secured transactions Flashcards
What is the key principle regarding Article 9?
Article 9 applies to all security interests in personal property, fixtures by contract, and lease agreements that are not true leases.
Even if the parties do not call the transaction a ‘security interest.’
What are the four classifications of goods under Article 9?
- Consumer goods: bought for personal, family, or household purposes.
- Inventory: goods held for sale or lease, or used in business operations.
- Equipment: goods used in business, not classified as inventory, farm products, or consumer goods.
- Farm products: supplies produced in unmanufactured state in farming operations.
What are the requirements for attachment of a security interest?
- Value must be given by the secured party to the debtor.
- The debtor must have rights in the collateral.
- There must be a binding security agreement (AID: authentication, intent to create, description of collateral).
What is after-acquired property?
Property obtained after taking on a debt; a security agreement can cover it without specific reference.
How can perfection of a security interest occur?
Perfection can occur by filing a financing statement, automatically in some cases, or by possession or control.
What is the priority rule when two secured parties have an interest in the same collateral?
The first to file or perfect has priority; if no party perfects, the first to attach has priority.
What happens when a debtor sells collateral subject to a security interest?
A buyer in the ordinary course generally takes free of any security interest, while a buyer not in the ordinary course takes subject to a perfected interest.
What is the exception for consumer to consumer goods?
A buyer not in the ordinary course takes free of a security interest if they buy without knowledge of it, for value, and for personal use, unless a financing statement was filed.
What is the priority rule when a lien creditor is involved?
Priority belongs to the secured party if perfected before the lien arises; otherwise, the lien creditor has priority.
What are the steps a secured creditor takes to foreclose on collateral?
- Default: lender can demand payment or reclaim goods without breaching peace.
- Resale: secured party may sell collateral commercially reasonably, discharging the security interest.
What are the debtor’s means of protection during a sale?
- Sale must be commercially reasonable.
- Debtor must receive written notification of the sale.
What are the remedies if a secured party fails to comply with requirements?
- Damages (including statutory damages for consumer goods).set amount of monetary compensation a consumer can recover from a company if they violate consumer protection laws
- Court may order a sale.
- Rebuttable presumption of collateral value in nonconsumer transactions.
What is the debtor’s right to redeem?
The debtor can redeem prior to the disposition of the collateral by paying everything due to the creditor.
