Secured Transactions Flashcards
Value may be given:
Definition of value in ST
i) By providing consideration sufficient to support a simple contract;
ii) By extending credit, either immediately or under a binding commitment to do so (the debtor need not draw upon the credit);
iii) By, as a buyer, accepting delivery under a preexisting contract, thereby converting a contingent obligation into a fixed obligation; or
iv) In satisfaction of, or as security for, part or all of a preexisting claim.
UCC § 1-204.
Attachment
i) Value has been given by the secured party;
ii) The debtor has rights in the collateral; and
iii) The debtor has authenticated a security agreement that describes the collateral, or the secured party has possession or control of the collateral pursuant to a security agreement.
Perfection is obtained by:
a) Filing a financing statement with the Secretary
of State (must identify the collateral and security
interest); OR
b) Taking possession or control of the collateral.
Priority of Interests
Perfected Interest vs. Unperfected Interest →
Perfected interest has priority over a conflicting
unperfected interest.
Priority of Interests
Unperfected Interest vs. Unperfected Interest
→ The first creditor to attach will prevail.
Priority of Interests
Perfect Interest vs. Perfected Interest →
Rule of “first in time, first in right” controls – first creditor to perfect has priority.
Priority of Interests
PMSI vs. Perfected/Unperfected Interest →
A PMSI in consumer goods enjoys automatic perfection, so it has priority.
− PMSI’s in non-consumer goods require filing a
financing statement to be perfected → so apply
the appropriate priority rule above (depending if
the interest was perfected or unperfected).
Article 9 of the UCC Governs Secured Transactions
• Article 9 of the Uniform Commercial Code (UCC) governs any transaction regardless of its form that creates a security interest, including security interests in personal property, consignments, a sale of accounts, chattel paper, and promissory notes.
“Equipment” consists of
goods other than inventory, farm products, or consumer goods.
An “account” is a right to payment of a monetary obligation (whether or not earned by performance) for any of the following:
(1) property that has been or is to be sold,
leased, or otherwise disposed of;
(2) services rendered;
(3) a policy of insurance issued;
(4) a secondary obligation incurred;
(5) energy provided;
(6) the use or hire of a vessel under a charter or other contract;
(7) a debt arising out of the use of a credit card; OR
(8) winnings in a lottery or other game of chance sponsored by a State.
“Inventory” means goods that:
(a) are leased by a person as lessor;
(b) are held by a person for sale/lease or to be given under a contract of service;
(c) are given by a person under a contract of service; OR
(d) consist of raw materials, work in process, or materials used or consumed in a business.
Inventory DOES NOT include farm products or
goods that are only being held for repair.
