Secured Transactions

Question 1

If Q asks whether Article 9 applies answer is usually?

Answer 1

YES - even if the parties do not call the action a “security interest”

Question 2

Classification of Goods 4 Types

Answer 2

CONSUMER

INVENTORY

EQUIPMENT

FARM STOCK

Question 3

Consumer Goods

Answer 3

used for personal, family or household purposes (computer in the hands of a consumer)

Question 4

Inventory

Answer 4

goods other than farm products that are held by a person for sale or lease to be furnished under a K of service; or raw material used or consumed in business (computers sold by a store)

Question 5

Equipment

Answer 5

computer used in business

Question 6

When does attachment occur?

Answer 6

(1) VALUE must be given by the secured party to the debtor (loan)
(2) debtor must have RIGHTS in the collateral; and
(3) BINDING SECURITY AGREEMENT which requires AID

Question 7

Binding Security Agreement AID

Answer 7

Authentication, Intent to create a security agreement, and a description of the collateral

*** can cover after-acquired property and does not need to specifically reference to be effective

Question 8

Methods of Perfection

Answer 8

Filing a financing statement and automatic perfection (PMSI in consumer goods) or by possession or control

Question 9

When 2 secured parties have an interest in the same to collateral, who has priority?

Answer 9

first to Perfect

if not perfect then first to attach has priority

Question 10

Unperfected PMSI is always beat by

Answer 10

a perfected interest in collateral

Question 11

Debtor Sells Collateral subject to a security interest

Answer 11

buyer in ordinary course of business, does not take subject to security interest BUT

buyer not in ordinary course of business ordinary does (unless interest was not perfected and he does not know about it)

Question 12

Consumer Goods (garage sale exception)

Answer 12

buyer in ordinary course of business takes FREE of security interest even if perfected if he buys without knowledge for consumer goods purpose

unless prior there has been a financing statemebt

Question 13

Lien Creditor

Answer 13

priority belongs to secured party, provided it perfects before the lien arises

if the interest was unsecured, then the lien creditor has priority

Question 14

How to foreclose on collateral

Answer 14

Default occurs, lender can demand payment or use self-help to reclaim goods so long as he does not BREACH THE PEACE

Resale

Question 15

Resale

Answer 15

secured party may sell or dispose of the collateral in a commercially reasonable way

security interest is discharged when this occurs but debtor liable for any deficiency

obligation owed to any junior liens is paid off (SENIOR LIENS REMAIN ON COLLATERAL)

Question 16

Debtor’s defenses

Answer 16

Sale must be comercially reasonable

debtor must recieve written notdification of. the sale debtor and perfected security parties must know when the chance to redeem collateral is going to pass

Question 17

Timeliness of notification

Answer 17

10 days or more before sale

Question 18

Content of Notification

Answer 18

Consumer - notification must additionally contain a description of any liability for a deficiency, telephone number

Non-consumer - describe debtor and secured party and collateral, method of disposition, debtor liable for unpaid as well as charge for accounting

Question 19

Remedies if secured party fails to comply with notification requirements

Answer 19

Damages (including consequential, debtor has duty to mitigate) Goods = statutory damages awarded

Sale (court may order sale)

Question 20

Rebuttable Presumption

Answer 20

Non consumer if failure to comply then collateral worth the amount of the debt and debtor’s deficency is nothing

Consumer Transaction - absolute bar (creditor’s noncompliance bars ANY recovery of deficency)

Rebuttable Presumption (same as above)

Question 21

Debtor has a right to

Answer 21

redeem prior to disposition by paying everything DUE AND OWING to the creditor