Rules

Question 1

Attachment requirements

Answer 1

1. Value has been given by the secured party
2. The debtor has rights in the collateral
3. 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

Question 2

When is a security interest perfected?

Answer 2

After attachment of the interest and compliance with one of the methods of perfection

Question 3

What can be perfected by filing a financing statement?

Answer 3

Any collateral except:

1. A deposit account
2. Money
3. A letter-of-credit rights that are not supporting an obligation

Question 4

What must a financing statement contain?

Answer 4

1. The debtor’s name
2. The name of the secured party
3. The collateral

Question 5

Who has priority between two or more perfected secured parties?

Answer 5

The first to file a financing statement OR perfect

Question 6

Default rule for continuation of security interest in collateral that is sold

Answer 6

A buyer of collateral subject to a perfected security interest takes subject to that interest, unless the secured party has authorized its sale free or the security interest.

Question 7

Buyer in the ordinary course of business (BCOB) Exception

Answer 7

Buyer takes the collateral free of the perfected security interest if:

1. Buys goods
2. In the ordinary course of business
3. From a merchant who is in the business of selling goods of this kind
4. In good faith
5. Without knowledge that the sale violates the rights of another in the same goods

Question 8

Who has priority between a perfected security interest and a PMSI?

Answer 8

Generally, a PMSI

Question 9

What just a PMSI in inventory do to have priority over a perfected interest?

Answer 9

1. perfect by the time the debtor receives possession of the collateral and
2. Send an authenticated notification of the PMSI to the holder of the previous interest before the debtor receives possession of the collateral.

Question 10

What must a PMSI in all goods other than inventory and livestock do to get priority over a perfected security interest?

Answer 10

PMSI must perfect within 20 days after the debtor receives possession of the collateral.

Question 11

In what case can an oral security agreement be enough for attachment?

Answer 11

If the secured party has possession or control of the collateral pursuant to an oral security agreement

Question 12

Who has priority between a perfected security interest and a judicial creditor

Answer 12

Perfected security interest, if it was already existing

Question 13

Are super generic descriptions sufficient for:

1. Attachment
2. Perfection

Answer 13

Attachment: Super-generic descriptions of collateral are not sufficient (e.g., “all of debtor’s assets” or “all personal property”

Perfection: super-generic descriptions of collateral are sufficient

Question 14

Is “all my equipment, including equipment hereafter acquired” super generic?

Answer 14

No

Question 15

What type of description of the collateral in a security agreement is sufficiently specific?

Answer 15

A description that identifies the collateral by type or category of collateral. E.g, farm products, inventory, consumer goods

Question 16

Unperfected security interest v judgement creditor

Answer 16

Judicial lien creditor has priority

Question 17

A secured party’s knowledge of another unperfected security interest in the same collateral’s effect on priority?

Answer 17

No effect

Question 18

When can a secured party demand payment of accounts receivable from the account debtor?

Answer 18

1. Secured party must have an attached interest in A/R
2. Debtor must have defaulted (or earlier if debtor agrees)
3. Secured party must send an authenticated notification to make the payment to the secured party. That notification must reasonably identify the rights assigned.

After receiving that notice, the account debtor can only discharge their obligation by paying the secured party.