SC

Question 1

Security Interest

Answer 1

Creditor’s interest in collateral. Interest arises when a debtor uses property as collateral to secure repayment of funds to lendor.

If the debtor defaults on repayment, the creditor may take possession and apply it to the balance owed by debtor..

Question 2

Goods (Types and Implications)

Answer 2

Collateral that is movable at the time the security interest attaches.

Characterization of good is based on primary use

Types:
Consumer Goods - Personal, family or household items

Inventory - Held for sale or lease to be furnished under contract or service OR raw materials, work in process, or materials used and consumed during business

Farm Products - Good used in farming operation such as crops, livestock, products of crops or livestock in their unmanufactured state, aquatic goods and supplies used in a farming operation

Equipment - Catch all category, includes all goods not falling in the other categories

Question 3

Fixtures

Answer 3

Goods that are so related to particular real property that an interest in those goods arises under law

Question 4

Accessions

Answer 4

Goods that are physical united in such a manner that the original identity of the goods is not lost

Question 5

Commingled Goods

Answer 5

Goods that are physically united in such a manner that the original identity of the goods is lost in a product or mass

Question 6

Tangible Intangibles (types and implications)

Answer 6

Intangibles that have been reduced tow written form (Title, Chattel Paper) (obligations to hold or deliver goods, pay money, and ownership in goods or business entities)

Types:
Instruments - Any writing that evidences a right to the payment of a monetary obligation

Documents - Document which in the regular course of business or financing is treated as adequately evidencing that the person in possession of it is entitled tot receive, hold, and dispose of the document and the good it covers (Bill of loading, dock reciepts, warehouse reciepts, delivery orders)

A document of title must purport to be issued by or addressed to a bailee and purport to cover goods in the baillee’s possession that identifiable

Chattel Paper - Record or records evidencing both a monetary obligation and a security interest in a lease or specific goods

Question 7

Intangible Intangibles

Answer 7

Intangibles that can be evidenced by writings but these writings have no commercial significance themselves. (web site domain names, IP rights, right to sue)

Includes

1. General Intangibles that dont fit into another category
2. Accounts - right of payment of a monetary obligation, generally for property that has been transferred or disposed of out of use of credit

Question 8

Security Agreement

Answer 8

Agreement that creates or provides for security interest in certain collateral.

Requires:
Writing that is authenticated by the debtor
Containing a granting clause
Containing description of the collateral

Generally biding and effective against the parties, against purchasers of collateral, and against other creditors.

Question 9

Financing Statement

Answer 9

Document that is filed to give notice of security agreement

Question 10

Attachement

Answer 10

Process by which security agreement is created

Question 11

Purchase-Money Security Interest

Answer 11

Security interest that pertains to goods or software securing an obligation that a debtor incurs to purchase the goods.

Goods securing a purhcase-money obligation that a debtor incurs to purchase the goods are purchase-money collateral

Debtor incurs a purchase-money obligation if the obligation is incurred as all or part of the price of the collateral AND the value given was to enable the debtor to acquire rights to the collateral if the rights are so used

Requirements:
PMSI:
Security interest must be in goods that are given as collateral for an obligation the debtor incurred for the purchase of the goods, and actually used to purchase the goods

Question 12

Perfection

Answer 12

Process by which the secured party gives notice to the entire world of its security interest

Question 13

UCC Article 9 Application

Answer 13

Applies to any transaction that creates a security interest in:

1. Personal property or fixtures by contract
2. Lease for entire economic life of item
3. Sales of accounts receivable, chattel paper, negotiable instruments, and payment intangibles

Question 14

Broad Types of Collateral

Answer 14

1. Goods
2. Tangible intangibles
3. Intangible Intangibles
4. Investment Property

Question 15

Investment Property

Answer 15

Certified and uncertified securities account and entitlements as defined in article 8

Question 16

Proceeds

Answer 16

Collateral can also take the form of proceeds obtained from the disposition of other collateral, including whatever is received upon the sale, lease, license, exchange, or other disposition of collateral including payment of insurance proceeds

Two Types:

1. Cash
2. Non-cash

Question 17

Possession

Answer 17

When the secured party has possession there needs to be an agreement.

Agreement can be an oral (pledge) that the secured party has a security interest