Secured Transactions

Question 1

a sale of accounts is governed by

Answer 1

ucc article 9 even tho its mot one in which prop secures an obligation

since article 9 governs a sale of accounts, 3 factors for security interest still apply

Question 2

under UCC §9-203(b) a security interest is enforceable if 3 criteria are satisfied

Answer 2

1) value has been given,

2) debtor had rights in the property, and

3) authenticated security agreement described the collateral + signed by debtor

Question 3

security interest attaches when

Answer 3

it becomes enforceable unless the time of attachment has been postponed by agreement

Question 4

an enforceable security interest becomes perfected when

Answer 4

it properly lists the debtor, indicates the collateral, and was filed in the appropriate filing office

or possession of the collateral by the secured party

Question 5

sufficient description of collateral (UCC §9-108(a))

Answer 5

• reasonably identifies what is described
• a description that identifies the collateral by category or by a type of collateral defined in the UCC reasonably identifies the collateral

Question 6

insufficient description of collateral

Answer 6

“all of debtor’s assets”

“all personal property owned by company”

dont reasonably ID the collateral

Question 7

Perfection through possession

Answer 7

perfected when secured party takes possession of the goods

Question 8

UCC § 9-309(1) - a security interest is automatically perfected upon attachment if

Answer 8

goods are “consumer goods” and,

the security interest is a purchase-money security interest.

Question 9

Security interest perfected before judgment creditor lien

Answer 9

a security interest is subordinate to the rights of a person who became a lien creditor before the security interest was perfected

Question 10

an unperfected security interest is subordinate to a judicial lien in

Answer 10

the same asset

Question 11

Unperfected security is subordinate to

Answer 11

a perfected security interest in the same property

Question 12

Priority of perfected security interest

Answer 12

Priority between competing perfected security interests is generally determined by the “first to file or perfect” rule

Question 13

unperfected vs. unperfected interest

Answer 13

first in time first in right controls

Question 14

A purchase-money security interest is an interest that

Answer 14

secures a debt that was incurred in order to enable the debtor to acquire rights in or the use of the collateral.

retained by the seller to secure buyer’s obligation to pay remainder of purchase price

PMSI in consumer goods perfects automatically

Question 15

purchase-money security interest in collateral has priority over a

Answer 15

competing non-purchase-money security interest (even if it was perfected before the purchase-money security interest) if the purchase-money interest was perfected when the purchaser received possession of the collateral or within 20 days thereafter

Question 16

equipment is defined under article 9 of UCC

Answer 16

referring to goods other than inventory, farm products, or consumer
goods that are used in the business but not inventory

goods = all things that are movable when a security interest attaches
and fixtures.

Question 17

consumer goods

Answer 17

are bought for use primarily for personal, family, or household purposes

Question 18

UCC § 9-406(a), an account debtor with respect to assigned accounts is entitled to discharge its obligation by

Answer 18

paying the assignor only until the account debtor receives notice of the assignment to the assignee, authenticated by either the assignor or the assignee, directing the account debtor to make payment to the assignee.

Once such a notice has been received, the account debtor is entitled to discharge only by paying the assignee.

Question 19

Following a debtor’s default, if the collateral is “equipment,” a secured party may

Answer 19

leave the equipment in place and render it unusable

Question 20

A secured party’s disposition of collateral after a debtor’s default transfers

Answer 20

the debtor’s rights in the collateral to any transferee for value, and also discharges the secured party’s interest
in the collateral and “any subordinate security interest

Question 21

Secured party disposal of secured property

Answer 21

After default by the debtor, a secured party may dispose of the collateral. UCC § 9-610(a).

If it does so, the proceeds of that disposition will be applied first to the expenses of that process and then to the satisfaction of the debtor’s obligation to the secured party. UCC § 9-615(a).

Before disposing of the collateral, however, the secured party must send the debtor a “reasonable authenticated notification of disposition.” UCC § 9-611(b).

The only exception to this notification requirement is if the collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market.

Question 22

A security interest in fixtures, even if perfected, is ordinarily subordinate to

Answer 22

a conflicting interest of an encumbrancer of the related real property

Question 23

exceptions to a security interest in fixtures ordinarily being subordinate to encumberance of real property

Answer 23

priority of a purchase-money security interest in fixtures as against an encumbrancer of the related real property

Question 24

a fixture filing for this exception ^ must provide

Answer 24

a description of the real property to which the collateral is related, and

must be filed in the office in which a mortgage on the related real estate would be filed, not in the state’s central filing office

Question 25

A secured party that has a security interest in collateral also has a security interest in any

Answer 25

identifiable “proceeds” of the collateral.

proceeds include whatever is acquired upon the lease of collateral

Question 26

A security interest in proceeds of collateral is perfected for at least 20 days if

Answer 26

the security interest in the original collateral was perfected

Question 27

when do rights under a lease constitute chattel paper?

Answer 27

when lease evidences both a monetary obligation and a lease of specific goods

Question 28

A security interest continues in collateral, even after a sale or other disposition of that collateral, unless

Answer 28

the creditor authorized the disposition “free of the security interest” or another Article 9 exception applies

Question 29

UCC §9-320(b) - a buyer of consumer goods can take free of a prior security interest in goods when

Answer 29

a buyer of goods from a person who used them for personal, family, or household purposes takes free of a perfected security interest in the goods if

(1) the buyer had no knowledge of the security
interest,

(2) the buyer gave value for the goods,

(3) the buyer purchased the goods primarily for
personal, family, or household purposes, and

(4) the purchase occurred before the filing of a
financing statement covering the goods

Question 30

buyer in ordinary course of business

Answer 30

a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person in the business of selling goods of that kind

takes free of a security interest created by its seller even if the security interest is perfected and the buyer knows of its existence

Question 31

a person who is gifted an item is not considered a

Answer 31

buyer bc he didnt give value for it

therefore, not protected by UCC buyer exceptions

Question 32

Shelter Principle

Answer 32

once a buyer acquires consumer goods free of the finance company’s security interest, any subsequent transfer of the property by the buyer to someone else was also free of the finance company’s security interest

Question 33

Disposal of collateral

Answer 33

When collateral is disposed of, a secured party automatically obtains a security interest in identifiable proceeds of the collateral. UCC § 9-315(a)(2).

Security interest in the check as proceeds is perfected for a 20 day period unless one of the three criteria in UCC § 9-315(d) is satisfied

Question 34

Security interest denominated as a “lease”

Answer 34

a transaction denominated as a ‘lease’ of goods is sometimes really a lease and sometimes a sale with a retained security interest

Under § 1-203, a transaction in the form of a lease creates a security interest if the lessee’s obligation to pay is not subject to termination by the lessee and the lessee has the option to become the owner of the goods for no additional consideration upon compliance with the lease agreement

Question 35

Whether a transaction in the form of a lease actually creates a “true lease” or a security
interest depends on the

Answer 35

“economic realities” of the transaction, not on the form of the transaction
or the supposed intent of the parties

Question 36

UCC § 1-203(b) identifies certain situations in which a transaction creates a security interest, not a lease

Answer 36

a transaction in the form of a lease creates a security interest if
- lease payments must be made for the full term of the lease and are not subject to termination, and
- the lessee has an option to become the owner of the goods for nominal additional consideration at the conclusion of the lease agreement

Question 37

an item is not considered inventory and rather equipment if it

Answer 37

is not held for sale or lease

Question 38

disposition at foreclosure sale

Answer 38

1) transfers all of the debtor’s rights in the collateral to a transferee for value;

2) discharges the security interest; AND

3) discharges any subordinate security interests

Question 39

commercially reasonable sale

Answer 39

if made

a) in usual manner on any recognized market;

b) at the current price in recognized market at the time of dispo; OR

c) in conformity with reasonable commercial pracitce among dealers in similar property

Question 40

debtor’s means of protection iteself

Answer 40

1) sale must be commercially reasonable

2) debtor must receive written notification of the sale (sent 10 days or more before sale is considered reasonable and must describe the parties, the collateral, and the sale)

Question 41

if secured party fails to comply with notification reqirements for sale of collateral

Answer 41

1) damages

2) court ordered sale

3) rebuttable presumption that collateral is worth more than the amount of the debt (nonconsumer transactino)

Question 42

debtor’s right to redeem

Answer 42

can redeem prior to disposition of the collateral by paying everything due and owing to the creditor

Question 43

secured party may purchase collateral at:

Answer 43

a) public sale, OR

b) a private sale only if collateral is customarily sold on a recongized market or subject to standard price quotitation