Secured Transactions Flashcards
UCC Article 9 applies to
any transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract
A security interest arises when
a party (the debtor) uses property as collateral to secure repayment of funds to another party (the secured party)
A security interest is
a creditor’s interest in personal property or fixtures (collateral)
What are the categories of collateral?
- goods
- tangible intangibles
- intangible intangibles
- investment property
Under Article 9
What are goods?
all things that are movable at the time the security interest attaches
Collateral refers to the property in which a security interest is created, and it extends to
all identifiable proceeds from the property that serves as collateral
Under Article 9,
What are the different categories of goods?
- consumer goods
- inventory
- farm products
- equipment
Under Article 9,
What are consumer goods?
goods bought mainly for personal, family, and household use
Under Article 9,
What is 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
includes consumable office supplies
Under Article 9,
What is equipment?
goods other than inventory, farm products, or consumer goods that are used or bought for use in business
Under Article 9,
What are 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 a farmer
What are tangible intangibles?
- Documents of Title - represent right to receive goods (bill of lading, warehouse receipt)
- Chattel Paper
- Negotiable Instruments - pieces of paper representing the right to be paid money (promissory notes, checks, etc.)
Under Article 9,
What is chattel paper?
a record or records evidencing a monetary obligation and a security interest in, or lease of specific goods
What are intangible intangibles?
- Accounts
- Commercial tort claims
- General intangibles
A security interest is not enforceable against a debtor unless it has
attached
What are the requirements for attachment?
- agreement to create a security interest
- value given by creditor to debtor
- debtor possesses rights in collateral
How is an agreement to create a security interest evidenced?
- creditor taking possession of the collateral
- creditor takling control over nonconsumer deposit accounts, electronic chattel paper, or investment property
- an authenticated security agreement
What are the requirements for an authenticated security agreement?
- in writing
- contain a granting clause (intent to create the security interest)
- reasonable description of collateral
- signed by the debtor
What is the rule about After-Acquired Property?
If there is an explicit after-acquired property clause in the security agreement, the security interest attaches to newly acquired property as soon as the debtor acquires interest in it
Even without an after-acquired property clause, a security interest will attach automatically to
collateral that’s rapidly depleted and replenished such as accounts and inventory; and to identifiable proceeds of collateral
An after-acquired property clause does not apply to consumer goods unless
the debtor acquires rights in the goods within 10 days after the creditor gives value
Does after-acquired property clauses apply to commercial tort claims
No
Under Article 9,
What are proceeds?
Anything acquired upon the sale, lease, exchange, or other disposition of collateral, or proceeds of original collateral
Proceeds must be identifiable. What does it mean to be “identifiable”?
the proceeds can be traced back to the original collateral
As related to commingled cash proceeds,
What does the Lowest Intermediate Balance Rule mean?
a method for tracing identifiable cash proceeds where you look at the bank account starting at the time the proceeds are deposited and ending at the time you are applying the rule. The lowest balance during that time period is the secured party’s identifiable proceeds (the amount cannot exceed the value of the cash proceeds originally deposited)
What is a conmingled good?
a collateral that loses its identity when physically united with other goods so the security interest attaches to the product that results
What is an accession?
collateral that does not lose its identity when physically united with other goods.
Under Article 9
What is perfection?
gives notice of secured party’s right in collateral to third parties who may have claims to the same
What are the requirements for perfection?
- Attachment; and
- one of the following:
- Automatic;
- Filing a finance statement;
- Possession of Collateral;
- Control of Collateral; or
- Temporary Perfection
A PMSI in consumer goods is perfected
as soon as it attaches
A security interest in motor vehicles is perfected only by
notation on the vehicle’s certificate of title
A PMSI in fixtures has priority over an encumbrancer of the real estate only if
The PMSI holder files a fixture filing
Taking possession can simultaneosly satisfy the requirements for
attachment and perfection
What type of collateral can be perfected by control?
investment property, noncomsumer deposit accounts, and electronic chattel paper
How can a secured party take control over a nonconsumer deposit account?
- automatically if the bank maintains it;
- putting the deposit account in the secured party’s name;
- control agreement between, bank, debtor, and secured party
For perfection,
A financing statement must contain
- the debtor’s name and address
- the secured party’s name and address
- a description of the collateral
A security interest may be perfected by filing a financing statement as to all kinds of collateral except
deposit accounts and money
As to indexing financing statements,
What name should be given if the debtor is
1. an individual
2. a corporation
3. partnership
- individual’s name on the unexpired license or ID issued by the state of Virginia
- corporate name that matches most recent public organic record
- partnership name
A financing statement is not seriously misleading if
it would be discovered in a filing office search under the debtor’s correct name, using the filing office’s standard search logic
If the debtor’s name as indicated on a filed financing statement becomes insufficient and thus seriously misleading, the financing statement is effective only against collateral
acquired by the debtor before the name change and within 4 months after.
A financing statement is valid for
5 years
A continuation statement can only be filed within how many months before the lapse of the filed financing statement?
6
Is the debtor required to authorize a continuation statement?
No, the secured party may authorize it.
If a secured party has a perfected security interest in collateral, the secured party automatically has a perfected security interest in any proceeds of that collateral for
20 days after receipt of the proceeds
The automatic security interest in proceeds will continue to be perfected beyond 20 days if
- proceeds are indentifiable cash proceeds
- security interest in the original collateral was perfected by filing a financing statement, a security interest in the type of collateral constituting the proceeds would be filed in the same place as the financing statement of the original collateral, and the proceeds were not purchased with cash proceeds of the collateral; or
- the security interest in the proceeds is perfected within the 20 day period
