secured transactions

Question 1

how to start each essay-what article 9 covers

Answer 1

Article 9 of the UCC governs any transaction regardless of its form the creates a security interest. This includes a security interest in both tangible and intangible property

Question 2

types of tangible collateral

Answer 2

Fixtures
computer software
consumer goods
equipment
Inventory
Farm products (NOT farm equipment)

Question 3

Types of intangible collateral

Answer 3

Accounts receivable
Deposit accounts (bank accounts)
Investments
Chattel paper

Question 4

What is required to create a security interest

Answer 4

Attachment

Question 5

What is required for the security interest to attach to an item of collateral

Answer 5

1. Value - money loaned
2. Rights- debtor must have rights/own in the collateral
3. Security interest - security agreement

Question 6

what does a security agreement need to include

Answer 6

AID
A- authentication- signed or electronically signed
I- intent
D- description of collateral- must be specific
“all cars” is ok but not “all assets”

Question 7

What is perfection

Answer 7

Once you have a security interest attached, the rights are established. Perfection determines when the secured party will have priority over 3rd parties

Question 8

What must you do to perfect

Answer 8

1. File a FINANCING STATEMENT or
2. Automatic perfection in PMSI- consumer goods
3. take POSSESSION
4. take CONTROL - of bank accounts

Question 9

what is a PMSI

Answer 9

purchase money security interest- exists only for two types of collateral- GOODS (including fixtures) and computer software.

typically occurs when debtor buys consumer good on credit.

Automatically perfected on attachment

Question 10

what if a consumer buys a stereo or item from a store and that item has a secured credit attached to it?

Answer 10

A buyer in the ordinary course of business takes the item free of a security interest. A BOCB is a person who:

1. Buys goods in the ordinary course of business in good faith
2. from a merchant who is IN THE BUSINESS OF SELLING GOODS OF THAT KIND
   3.THE BUYER HAS NO KNOWLEDGE THAT THE SALE VIOLATES THE RIGHTS OF ANOTHER IN THE SAME GOODS>

IT does not matter if the security interest was perfected or not.

Question 11

If a buyer in the ordinary course of business takes an item free of a security interest under the BOCB exception and then SELLS it to a 3rd party, does an interest pass along to the 3rd party?

Answer 11

No. That buyer takes free of a security interest also

Question 12

what is the garage sale rule

Answer 12

A consumer buyer will take an item free of security interest even if perfected if the consumer buyer is
1) buying consumer goods for value
2) for own personal use
3) from a non- merchant/”consumer” seller/ordinary person not in business of selling those items
4) w/o knowledge of the security interest

Question 13

What is the exception to the garage sale rule

Answer 13

If before purchase the secured party filed a financing statement cover the consumer goods (even though they were PMSI and automatically perfected) then the consumer buyer can NOT buy them free of the security interest.

Question 14

If something is a LEASE- is it a security interest and when does it qualify as a security interest

Think RENT TO OWN

Answer 14

A transaction in the form of a lease is treated as a security interest if the lessee must pay consideration to the lessor for the right to possess and use the goods for the term of the lease,

the payment obligation cannot be terminated by the lessee

and the lessee has an option to become the owner of the goods upon completion of the lease agreement.

Here, what the parties refer to as a lease is equivalent to a secured sale transaction because Decorator will have purchased the vacuum after making the “lease” payments.

Question 15

When you see goods SOLD of any kind- remember….

Answer 15

PMSI

PMSI has automatic perfection and takes priority over other security interests in the same goods

Question 16

Is an oral security agreement ok?

Answer 16

Only if the lender has possession or control of the item in addition to the oral security agreement

Question 17

Can a lender sell an item they have possession and a security agreement in when the debtor defaults

Answer 17

yes, but they need to give notice to debtor (at least 10 days) unless the item is perishable or could speedily decrease in value

Question 18

what can you do if collateral is equipment and the borrower defaults

Answer 18

ollowing a debtor’s default, if the collateral is “equipment,” a secured party may leave the equipment in place and render it unusable if you can do so without breach of the peace

Question 19

prior for a security interest in fixtures

Answer 19

A security interest in fixtures even if perfected, is ordinarily subordinate to a conflicting interest of a security interest. of the related real property,”

Question 20

How is priority determined

Answer 20

The first to FILE OR PERFECT has priority

Question 21

idiot thing not to forget… in battle as to who has priority, if consumer goods are at all involved… (look for goods bought on credit as a tip)

Answer 21

PMSI perfected in consumer goods trumps all else.

Question 22

If a person who has security interest on their consumer goods GIVES that consumer good to a friend, does security interest stay attached

Answer 22

Yes bc given- not a buyer. Did not give value for consumer good