Secured Transactions Flashcards
What is required for a security interest to attach
Debtor must
(1) have paid value
(2) have rights in the collateral
(3) there must be a security agreement describing the collateral or the creditor must have possession or control over the collateral
NOTE: A security interest attaches to the collateral as soon as the three requirements are satisfied, unless the parties expressly agree to postpone the time for attachment
What is a PMSI
A transaction in which a seller transfers property to a buyer and retains a security interest in that property as collateral is called a seller “purchase money security interest” (seller PMSI).
Creditor (Definition)
Creditor (secured party): party that extends value to a debtor in exchange for security interest in debtor’s collateral property
Debtor
Debtor: party with property right in the collateral, who made a security agreement with creditor
Obligor
Obligor: party under obligation to furnish money or services due (often also the debtor)
What is collateral
property subject to a security interest that a creditor can look to satisfy the debt
Types of Collateral
IIFFACE
I: Inventory
I: Intangibles / semi intangibles
F: Farm Products
F: Fixtures
A: Accessions
C: Consumer Goods
E: Equipment
Inventory
goods for sale or lease to others in the ordinary course of business, or raw materials, work in process, or materials used or consumed in business
Accessions
goods physically united with other goods while retaining separate identity (e.g., GPS unit installed in car)
Farm Products
goods used for or produced by farming operation, except uncut timber (includes growing/grown crops and born/unborn livestock)
Fixtures
goods that are attached to real property such that an interest in them arises under real property law (e.g., chandelier, sprinkler system, furnace)
Consumer Goods
goods used primarily for personal, family, household purposes
Equipment
goods (for business) other than consumer goods, inventory, farm products
Intangibles / Semi Intangibles
include intellectual property, financial instruments (e.g., stocks, bonds, cash proceeds), accounts (right to payment), promissory note / chattel paper (record of monetary obligation and security interest in or lease of specific goods)
A valid security interest requires?
A valid security interest in collateral against debtors requires (1) attachment to collateral, and (2) against others requires perfection of the interest
NOTE: Perfection cannot occur until all of the requirements for attachment have also been satisfied
Security Agreement
Debtor must authenticate a security agreement granting the creditor security interest in collateral + reasonably identify collateral (including any after-acquired property) EXCEPT for creditor in possesion