Secured Transactions Flashcards
creating attachment:
Rule: for an Article 9 security interest to be enforceable it must attach, the three requirements of attachment are:
a. Value has been given
b. The debtor must have rights to the collateral;and
c. Either the debtor has** authenticated **a security agreement that provides a description of the collateral or the secured party possesses the collateral pursuant to the security agreement.
how is value given
the DR must get something of value for its giving of the security interest. this is similar as consideration in K-Law
the secured party gives the value
Dr has rights in the collateral
alway ask yourself “what right does the debtor have” in this property. These rights extend to the secured party….look at consignment in MST…the consignee can use the consignor’s goods to secure a loan.
a pledge agreement can be oral and not in writing
in this type of agreement the collateral is in the possession of the creditor.
when is the time of attachment
it is when the events happen to attach, unless the K pospones the time of attachment.
there is not authentication needed if the collateral is in possion of the third party
think the ted william rookie card example. no written K needed.
is the financial statement filed with the state a valid security agreement
no, tpyically it does not have signatures, the collateral description is broad. etc
i need a majority composite documents rule
Rule: An agreement that creates or provides for a security interest, it is well established that no specific words or formalized documents are necessary. There must be some documentation that indicates parties intent to create a security interest.
what is the insurance exemption that is not covered by article 9
article 9 does not apply to the transfer of interest in OR assigment of a claim under an insurance policy, UNLESS the interst represents collateral or it is an assigment of a healh care benefit to a provider. MST At 26.
the Personal injury protection PIP cases that are under massimiano or the car accident where the ins company pays the bank
what for is usually used to assign away healh care “rights to payment”
treament and consent form
how to we perfect a health care assigment at the first level
they are automatically perfected upon attachment.
a health company needs financing, can it assigns its “right to payment” of health care receivable from insurance companies to a creditor as collateral?
yes, this assigment is like a financial transaciton, the asignee/creditor must perfect the SI
a commercial tort claim is
a claim that arose from an individual’s or organization business that does not include personal injury or death. Article 9 Applies
what acount the negligenct destruction to PROCEEDS of collateral, is that tort claim covered under article 9
i need a better example of this…MST At 28
consumer deposit accounts: are excluded from article 9
these accounts are held at a bank of a organization that is in the businsess of banking.
if you provide a bank SI in your personal bank account, this is not a SI under article (.
But if you have a lemonade stand and you provide the bank a SI in that account. it is covered under article 9.
consumer bank accounts are primarily used for personal, family or household expenses.
statutory liens are excluded from article 9, except agricultural liens
MISC Exclusions of preemtpion
Keep in mind that the preemption may not completely exclude atricle 9. for example a federal preemption may exclude
first element of SI attachmetn is: when is value given
- when credit is extended or immediately available.
- as securtiy for, or in total or partial satisfaction of a preexisting claim
- by accepting delivery under a preexisting K for purchase, OR
- in return for consideration sufficient to support a simple K.
there is one set of requirements for attachment and enforcebility
a security interest attaches to collateral when the SI becomes enforcable agains the Dr.
Note: the parties can postpone the attachment
also then the term attachment is used it typically means that the parties hvae created an effective SI.
Possession and control can create a secured interest
Certain property under the control of the Secured Party can substitute for a security agreement.
certain types of property in control of Secured party can create a security agreement
typically when is value given
- loaning money
- providing line of credit
- makeing a credit sale of collateral.
- a binding promise to make a loan in the future
2nd element in establishing attachment is: Dr must have some rights or the power to transfer rights in the collateral
A dr with less than full right may have rifght sufficient enough to an SI to attach.
For example: a joint owner can transfer right to the extent of their ownership.
most typical transacion
you buy a washing machine on credit….you are now the DR and you have created a SI in the washing machine.
This transaction is known as a Purchase-money- security- interest PMSI
Dr can get rights in collateral after receiving money from bank
the crane example: the crane is not built yet,,,,Dr get rights when they take possession.
note: Could have rights earlyifthe crane is edentified by the seller this is a special property and insurable interest.
wood example
wood cutter delivers raw material to furniture company. either with or without addition of other materials owened by manufacturer. wood cutter expressly reserves title ot wood it delivers.
**Bank has perfect SI in inventory, including “works in progress” Manufacturer defaults. Courts have held that manufactuer has sufficient rights in the wood for banks security interest to attach. **
Wood cutter ias a PMSI created by the owner manufacturer transacition.
DRs may not have rights in collateral but may have the “power to transfer rights in collateral to a SP”
third element in creating a SI
DR must aggree
1. Dr authenticates SI agreement with description of collateral
2. SP takes control of collateral
3. collateral that is a certificated security is delivered to SP
4. the SP established control of: deposit accounts, electronic chattel paper, letter of credit rights, investmetn property or electronic document
some method of attachement are RESTRICTED to certain types of collateral
authentication
agreement, usually in writing, DR grants interest in collateral, and providesdescription of collateral.
the agreement need only to indicate DR is creating an SI.
Contract law rules unless article 9 preempts it
is a signature required to authenticate
Both written and electronic security agreements are fine.
no, can also present and INTENT to adopt or accept a record, to attach to or logically associate with the record an electronic sound, symbol or process.
what is enough: a letterhead signature,
think of a credit card receipt: the secured party is not required to sign
Description of collateral
whether the description is is specific or not, it just needs to reasonably identify the collateral.
