For sale/lease/under contract
Ex. store inventory, raw materials, work in progress, materials used/consumed in a business
Farm Products
crops, livestock, and supplies used in farming operations
Equipment
Catchall - goods other than consumer, farm, or inventory
Three requirements for Attachment of Security Interest
- Value given by secured party to debtor
- Debtor has rights in the collateral
- Binding Security agreement, possession, or control
Requirements of a Binding Security Agreement
Did I Agree DIA (Description, Intent, Authentication)
- Authentication by debtor
- Intent to create a security agreement
- Description of Collateral (cannot be super generic)
A security agreement is not enforceable unless:
It has attached
Perfection of Security Interest Meaning
Perfection = Priority
To acquire maximum priority over others with an interest in the property, the secured party must perfect.
Perfection gives notice of interest to others.
First to file/perfect has priority.
Security interest cannot be perfected before it attaches.
Five Methods of Perfection
PFACT to perfect
Possession
Filing
Automatic
Control
Temporary
Automatic Perfection - what & when
PMSI in Consumer Goods
Perfected as soon as it attaches
Limitations:
1. Motor vehicles - requires notation on title
2. Fixtures - have priority over encumbrancer of real estate ONLY if there was a fixture filing
Fixture Filing Requirements
- Names of parties
- Indicate it covers fixtures
- Description of real property
- to be filed in real property records
- Name of real property’s record owner if debtor has no interest
Perfection for Motor Vehicles
Perfection requires notation on certificate of title
Dealers: need only file a financing statement
Perfection by Control
Can be obtained over non-consumer deposit account by:
- putting it in secured party’s name OR
- agreeing in authenticated record with the debtor and bank that bank will comply with secured party’s orders
Perfection by Filing requires
Filing a financing statement containing:
1. party names and addresses
2. description of collateral
debtor’s name must match license or for a business, the public organic record
Error in debtor’s name of financing statement
Minor errors do not invalidate, seriously misleading errors will
Seriously misleading error = would not be discovered in search
Incorrect indexing by office does not impact effectiveness
Debtor name change
Financing statement is effective only against collateral acquired before the change and withing 4 months after.
Collateral acquired later than 4 months after require a new filing with correct name.
Supergeneric description of collateral
Security Agreement - NO
Financing Statement - YES
Relocation of Debtor
If debtor moves to another state, the security interest generally will become unperfected 4 months after unless SP files a financing statement in the new jurisdiction before then
If collateral is transferred to new owner in a new state
the security interest will become unperfected one year after unless creditor files a financing statement before then
Temporary Perfection
If perfected, secured party has continued perfection in any proceeds for 20 days.
Interest has continued perfection BEYOND 20 days if:
1. proceeds are identifiable cash
2. interest was perfected by filing, and the proceeds would be perfected by filing in the same place, and not purchased with cash proceeds, OR
3. interest is perfected within the 20-day period
Perfected v. Perfected Priority
first to file or perfect wins
Unperfected v. Unperfected Priority
First to attach wins
Perfected v. Unperfected
Perfected wins
PMSI Superpriority
PMSI superior to all IF:
- Goods other than inventory and livestock if perfected within 20 days of debtor taking possession
- Inventory and Livestock perfected at time debtor gets possession and other secured parties receive authenticated notification of PMSI before
PMSI v. PMSI Priority
Seller PMSI wins over lender PMSI
Otherwise, first to file or perfect wins
Buyer in the Ordinary Course
buys goods:
1. in good faith
2. without knowledge the sale violates rights of another, and
3. in the ordinary course of business from a seller in the business of selling goods of that kind
Buyer takes consumer goods free of interest if:
buyer buys:
- without knowledge of the interest
- for value,
- for own personal, family, or household purposes, and 4. before a financing statement covering the goods has been filed
It does not matter that consumer goods automatically perfect
Secured party v. Judicial Lien Creditor
lien creditor wins IF he becomes such before security interest is perfected
Self-Help Repossession
can be done without breach of the pease
Breach of the Peace
Generally, presence + objection
Breaking and Entering
