Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Bar Prep > Secured Transactions > Flashcards

Secured Transactions Flashcards

1
Q

Purchase money security interest (PMSI)

A

1) seller-financed = SC sells the goods to D on credit and retains SI in goods sold
2) financier-financed = SC loans funds to D to enable D to buy specific collateral, in which SC takes SI

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

After-acquired property clause

A

Grant of SI in property obtained in future

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Future advances clause

A

Grant of SA securing future loans with same collateral

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Tangible collateral (goods)

A

Classification depends on how D is using the collateral

1) consumer goods = personal purposes
2) equipment = goods used or bought for use in business (default category)
3) farm products = crops or livestock in possession of D engage in farming operations
4) inventory = goods held for sale or lease and materials used or consumed in a business in a short period of time

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Structure of an essay answer on goods

A

1) this is a [type of good]
2) definition of [type of good]
3) the [item] is [type of good] because [fact about why good was bought/how D is using it]

  • If in between two choices, give and explain both!
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Instruments

A

pieces of paper representing the right to be paid money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Documents

A

represents right to receive goods (bills of lading)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Chattel paper

A

record which evidences:
1) monetary obligation AND
2) SI in or lease of specific goods

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Investment property

A

stocks, bonds, mutual funds

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Accounts

A

right to payment for property sold or services rendered

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Deposit accounts

A

Account maintained in a bank

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

General intangibles

A

any personal property not coming within scope of other definitions, like IP stuff

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Payment intangible

A

Account D’s principal obligation is a monetary obligation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Attachment requirements

A

1) security agreement
2) value given by both parties
3) D has rights in collateral

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Authenticated security agreement

A

1) record showing intent to create SI
2) authenticated by D (usually signed)
3) describes collateral (reasonably identifies)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Value given

A
  • Any consideration for K law
  • includes past consideration
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Exceptions to after-acquired property clause in SA

A

SI will attach automatically to collateral of a type that’s rapidly depleted and replenished, like accounts and inventory
- also automatic attachment to identifiable proceeds of collateral

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

After-acquired property clauses don’t apply to

A

consumer goods and commercial tort claims

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Proceeds

A

anything received from sale, exchange, collection or other disposition of collateral or proceeds

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Identifiable proceeds and AAP

A

Unless otherwise agreed, SA automatically gives SC a SI to identifiable proceeds

Identifiable = proceeds can be traced back to original collateral

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Lowest intermediate balance rule

A

When cash proceeds are commingled, identifiable proceeds are determined by looking at bank account at time proceeds are deposited and ending at time applying the rule –> lowest balance during that time = identifiable proceeds

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Perfection

A

Deals with rights between SC and third parties
- NOT necessary for valid SA between C and D (that’s attachment)
- allows SC to acquire maximum priority in collateral

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

5 methods of perfection

A

1) filing
2) taking possession of collateral
3) control
4) automatic perfection
5) temporary perfection

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Relationship between attachment and perfection

A
  • Attachment creates the SI, NOT perfection
  • perfection creates priority for SC
  • perfection cannot happen without attachment
  • can be simultaneous
  • if perfection method occurs first, perfection is complete when attachment occurs
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Automatic perfection
PMSI in consumer goods is automatically perfected when it attaches
26
Limitations to automatic perfection
1) Motor vehicles can only be perfected by notation on certificate of title 2) fixtures must be perfected with fixture filing
27
Possession of collateral
- Perfected at moment of possession - continues as long as possession is retained - only possible with tangible goods - only way to perfect a SI in money - not usually practical
28
Obtaining control
Available for SI's in investment property, nonconsumer deposit accounts and electronic chattel paper
29
Nonconsumer deposit accounts
- can only be perfected by control - Bank in which account is maintained automatically has control - SC who is not a bank can obtain control by: 1) putting deposit account in SC's name OR 2) control agreement = K between D, SC and bank that D gives permission to give SC the account
30
Perfection for car dealers
SIs created by car dealers for cars held in inventory are perfected by filing FS
31
Filing a financing statement
Form UCC-1 must contain: 1) D's name and mailing address 2) SC's name and mailing address 3) description of collateral covered by FS
32
FS are indexed under
debtor's name
33
D's name on FS
1) must match unexpired driver's license, if D has one 2) if no license, must be their name (undefined)
34
Effect or error in D's name
FS is still effective if the error is not seriously misleading Not seriously misleading = FS could still be discovered in a filing office search under D's correct name - does NOT include spelling errors!
35
Rule for debtor name change
FS is effective only against collateral acquired by D before name became insufficient and within 4 months after - collateral acquired after 4-month period = must refile with correct name
36
description of collateral in a FS
- must reasonably identify collateral - may contain a supergeneric description like "all assets"
37
Authorization of FS
FS does not have to be signed, but must be authorized by D, in any signed writing (usually SA)
38
Where FS is filed
With secretary of state, unless collateral is related to real estate --> then file in county where land is located
39
State law governing perfection
Law of the state where D is located --> SC must file in that state
40
Movement of D to a new state
SC becomes unperfected 4 months after D's move to a new state unless it files a FS in the new state first
41
Collateral transferred to a new D in a different state
SC has one year to file in new state before becoming unperfected
42
Continuation statements
FS is valid for 5 years --> must file continuation statement to continue perfection - Can ONLY be filed within 6 months before lapse of filed FS - D's authorization not required
43
Termination statements
SC not obligated to file termination statement but once D no longer owes obligation and there is no commitment by SC to make further advances, SC must terminate: 1) on demand of D 2) within 20 days
44
Perfection for proceeds
Automatically perfected SI in proceeds of secured collateral for 20 days after receipt of proceeds Perfection continues if: 1) proceeds are identifiable cash proceeds OR 2) same office rule OR 3) SI in proceeds perfected within 20 days
45
Change in use of collateral
SC has no duty to monitor the collateral or amend FS if description changes - FS remains effective to perfect SI
46
Priority
A creditor's place in line visa vi other creditors - determines which creditor is first in line to get paid
47
Perfected SC vs perfected SC
first to file OR perfect - whichever occurs first wins
48
Unperfected SC vs unperfected SC
first to attach wins
49
Perfected SC vs unperfected SC
perfected party wins - strategy if you are perfected SC is to challenge other SC's perfection (argue they are not perfected so you win!)
50
PMSI superpriority
PMSIs are superior to prior perfected SIs in the same collateral if certain conditions are met
51
PMSI in goods other than inventory and livestock
Priority over conflicting SIs in same goods or their proceeds if interest is perfected before or within 20 days after D receives possession of goods
52
PMSI in inventory and livestock
Priority of conflicting SIs in same inventory or proceeds if: 1) perfected at time D gets possession 2) SC sends authenticated notice to other SCs before D possesses and 3) notice is effective for deliveries of same type of collateral for 5 years
53
Conflicting PMSI superpriorities
Seller-financed PMSI = priority over financer-financed PMSI Otherwise, first SC to file or perfect prevails
54
PMSI in consumer goods is...
automatically perfected
55
Priority rules for investment property
1) control beats other perfection methods 2) earlier control beats later control 3) D's intermediary beats other creditors
56
Priority rules for deposit accounts
Only way to perfect SI in deposit account = control Rank according to time of control, except: 1) SC's name on account prevails 2) maintains account is next in line
57
SC vs buyer
SC wins unless an exception applies
58
Authorized sale exception
Authorization by SC to sell collateral free of SI - can be express or implied, from type of sale or seller's conduct
59
Buyer in the ordinary course of business (BIOC)
1) buyer in good faith 2) without knowledge of violations 3) in ordinary course 4) from seller of goods of that kind
60
BIOC general rule
1) takes free of a nonposessory SI in the goods 2) created by his seller
61
Buyers not in the ordinary course of business
1) take subject to perfected SIs 2) take free from unperfected SIs unless they know of it when they give value or take delivery
62
Consumer to consumer sales
"Garage sale" rule Buyer takes free of SI if he buys: 1) without knowledge of SI 2) for value 3) for personal use 4) before a FS covering goods has been filed Must be consumer goods in hands of both buyer and seller
63
SC vs judicial lien creditor
Levy before perfection = judicial LC wins Perfection before levy or before lien arose = SC wins SC obtains SA and files FS before lien arose = SC wins, as long as they eventually attach and perfect
64
PMSI vs lienholder
FS for PMSI filed within 20 days after D receives collateral = SC has priority over lien arising between attachment and filing
65
Statutory lienholder
Lien is statutorily imposed for supplication of certain goods or services not paid for - e.g., mechanics lien
66
SC vs statutory lienholder
statutory lienholder wins if they maintain possession of collateral
67
Default
Event causing SI to spring to life - gateway to remedies - no definition in Article 9 - usually defined in SA
68
Self-help repossession
Taking possession of collateral after default without judicial process - can ONLY be done WITHOUT breach of peace
69
Breach of the peace
Any conduct by SC that has potential to lead to violence - causes SC to lose authorization to repossess Includes: - physical presence + verbal objection by D - breaking and entering - unauthorized entry into a home, even through open window
70
Repossession with judicial process
SC asks court for writ of replevin = court order directing sheriff to repossess collateral
71
Right to render equipment unusable
Self-help repossession --> can be done, if without breach of peace - directed toward problem of taking possession of heavy, bulky equipment that is not easily movable - taking keys - pulling out engine wires - rendering nonfunctional
72
Self-help in accounts
SC can notify person owing money to D to make payment to SC instead of D - upon notice, account D must pay to SC --> payment to D will not discharge obligation
73
Strict foreclosure
SC keeps collateral itself (instead of selling it) to satisfy the debt (partial or full) SC must: 1) notify any other SC with lien in same collateral 2) obtain D's consent 3) if any other SC objects within 20 days of notice, must sell
74
Partial strict foreclosure in consumer transactions
SC may not keep collateral in consumer transaction in partial satisfaction --> can ONLY keep in FULL satisfaction of debt
75
Requirements for foreclosures sales
1) reasonable notice to to D and sureties and other SCs 2) sale must be commercially reasonable
76
Timeliness and contents of foreclosure sale notice
- must be sent within a reasonable time - contents for public sale = time and place of sale - contents for private sale = time of sale
77
Commercially reasonable sale
Every aspect must be commercially reasonable = SC must make an effort to obtain best price for collateral: - sufficiency of advertising - limited market contacted - whether collateral needed cleaning and repair - convenience of time and place for public auction
78
Distribution from proceeds of foreclosure sale
1) repaying cost of repossession and sale 2) debt of foreclosing SC satisfied 3) debt of lower priority SC satisfied 4) any surplus goes to D
79
Right to redeem
D has ability to recover collateral by paying everything owed to SC (plus additional reasonable expenses) - must be done before foreclosure sale - if acceleration clause = SC has right to demand entire loan balance due
80
Fixtures
Goods permanently attached to real property - NOT ordinary building materials - started off as personal property, but now so attached to real property that it cannot be disconnected - e.g., elevator
81
Perfection of fixtures
Fixture filing (not just a FS) must be made in office where mortgage on real estate would be filed - requires information in a FS PLUS: 1) description of real property and 2) name of landowner
82
Rights on default
If SC in fixture has priority over all interest in real property, SC can remove fixture upon default If D does not own property fro which collateral is removed, SC must reimburse owner for any damage caused by removal
83
SC in fixture vs subsequent real estate SI
SI in fixture has priority over any real estate interest recorded subsequent to perfection of SI by filing
84
SC in fixture vs prior real estate interest
Prior real estate interest that is properly recorded prevails - exception = PMSI takes priority over a prior realty interest if it's perfected within 20 days after goods become fixtures
85
Construction mortgage
Takes priority over a subsequent PMSI in fixtures
86
Fixture filing unnecessary when:
1) readily movable collateral - any method of perfection 2) consent, disclaimer or right to remove - perfection not required
87
Accessions
Goods physically united with other goods in such a manner that identity of goods not lost - e.g., tires on a car
88
Priority for accessions
General priority rules apply, except: - SI in an accession is subordinate to SI in a whole which is perfected by compliance with title statute (car)

Bar Prep (12 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions