Secured Transactions

Question 1

What are goods?

Answer 1

Movable tangible property

Question 2

What are rights to payment?

Answer 2

Instruments, chattel paper, accounts, payment intangibles

Question 3

What is attachment?

Answer 3

An arrangement linking a debt to collateral, upon attachment interest becomes enforceable.

Requires value given, the debtor to have rights, and either a security agreement or possession/control

Question 4

What are the requirements of a security agreement?

Answer 4

(1) in a record;
(2) containing a description of the collateral; and
(3) authenticated by the debtor

*no supergeneric descriptions
**in some cases, possession/control may suffice

Question 5

Accessions are?

Answer 5

Goods that are united with another good but are identifiable. The security interest continuous in the accession.

Question 6

Commingled goods are?

Answer 6

A good that is united but the identity of the good is lost. The security interest transfers to the larger good.

Question 7

Proceeds are?

Answer 7

Whatever is exchanged for the collateral. The security interest in the collateral attaches to the proceeds automatically.

Question 8

Perfection can occur by?

Answer 8

Filing, possession/control, automatic perfection, or alternate perfection systems (like for car registration)

Question 9

Filing a financing statement can perfect all interests except those in?

Answer 9

Deposit accounts, cars, money, and letters of credit

Question 10

Where must a financing statement be filed to perfect an interest?

Answer 10

For everything except interests in real property, filing is in the central filing office where the DEBTOR is located. This is the state of incorporation for a corporation or the principal residence of individuals.

For real property interests, it is filed in the county where toe property is located.

Question 11

Financing statements require what information to perfect an interest?

Answer 11

The names of the parties, the description of the collateral and if it is for real property, name of the record owner and describe the property.

Question 12

What information is non essential to perfect but will cause the financing statement to be refused at the office?

Answer 12

Addresses of the parties and an indication of whether the debtor is an individual or a corporation.

Question 13

A mistake in a financing statement will only affect perfection if it is?

Answer 13

Seriously misleading.

Question 14

Financing statements lapse after ___ years but may be continued within ___ months before lapsing.

Answer 14

Five, Six.

Question 15

A security interest in money can only be perfected by?

Answer 15

Possession

Question 16

Interests in deposit accounts and letter of credit rights can only be perfected by?

Answer 16

Control

Question 17

A PMSI in ____ will automatically perfect.

Answer 17

Consumer goods.

Question 18

Priority between Perfected int v. perfected int? (Non-PMSI)

Answer 18

First in time to file OR perfect

Question 19

Priority between perfected v unperfected? (Non-PMSI)

Answer 19

Perfected wins

Question 20

Priority between two unperfected? (Non-PMSI)

Answer 20

first to attach or become effective

Question 21

Perfected v Lien creditor?

Answer 21

Perfected wins

Question 22

Unperfected v lien creditor?

Answer 22

Lien creditor wins unless the secured party has already filed a financing statement, the debtor has authenticated the security agreement, and the secured party hasnt given value yet.

Question 23

Sec int v statutory lien

Answer 23

Statutory lien wins if the lien 1) is effective based on possession of the goods, and the lien is for payment or performance of an obligation furnished in the ordinary course of business.

Question 24

Sec party v sec party over future advances?

Answer 24

First to file or perfect

Question 25

A buyer takes subject to a perfected security interest unless?

Answer 25

The secured party authorizes the sale is free and clear, the buyer is in the ordinary course of business, or it is a consumer to consumer buyer.

Question 26

What is a buyer in the ordinary course of business?

Answer 26

A buyer who buys goods from a merchant, in the ordinary course of that business, in good faith and without notice of the security interest.

Question 27

What is a consumer to consumer buyer?

Answer 27

Buyer buys consumer goods, for their own consumer use, froma consumer seller, without knowledge of the security interest. (This does not apply if there is a financing statement covering the goods).

Question 28

A buyer takes subject to an unperfected interest unless?

Answer 28

The buyer (1) gives value, (2) receives the collateral, and (3) does not know of the interest.

Question 29

PMSI v lien creditors

Answer 29

Same as usual, if perfected PMSI if unperfected lien creditors, but a 20 day grace period to perfect where the interest is considered perfected.

Question 30

PMSI v sec interests

Answer 30

PMSI in goods other than inventory take priority over all other interests no matter whne perfected if perfected within 20 days (otherwise its first in time to file or perfect).

Question 31

PMSI in inventory has priority over all other interests in that inventory when?

Answer 31

If the PMSI is perfected before delivery and the holder sends an authenticated notification to the other secured parties.

Question 32

PMSI v PMSI

Answer 32

Seller beats lender, otherwise apply the first to file or perfect rule.

Question 33

Are leases never governed by UCC art 9?

Answer 33

No, only true leases. Look to whether the “lease” is actually a secured transaction.

Question 34

How are proceeds distributed after disposition?

Answer 34

1) reasonable expenses for collection/enforcement, 2)pay the debt to the foreclosing party, 3)pay subordinate interest if there is a formal demand, 4) return the surplus to the debtor. Senior security interests survive in the collateral!.