SECURED TRANS Flashcards
What is a secured transaction?
A transaction intended to create a security interest in personal property or fixtures.
Generally involves a sale on credit or a loan where the seller or lender obtains a lien on the debtor’s property.
Which law governs secured transactions?
Article 9 of the UCC governs any transaction that creates a security interest.
Includes security interests in personal property, consignments, sale of accounts, chattel paper, and promissory notes.
What is the scope of Article 9?
Article 9 applies to all security interests in personal property or fixtures by contract, lease agreements that are not true leases, and consignments as defined by A9.
Substance over form controls as to whether a security interest was created.
How do courts determine if a lease is actually a security interest?
Courts will look at economic reality to determine if a lease is actually a security interest.
A lease will be deemed a security interest if certain conditions regarding payments and terms exist.
What is intangible collateral?
Intangible collateral is property subject to a security interest that the secured party can repossess upon default.
Examples include accounts, chattel paper, investment property, deposit accounts, and general intangibles.
What are the types of goods classified under collateral?
Goods are classified as consumer goods, equipment, inventory, and farm products.
Each type has specific definitions based on usage and purpose.
What are the two steps to enforce a security interest under Article 9?
1) Attach the security interest to the collateral and 2) Perfect the security interest.
What is required for attachment of a security interest?
Attachment requires: 1) Creditor extends value to the debtor, 2) Debtor has rights in the collateral, and 3) There is a binding security agreement.
The agreement must include authentication, intent, and a description of the collateral.
What is perfection of a security interest?
Perfection gives notice of a creditor’s rights in collateral and determines priority.
Perfection can occur by filing a financing statement, automatic perfection, or possession.
What must an effective financing statement include?
An effective financing statement must identify the debtor and creditor, describe the collateral, and be filed by a person authorized by the debtor.
What is a Purchase-Money Security Interest (PMSI)?
A PMSI secures a debt incurred to enable the debtor to acquire rights in or the use of the collateral.
It arises when the lender loans money specifically for the purchase of certain goods.
What happens to a security interest after the sale of collateral?
The security interest continues despite the sale, lease, or disposition of the collateral unless the secured party agrees otherwise.
What is after-acquired property?
After-acquired property refers to collateral that may be included in a security agreement except for commercial tort claims and consumer goods.
What is a consignment?
A consignment is a transaction where goods are delivered to a merchant for sale under specific conditions.
It is treated the same as a PMSI.
What rights does a secured party have after default?
A secured party may take possession of collateral and dispose of it in a commercially reasonable manner.
What is required for a commercially reasonable sale?
The sale must be conducted in a commercially reasonable way, and the debtor must receive written notification of the sale.
What is the right to redeem collateral?
The debtor can redeem collateral by paying everything due before the secured party has disposed of it.
What remedies are available if a secured party fails to comply with UCC requirements?
Remedies include damages, court-ordered sale, or rebuttable presumption regarding the value of the collateral.
What is the priority of perfected interests over unperfected interests?
Perfected interests have priority over unperfected interests, and among unperfected interests, the first to attach prevails.
What is the shelter principle?
If a buyer acquires property free of a security interest, then a subsequent transfer is also free of the security interest.
What is the significance of judgment liens?
Judgment lien creditors have priority over conflicting security interests only if they became a lien creditor before the security interest was perfected.
What rights does a secured party have regarding fixtures?
An ownership interest in real property has priority over conflicting security interests in fixtures, except in certain conditions.
