SecT Flashcards
Security interest
When a party uses certain property as collateral to secure repayment of funds to another party
Result of collateral
By using the property as collateral, if the debtor defaults on repayment the creditor can take the collateral
UCC article 9
-Applies to any transaction that creates a security interest in PERSONAL property or fixtures by a K
-leases if the economic substance of the lease is a financed purchased rather than a true lease
-sales of accounts receivable, chattel papers, negotiable interests, and payment intangibles
Types of collateral
GIIT
Goods
Intangible intangibles
Investment properties
Tangible intangibles
Goods
Movable, fungible, at the time of the security interest
- Consumer goods; goods bought or sold for personal/family/household
- Inventory; goods other than farm products that are for sale or lease (includes raw materials)
- farm products; crops, livestock etc other AG products
- equipment; catch-all
Tangible intangibles
- Instruments; like deeds, notes, must be type of ordinary course of business
- Documents; of title including bills of landing, warehouse receipts, delivery orders or anything evidencing that the person in possession isn’t entitled to receive, hold, dispose of the good
- Chattel paper; record evidencing monetary obligation and SI or a lease of goods
Intangible intangibles
Example; literary rights, knowledge
Note; even if there’s a writing referencing it; the writing is NOT the final product
- General intangibles; things (choses) in action, payment intangibles, software
- Accounts; rights to payment of a monetary obligation, generally for property or services
Investment property
Certified AND uncertified securities as defined in art 8
Proceeds
Cash
Noncash
Security interest; How to?
A written security agreement OR possession of the collateral AND
attachment of the security interest to the collateral
- a security agreement is an agreement that creates interest in certain collateral. It must be (1) WRITTEN, (2) AUTHORIZED by the debtor, (3) contain a GRANTING clause (informal is fine) and (4) contain a DESCRIPTION of the collateral
- Possession; if the creditor has possession of the collateral, oral is fine
Purchase Money Security Interest
PMSI
- A security interest in goods if it pertains to good that are purchase money collateral
1. Goods securing a PMO that a debtor incurs to purchase the goods are called Purchase-money collateral
2. A debtor incurs a PMO if the obligation is incurred (1) as all of part of the price of the collateral OR (2) for value given to enable the debtor to acquire rights in or the use of the collateral if the value is in fact so used
- To qualify as a PMSI, the 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
Attachment
- a process by which security interest is created by a contract b/w debtor and secured party
- Once the SI has attached, the SP has all the enforcement rights including repossess
Security Interest (SI)
Attaches when;
(1) SP gives value
(2) Debtor has rights in collateral
(3) Debtor authenticated Security agreement sufficiently describes collateral
After-acquired Collateral (AAC)
Rule; SI attach to AAC if agreement says it includes AAC
Exceptions; (1) SA specifying interest in inventory or accounts receivable creates interest in AAC even if not named OR (2) SA cannot provide THST it covers AAC unless debtor acquired rights in consumer goods w/in 10 days of SP given value
Future Advances (FA)
A SA may provide collateral secures FA ie under a revolving credit agreement
