Secured Transactions Flashcards
What is required for attachment?
(i) parties agree to create a security interest (by possession, control, or authenticated security agreement), (ii) creditor gives value, (iii) and debtor has rights in the collateral
What is required for an authenticated security agreement?
(i) evidenced by a record and must show an intent to create a security interest; (ii) signed by the debtor (any symbol with intent to authenticate; and (iii) description that reasonably identifies collateral (no supergeneric)
types of goods
consumer goods, equipment, farm products, and inventory
definition of consumer goods
goods used or bought primarily for personal, family, or household use
definition of equipment
goods used or bought for use in a business
OR
good that is not consumer goods, inventory, or farm products
definition of 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 the possession of a debtor engaged in farming operations
definition of inventory
goods held for sale or lease, goods that are to
be furnished under service contracts, and materials used
or consumed in a business in a short period of time
types of intangible collateral
instruments, documents, chattel paper, investment property, accounts, deposit accounts, commercial tort claims, and general intangibles
What is a future advances provision?
When a security agreement provides that the collateral will serve as security for both the present obligation and advances the creditor makes to the debtor in the future
What is an after-acquired property provision, and what is its effect?
An explicit clause in a security agreement providing that the security interest reaches not only collateral the debtor has rights in at the time of the agreement, but also to after-acquired property. The security interest will attach to the property when the debtor acquires an interest in it.
Exceptions:
-no provision necessary when collateral is a type that is rapidly depleted and replenished or identifiable proceeds of collateral
-provision doesn’t apply to consumer goods unless acquired within 10 days of creditor giving value
what are “identifiable” proceeds?
proceeds that can be traced back to the original collateral
What is the lowest intermediate balance rule?
In the case of commingled cash proceeds, you look at the bank account starting when proceeds are deposited and ending at the time you are applying the rule. The lowest balance (can’t exceed proceeds amount deposited) during that time period is the secured party’s identifiable proceeds.
What are the methods of perfection?
(1) filing; (2) possession; (3) control; (4) automatic perfection; and (5) temporary perfection
What is required for perfection?
(1) attachment and (2) one of the five methods of perfection
definition of PMSI
security interest that arises:
(1) when the secured party sells goods to the debtor on credit and retains a security interest in the goods sold; OR
(2) when the creditor loans funds to the debtor to enable the debtor to buy specific collateral, debtor uses those funds to acquire specific collateral, and creditor takes security interest in that collateral
When does automatic perfection apply, and what is the exception?
PMSI in consumer goods
Exception: security interest in motor vehicles can be perfected only by notation on the vehicle’s certificate of title (Exception exception: when debtor is dealer holding vehicles in inventory for sale or lease - then filing)
What interests can only be perfected by control?
money and nonconsumer deposit accounts
What are the methods of obtaining control of a nonconsumer deposit account?
(1) the bank in which a nonconsumer deposit account is maintained automatically has control over the deposit account;
(2) putting the deposit account in the secured party’s name; or
(3) agreeing in an authenticated record with the debtor and
the bank in which the deposit account is maintained that
the bank will comply with the secured party’s orders
regarding the deposit account without requiring the debtor’s consennt
What are the requirements for a financing statement?
(i) debtor’s name and mailing address; (ii) secured party’s name and mailing address; and (iii) a description that reasonably identifies collateral (can use supergenerics)
*Debtor must also authorize filing (in any signed writing or automatically if debtor authenticates the financing statement or security agreement covering same collateral)
