Secured Transactions

Question 1

Article 9

Answer 1

Article 9 applies to all security interests in personal property or fixtures by contract. The words “security interest” do not have to be specifically stated for one to exist.

Question 2

Consumer Goods

Answer 2

Goods that are bought for use primarily for personal, family, or household purposes

Question 3

Inventory

Answer 3

Goods, other than farm products, that are held by a person for sale or lease to be furnished under a contract of service, or raw materials

Question 4

Equipment

Answer 4

Goods, other than inventory, farm products, or consumer goods

Question 5

Farm Products

Answer 5

Crops, livestock, and supplies that are used in or associated with farming operations

Question 6

Attachment

Answer 6

Attachment requires: value being given by the secured party to the debtor, the debtor must have rights in the collateral, and there must be a binding security agreement which requires authentication, intent, and a description of the collateral.

Question 7

Perfection

Answer 7

Perfection can occur by filing a finance statement, automatically, by possession, or by control.

Question 8

Buyer in the Ordinary Course of Business

Answer 8

A buyer in the ordinary course of business generally takes free of any security interest created by the buyer’s seller even if they know about it but don’t know it would violate a security agreement

Question 9

Buyer Not in the Ordinary Course of Business

Answer 9

A buyer not in the ordinary course of business takes collateral subject to a perfected interest.

Question 10

Default

Answer 10

If a default occurs, the lender can demand payment or use self-help the reclaim the goods as long as it doesn’t breach the peace

Question 11

Purchase Money Security Interest

Answer 11

A PMSI is created when a creditor sells goods to a debtor on credit and takes a security interest in in the goods purchased or a creditor advances funds that are used by the debtor to purchase goods.

Question 12

Competing Security Interests-Perfected

Answer 12

When two perfected security interests are competing, the first secured party to file or perfect has priority

Question 13

Original Use Test for Collateral

Answer 13

Under the original use test, the debtors original intended use of collateral governs the collaterals classification

Question 14

Accessions

Answer 14

Accessions are goods that are physically united with other goods in such a manner that the identity of the original goods is not lost. A security interest in the whole has priority over a security interest in the accession

Question 15

PMSI Priority

Answer 15

A PMSI has priority over other security interests if the PMSI is perfected when the debtor receives possession of the goods or within 20 days

Question 16

Perfection - Deposit Account

Answer 16

A security interest in a non consumer deposit account is perfected by control. Control is automatically had by the bank maintaining the account, but can also be gained by putting the account in the second party’s name or agreeing in an authenticated record that the bank will comply.

Question 17

Financing Statement Requirements

Answer 17

A financing statement must list the name and address of the debtor, the name and address of the secured party, and a description of the collateral. Minor errors don’t render it ineffective

Question 18

Competing Interest- Judicial Lien

Answer 18

A perfected interest has in collateral trumps a judicial lien

Question 19

Redemption

Answer 19

Article 9 provides that a debtor has the right to redeem collateral after default. It can only be waived after the default has occurred, not before.