secured transactions Flashcards
lease v. security interest
courts look at economic reality to determine if a lease is actually a security interest
lease will be security interest if
1. commitment to make payments for a term exists AND
2. either: OG term is equal to or greater than the remaining economic life of goods,
lessee must renew the lease for the remaining economic life of the goods or is forced to take ownership,
lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or
lessee has the option to become the owner of the goods for no additional consideration
collateral: farm products
crops or livestock or supplies used or produced in farming operations or products of crops or livestock in their unmanufactured states if they are in possession of someone engaged in farming operations
types of collateral: account
a right to payment of monetary obligation whether or not earned by performance
includes property that has been or is to be sold, leased, disposed of services rendered policy of insurance secondary obligation incurred energy provided use or hire of vessel under charter or contract credit card debt lottery winnings
types of collateral: deposit account
a demand, time, savings, or similar account maintained with bank (can only be perfected by control)
does not include investment property or accounts evidenced by instrument
types of collateral: inventory
goods that are leased, held for sale or lease or to be given under k of service, given under k of service, or consisting of raw materials, working process, or materials used/consumed in business
does not include farm products or goods held only for repair
types of collateral: equipment
goods other than inventory, farm products, or consumer goods
this is catchall category for “goods”
goods = all things moveable when the security interest attaches
certificate of title statute: some states require that security interest in car be noted on the title in order to be perfected
types of collateral: instrument
pieces of paper representing the right to be paid money, like promissory note, drafts, and certificates for deposit
types of collateral: consumer goods
goods purchased primarily for personal, family, or household purposes
types of collateral: proceeds
the following types of property:
acquired upon sale, lease, or other disposition of collateral
collected/distributed on account of collateral
rights arising out of collateral
claims arising out of loss, nonconformity, defect, or interference with the use of collateral or
insurance payable by loss of collateral
check in exchange for collateral is cash proceeds
types of collateral: chattel paper
a record that evidences a monetary obligations and a security interest in specific goods
collateral types: accounts
right to payment for goods sold or services rendered
note: contract obligations arising from loan is not an account it is a general intangible
collateral types: deposit account
an account maintained at a bank
only applies to nonconsumer deposit account
collateral type: investment property
includes items such as stock, bonds, mutual funds, and brokerage funds
types of collateral: general intangibles
any personal property not coming within other definitions - trademark, copyrights, etc.
also includes monetary obligations
this is the catchall for intangible things
attachment and perfection
enforcing a security interest depends on two factors:
- attachment = secures the creditor’s rights in the collateral, making it enforceable (security interest has been created) attachment gives creditor rights against debtor
- perfection = gives notice of the creditors rights in collateral (determines priority of interests) gives creditor rights against the world/other creditors
security interest cannot be perfected unless it is first attached
requirements of attachment
creditor extend value to debtor
debtor have rights in the collateral AND
security agreement (must be authenticated, or can be oral if collateral is in possession of creditor -i.e., pledge)
requirements for security agreement in writing
- evidenced by a record: agreement must be evidenced by record and must show an intent to create a security interest
- agreement must be authenticated by debtor - aka signed by debtor
- description of collateral - reasonably identifiable
requirements of perfection
obtained by filing a financing statement with the secretary of state or taking possession or control of the collateral