Secured Transactions

Question 1

bright line test

Answer 1

(i) can’t be terminated early
(ii) one of these “weird” options / situations is going on:
— e.g., buying for low value @ end of lease
— option to renew lease for low add’l consideration
— bound to renew lease for remaining life of good for no add’l consideration
— term of lease > remaining life of good

ASK: “does the lessor get something of value back at the end of the lease?” If not, likely a secured transaction

Question 2

consignment rules

Answer 2

(i) consignor > > > merchant
(ii) merchant not known to sell others’ goods
(iii) $1,000+ in each delivery
(iv) goods are not consumer goods immediately before

Question 3

attachment of security interest

Answer 3

attachment is a security interest that is enforceable against the debtor

Attachment occurs when:
(i) secured party gives value
(ii) debtor has rights in the collateral
(iii) authenticated security agreement or secured party has possession or control of collateral pursuant to a security agreement

Question 4

buyer in the ordinary course of business

Answer 4

(i) buyer buys goods
(ii) in the ordinary course of business
(iii) from a merchant who is in the business of selling goods of that kind
(iv) in good faith
(v) without knowledge that the sale violates the rights of another

Question 5

consumer buyer / “garage sale” rule

Answer 5

(i) buys consumer goods for value
(ii) for his own personal, family, or household use
(iii) from a consumer seller
(iv) without knowledge of the security interest

Question 6

types of collateral

Answer 6

Types of collateral are FACIE.

Farm goods
Accounts
Consumer goods
Inventory
Equipment

Question 7

security agreement

Answer 7

— words granting security interest
— description that reasonably identifies collateral
— signed / marked or otherwise authenticated

Question 8

PMSI – perfection rules

Answer 8

PMSI consumer goods = perfects automatically / priority automatically

PMSI equipment (& other) = priority if perfected w/in 20 days of debtor’s possession

PMSI inventory / livestock = priority if perfected by the time debtor gets possession + authenticated notification to other secured parties

Question 9

perfection

Answer 9

perfection of a security interest is generally necessary for the secured party to have rights in the collateral that are superior to any rights claimed by third parties

a security interest is perfected upon attachment of that interest and compliance with one of the methods of perfection (such as filing a financing statement)

Question 10

what must a financing statement contain?

Answer 10

a financing statement must contain:
(i) names of both parties (debtor & secured party)
(ii) general description of collateral