Secured Transactions Flashcards
What does Article 9 of the UCC apply to?
ANY transaction intended to create a security interest in personal property or fixtures
It does not apply to mortgages on real property.
What is a security interest?
A right a creditor has to sell a debtor’s property to satisfy a debt.
Who are the three main parties to an Article 9 transaction?
- Secured Party
- Debtor
- Obligor
Define collateral in the context of Article 9.
Property in which a security interest is created, including identifiable proceeds.
What are the types of collateral defined by Article 9?
- Goods
- Consumer Goods
- Inventory
- Accounts
What is the definition of ‘Attachment’ in security interests?
The process by which a security interest becomes enforceable against the debtor.
What are the three requirements for valid attachment of a security interest?
- The secured party extends value to the debtor
- The debtor has rights in the collateral
- A UCC § 9-203(b)(3) condition is met
What is a consignment?
A transaction where goods are delivered to a merchant for sale under specific conditions.
What are the conditions that define a consignment?
- Merchant deals in goods of that kind under a different name
- Merchant is NOT an auctioneer
- Aggregate value of goods is $1,000 or more
- Goods are NOT consumer goods before delivery
- Transaction does NOT create a security interest
What is a future advances clause in a security agreement?
A provision that allows collateral to secure future advances.
What is an after-acquired property clause?
A clause that allows the security agreement to secure property acquired after the agreement is made.
What is an accession in the context of collateral?
Collateral that does NOT lose its identity when physically united with other goods.
What is a commingled good?
Collateral that loses its identity when physically united with other goods.
What are the methods of perfecting a security interest?
- Filing
- Taking Possession
- Automatic Perfection
What must be included in a financing statement for it to be valid?
- Debtor’s name
- Secured party’s name
- Description of collateral
- Filing fee
True or False: A perfected security interest has priority over a conflicting unperfected security interest.
True.
What is the priority rule between multiple perfected creditors?
The first to file obtains priority.
What is a buyer in the ordinary course of business?
A person who buys in the ordinary course from a seller in the business of selling goods of that kind.
What is a Purchase-Money Security Interest (PMSI)?
A security interest held by the seller to secure payment of all or part of the price.
What rights does a secured party have upon default?
- Right to repossess
- Right to dispose of collateral
- Right to collect directly from account debtor
What is the debtor’s right of redemption?
The right to reclaim collateral until a specified point.
What are the consequences of a non-complying disposition of collateral?
- Recover actual damages
- Recover statutory damages
- Subject to judicially mandated disposition
What is the right of redemption?
A debtor or any secondary obligor has the right to redeem collateral until the secured party has disposed of it or entered into a contract for its disposition.
Redemption requires fulfilling all obligations secured by the collateral and paying reasonable expenses and attorney’s fees.
What must a debtor do to redeem collateral?
- Fulfill all obligations secured by the collateral
- Pay the reasonable expenses and attorney’s fees
These conditions must be met before the secured party disposes of the collateral.
