Sec Trans

Question 1

What is required for attachment?

Answer 1

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i. Value given by the secured party,
ii. Rights in the collateral by the debtor,
iii. Security Agreement authenticated by debtor that describes the collateral, or the secured party has possession or control of the collateral pursuant to a security agreement.

Question 2

What is inventory?

Answer 2

Inventory includes goods, other than farm products, that are held for sale or lease.

Question 3

Perfection

Answer 3

Perfection of a security interest is generally necessary for the secured party to have rights in the collateral that are superior to any rights claimed by third parties. A security interest in goods can be perfected by filing a financing statement.

Question 4

What is a BCOB?

Answer 4

Takes free of security interest:

(i) buys goods;
(ii) in the ordinary course of business;
(iii) from a merchant who is in the business of selling goods of that kind;
(iv) in good faith; and
(v) without knowledge that the sale violates the rights of another in the same goods.

*In order to qualify as a buyer, the purchaser must give new value

Question 5

Categories of tangible goods

Answer 5

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Consumer Goods
Farm Equipment
Inventory
Equipment

Question 6

Requirements for Security agreement

Answer 6

RAD

Record
Authentication
Description of collateral

Question 7

Methods of perfection

Answer 7

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Filing
Possession
Control
Automatic
Alternative statute

Question 8

What is a PMSI?

Answer 8

arises when a creditor sells goods to a debtor on credit and retains a security interest in those goods, or the creditor advances funds, which are then used to purchase the goods and the creditor reserves a security interest in those goods

Question 9

PMSI in consumer goods

Answer 9

automatically perfected upon attachment

Question 10

What are consumer goods?

Answer 10

those goods acquired primarily for personal, family, or household purposes

Question 11

Consumer buyer of consumer goods and garage sale rule

Answer 11

a consumer buyer of consumer goods takes free of a security interest, even if perfected, unless prior to the purchase the secured party filed a financing statement covering the goods. A consumer buyer is a person who: (i) buys consumer goods for value;

(ii) for his own personal, family, or household use;
(iii) from a consumer seller; and
(iv) without knowledge of the security interest.

Question 12

What is an account?

Answer 12

includes the right to payment for property sold, leased, licensed, or for services rendered (such as a company’s accounts receivable). A security interest in accounts may be perfected only by filing.

Question 13

What is attachment?

Answer 13

A security interest is enforceable against the debtor with respect to the collateral if the interest has attached to the collateral. The basic rule is that a security interest attaches only to rights that the debtor has.

Question 14

What may a secured party do upon default of an SI in an account?

Answer 14

• may notify an account debtor (the person obligated on an account) to make payment to the secured party
• may exercise any rights of the debtor with respect to the obligation of the account debtor
• In a commercially reasonable manner, may collect from the account debtor
• if the account debtor does not pay, may enforce the obligation of the account debtor

Question 15

What may a secured party do upon default on an SI in goods?

Answer 15

may (i) seek possession of the collateral and

sell it or retain it, or (ii) sue for a judgment based on the obligation

Question 16

Who must receive notice of a disposition?

Answer 16

(I) debtor,
(ii) any secondary obligor,
(iii) any other secured party or lien holder
who has an SI perfected by filing, and
(iv) any party who has notified the secured party of a claim or interest in the collateral

Question 17

When must notice of disposition be sent?

Answer 17

at least 10 days before disposition

Question 18

What are exceptions to notification of disposition?

Answer 18

(i) the collateral is perishable or threatens to decline
speedily in value;
(ii) the collateral is of a type customarily sold on a recognized market;
(iii) the person has waived his right in an authenticated writing

Question 19

When does UCC Art. 9 not apply?

Answer 19

• Transactions governed by fed., state, or foreign law
• Most real property transactions involving interests or liens on land (i.e., does not apply to mortgages on real property)
• Assignment of tort claims (except with respect to proceeds and priority in proceeds from tort claims)
• Assignment of claims for wages

Question 20

Categories of intangible goods

Answer 20

• Instruments
• Documents
• Chattel paper
• Accounts
• General intangibles

Question 21

What must a filing statement include?

Answer 21

• Identify debtor — name must exactly match (if debtor is business org., name must match Art. of Incorporation)
• Identify secured party/creditor
• Contain an adequate description of collateral

Question 22

What cannot be perfected by possession?

Answer 22

accounts, certificate of title goods, electronic chattel paper, general intangibles

Question 23

Fixture filings

Answer 23

consumer goods that are to become fixtures require a fixture filing to obtain priority over an interest in the real property to which fixture is affixed

Question 24

small assignment of accounts

Answer 24

SI perfects automatically when:

1. Accounts or payment intangibles are assigned; and
2. Assignment does not transfer a significant portion of the assignor’s outstanding accounts or intangibles

Question 25

Sale of payment intangibles or promissory notes

Answer 25

automatically perfected

Question 26

Attached vs. unattached/unsecured interest

Answer 26

attached SI prevails

Question 27

Perfected vs. unperfected SI

Answer 27

perfected SI prevails

Question 28

Perfected vs. perfected SI

Answer 28

first to file or perfect

Question 29

PMSI in inventory - priority

Answer 29

has priority over other SIs in the inventory or proceeds from inventory if:

1. PMSI is perfected when debtor takes possession of inventory; and
2. Other parties who filed their SIs in inventory receive authenticated notification of the PMSI before debtor takes possession of inventory

Notification must state that PMSI will be taken in debtor’s inventory and describe kind and type of inventory

Question 30

PMSI in goods (non-inventory or livestock) - priority

Answer 30

has priority over other SIs in the same goods and their proceeds if PMSI is perfected before or within 20 days after debtor receives possession

Question 31

PMSI v PMSI

Answer 31

A. Secured party who has PMSI as the seller of the collateral (as opposed to lender), or
B. Otherwise, first secured party to file or perfect

Question 32

SI in fixtures - priority

Answer 32

first to file or record prevails

*Exception: PMSI secured parties who make a fixture filing within 20 days of affixation prevail over a real property interest recorded prior to affixation

Question 33

Buyer v unperfected SI

Answer 33

Buyer prevails if:

1. Gives value and receives delivery; and
2. Has no knowledge of the SI