secured transactions Flashcards

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1
Q

how to start each essay-what article 9 covers

A

Article 9 of the UCC governs any transaction regardless of its form the creates a security interest. This includes a security interest in both tangible and intangible property

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2
Q

types of tangible collateral

A

Fixtures
computer software
consumer goods
equipment
Inventory
Farm products (NOT farm equipment)

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3
Q

Types of intangible collateral

A

Accounts receivable
Deposit accounts (bank accounts)
Investments
Chattel paper

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4
Q

What is required to create a security interest

A

Attachment

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5
Q

What is required for the security interest to attach to an item of collateral

A
  1. Value - money loaned
  2. Rights- debtor must have rights/own in the collateral
  3. Security interest - security agreement
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6
Q

what does a security agreement need to include

A

AID
A- authentication- signed or electronically signed
I- intent
D- description of collateral- must be specific
“all cars” is ok but not “all assets”

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7
Q

What is perfection

A

Once you have a security interest attached, the rights are established. Perfection determines when the secured party will have priority over 3rd parties

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8
Q

What must you do to perfect

A
  1. File a FINANCING STATEMENT or
  2. Automatic perfection in PMSI- consumer goods
  3. take POSSESSION
  4. take CONTROL - of bank accounts
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9
Q

what is a PMSI

A

purchase money security interest- exists only for two types of collateral- GOODS (including fixtures) and computer software.

typically occurs when debtor buys consumer good on credit.

Automatically perfected on attachment

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10
Q

what if a consumer buys a stereo or item from a store and that item has a secured credit attached to it?

A

A buyer in the ordinary course of business takes the item free of a security interest. A BOCB is a person who:

  1. Buys goods in the ordinary course of business in good faith
  2. from a merchant who is IN THE BUSINESS OF SELLING GOODS OF THAT KIND
    3.THE BUYER HAS NO KNOWLEDGE THAT THE SALE VIOLATES THE RIGHTS OF ANOTHER IN THE SAME GOODS>

IT does not matter if the security interest was perfected or not.

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11
Q

If a buyer in the ordinary course of business takes an item free of a security interest under the BOCB exception and then SELLS it to a 3rd party, does an interest pass along to the 3rd party?

A

No. That buyer takes free of a security interest also

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12
Q

what is the garage sale rule

A

A consumer buyer will take an item free of security interest even if perfected if the consumer buyer is
1) buying consumer goods for value
2) for own personal use
3) from a non- merchant/”consumer” seller/ordinary person not in business of selling those items
4) w/o knowledge of the security interest

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13
Q

What is the exception to the garage sale rule

A

If before purchase the secured party filed a financing statement cover the consumer goods (even though they were PMSI and automatically perfected) then the consumer buyer can NOT buy them free of the security interest.

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14
Q

If something is a LEASE- is it a security interest and when does it qualify as a security interest

Think RENT TO OWN

A

A transaction in the form of a lease is treated as a security interest if the lessee must pay consideration to the lessor for the right to possess and use the goods for the term of the lease,

the payment obligation cannot be terminated by the lessee

and the lessee has an option to become the owner of the goods upon completion of the lease agreement.

Here, what the parties refer to as a lease is equivalent to a secured sale transaction because Decorator will have purchased the vacuum after making the “lease” payments.

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15
Q

When you see goods SOLD of any kind- remember….

A

PMSI

PMSI has automatic perfection and takes priority over other security interests in the same goods

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16
Q

Is an oral security agreement ok?

A

Only if the lender has possession or control of the item in addition to the oral security agreement

17
Q

Can a lender sell an item they have possession and a security agreement in when the debtor defaults

A

yes, but they need to give notice to debtor (at least 10 days) unless the item is perishable or could speedily decrease in value

18
Q

what can you do if collateral is equipment and the borrower defaults

A

ollowing a debtor’s default, if the collateral is “equipment,” a secured party may leave the equipment in place and render it unusable if you can do so without breach of the peace

19
Q

prior for a security interest in fixtures

A

A security interest in fixtures even if perfected, is ordinarily subordinate to a conflicting interest of a security interest. of the related real property,”

20
Q

How is priority determined

A

The first to FILE OR PERFECT has priority

21
Q

idiot thing not to forget… in battle as to who has priority, if consumer goods are at all involved… (look for goods bought on credit as a tip)

A

PMSI perfected in consumer goods trumps all else.

22
Q

If a person who has security interest on their consumer goods GIVES that consumer good to a friend, does security interest stay attached

A

Yes bc given- not a buyer. Did not give value for consumer good