Sec Trans Flashcards
What is required for attachment?
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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.
What is inventory?
Inventory includes goods, other than farm products, that are held for sale or lease.
Perfection
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.
What is a BCOB?
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
Categories of tangible goods
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Consumer Goods
Farm Equipment
Inventory
Equipment
Requirements for Security agreement
RAD
Record
Authentication
Description of collateral
Methods of perfection
Famous People Can’t Avoid Attention
Filing Possession Control Automatic Alternative statute
What is a PMSI?
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
PMSI in consumer goods
automatically perfected upon attachment
What are consumer goods?
those goods acquired primarily for personal, family, or household purposes
Consumer buyer of consumer goods and garage sale rule
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.
What is an account?
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.
What is attachment?
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.
What may a secured party do upon default of an SI in an account?
- 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
What may a secured party do upon default on an SI in goods?
may (i) seek possession of the collateral and
sell it or retain it, or (ii) sue for a judgment based on the obligation
Who must receive notice of a disposition?
(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
When must notice of disposition be sent?
at least 10 days before disposition
What are exceptions to notification of disposition?
(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
When does UCC Art. 9 not apply?
- 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
Categories of intangible goods
- Instruments
- Documents
- Chattel paper
- Accounts
- General intangibles
What must a filing statement include?
- 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
What cannot be perfected by possession?
accounts, certificate of title goods, electronic chattel paper, general intangibles
Fixture filings
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
small assignment of accounts
SI perfects automatically when:
- Accounts or payment intangibles are assigned; and
- Assignment does not transfer a significant portion of the assignor’s outstanding accounts or intangibles
Sale of payment intangibles or promissory notes
automatically perfected
Attached vs. unattached/unsecured interest
attached SI prevails
Perfected vs. unperfected SI
perfected SI prevails
Perfected vs. perfected SI
first to file or perfect
PMSI in inventory - priority
has priority over other SIs in the inventory or proceeds from inventory if:
- PMSI is perfected when debtor takes possession of inventory; and
- 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
PMSI in goods (non-inventory or livestock) - priority
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
PMSI v PMSI
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
SI in fixtures - priority
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
Buyer v unperfected SI
Buyer prevails if:
- Gives value and receives delivery; and
- Has no knowledge of the SI
