Secured Transaction Cliff Notes

Question 1

Application of Article 9

Answer 1

All security interests in personal property or fixtures by contract

“Lease agreements” that are not “true leases”

Consignments as defined by Article 9

Sales of payment intangibles, promissory notes, accounts receivable, chattel paper, instruments

Health insurance receivables

Commercial tort claims

Question 2

Four types of goods

Answer 2

1. Consumer goods
2. Inventory
3. Farm products
4. Equipment

Question 3

Consumer Goods

Answer 3

Goods used or bought for use primarily for personal, family, or household purposes

Question 4

Inventory

Answer 4

Goods, other than farm products,

• that are held by a person for sale or lease or
• to be furnished under a contract of service; or
• raw materials or
• work in process or
• materials used or consumed in a business (computers sold by computer store)

Question 5

Equipment

leftovers

Answer 5

Goods other than inventory, farm products, or consumer goods

Question 6

Farm products

Answer 6

• Crops
• livestock
• supplies used/produced in a farming operation or
• products of crops or livestock in their unmanufactured state

that are in possession of debtor who is engaged in a farming operation.

Question 7

General Intangibles and intangibles

Answer 7

Accounts and chattel paper

rarely been tested on MEE until probably February 2025 knowing my luck

Question 8

Attachment

Answer 8

how the security interest “attaches” to the collateral.

Attachment makes the security agreement binding as between the secured party and the debtor.

If attachment doesn’t happen, the secured party won’t have an enforceable security interest.

Question 9

Requirements for Attachment

three

Answer 9

Value must be given by the secured party to the debtor

Debtor must have rights in the collateral, and

must be a binding security agreement which includes

1. authentication by the debtor
2. intent to create a security agreement, and
3. a description of the collateral

Question 10

Perfection

Answer 10

Is an issue only when there is more than one secured party competing for a single piece of collateral.

Attachment is requried for SP to have a SI in the collateral.

If question asks if a party has a SECURED INTEREST—-DISCUSS ATTACHMENT

If question asks who has PRIORITY IN A PIECE OF COLLATERAL—DISCUSS PERFECTION

Question 11

Four ways to Perfect

Answer 11

• Filing
• Automatic perfection
• Possession
• Control

Question 12

Perfection by filing

Answer 12

Perfection by filing takes place when the secured party files a financing statement with the secretary of state where the debtor is located.

Financing statement should include:

1. Debtor’s name
2. Description of collateral
3. Secured Party’s Name

Question 13

Automatic Perfection

Answer 13

There is automatic perfection for purchase money security interests in consumer goods (PMSI in consumer goods)

Note: temporary automatic perfection is available in some instances as well.

Question 14

Perfection by Possession

Answer 14

Perfection can take place by possession for tangible, negotiable documents, goods, instruments, money, or tangible chattel.

The secured party is only perfected so long as the item is possessed
(unless the 20 day rule applies)

Question 15

Perfection by Control

Answer 15

Security interests in investment property, deposit accounts, and electronic chattel paper may be perfected by control.

Deposit accounts MUST be perfected by control.

Question 16

What to do to perfect

Answer 16

1. Make sure attachment has happened
2. Classify the collateral
3. Determine whether you need to perfect under Article 9 or some other way (i.e., real estate recording statutes, etc)
4. Determine what you need to do to perfect your interest using analysis.

Question 17

First to File or Perfect

Answer 17

When 2 secured parties have a security interest in the same collateral, the first to file or perfect has priority.

If NO PARTY PERFECTS, then the first to attach has priority.

Question 18

Secured party

Answer 18

The entity loaning money to the debtor in exchange for a security interest in the debtor’s collateral

Question 19

Debtor

Answer 19

The entity borrowing money from the secured party in exchange for a security interest in the debtor’s collateral

Question 20

Collateral

Answer 20

A piece of property that the debtor offers to the secured party to create a security interest

Question 21

Attachment

Answer 21

For the secured party to have a security interest in the collateral, there must be attachment of the security agreement to the collateral.

**Attachment **requires three things:

(1) value must be given by the secured party,
(2) the debtor must have rights in the collateral, and
(3) there must be a binding security agreement between the parties.

Additionally, a binding security agreement has three requirements:

(1) authentication by the debtor,
(2) and intent to create a security agreement, and
(3) a description of the collateral.

In discussing attachment on the MEE, you want to include all these elements!

Question 22

Perfection

Answer 22

Perfection is giving notice to others of the secured party’s security interest in the collateral.

Perfection is NOT REQUIRED to have a security interest, it just gives priority when more than one party has a security interest in the same collateral.

Question 23

Default

Answer 23

Default happens when the debtor doesn’t make the required payments to the secured party (or lender).

The lender has a statutory right to repossess the collateral pursuant to the judicial process or via self-help **so long as the lender does not breach the peace. **

Question 24

Fixture

Answer 24

A fixture is a good that has become so related to a particular real property that an interest in the good arises under real property law.

Perfection in a fixture requires a fixture filing.

Question 25

Fixture Filing Requirements

Answer 25

1. Names of debtor and secured party 2. Indicate that it covers the fixtures 3. Description of the real property 4. State it should be filed in the filing office's REAL PROPERTY RECORDS 5. Name of the real property's record owner if the debtor has no interest in the property

Question 26

PMSI

Answer 26

A purchase-money security interest (PMSI) arises when the goods for which the loan is extended to the debtor is the collateral for the security interest. The general rule is that a PMSI takes priority over a conflicting, perfected security interest in the same goods.

Question 27

Creating a PMSI

Answer 27

A PMSI arises when: * the debtor buys collateral from a seller who retains a security interest in the goods OR * the debtor borrows money from a lender who advances funds for the buyer to purchase the collateral.

Question 28

Proceeds

Answer 28

Whatever is received upon the sale, lease, license, exchange, or other disposition of collateral. In general, a security interest in proceeds remains automatically perfected for 20 days if the security interest in the collateral was perfected.

Question 29

Proceeds That Remain Automatically Perfected After 20 Days

Answer 29

An automatically perfected security interest in proceeds must be perfected after 20 days UNLESS: The proceeds are **IDENTIFIABLE CASH PROCEEDS** The proceeds are of the **SAME TYPE as the original collateral** OR A financing statement covers the original collateral, a financing statement for the proceeds would be perfected by filing in the same office, and the proceeds are not acquired with cash proceeds.