Secured Transactions Flashcards
Collateral Descriptions
What is the term to describe goods that are not consumer goods, farm products, or inventory?
(e.g., durable goods used in a business, paintings on an office wall)?
Equipment.
Equipment refers to goods that are not consumer goods, farm products, or inventory.
Collateral Descriptions
__________ describes crops, livestock, unmanufactured products of livestock (e.g., eggs), and supplies used or produced in farming operations and either in the possession of/used by a farmer.
Farm products.
Farm products are crops, livestock, unmanufactured products of livestock and supplies used or produced in farming operations and either in the possession of or used by a farmer.
Collateral Descriptions
What is the term for goods held for sale or lease, goods furnished under a contract of service, supplies used in manufacturing, materials consumed in a business?
Inventory.
Inventory includes goods held for sale or lease, goods furnished under a contract of service, supplies used in manufacturing, materials consumed in a business (e.g., fuel used to run a factory), and work in progress.
Collateral Descriptions
What is the term for goods used or bought for personal, family, or household purposes?
Consumer goods.
Consumer goods are goods used or bought for personal, family, or household purposes.
A security interest cannot be __________ until it has attached.
Perfected.
A security interest cannot be perfected until it has attached.
In most states, and for most types of collateral, a financing statement must be filed with the secretary of state of the state where… __________.
The debtor is located.
In most states, and for most types of collateral (including goods), a financing statement must be filed with the secretary of state of the state where the debtor is located.
A PMSI (purchase money security interest) arises where the creditor:
- _____________________________
- _____________________________
A PMSI arises where the creditor:
1) Sells goods to the debtor on credit and reserves a security interest in those goods, or
2) Advances the funds used to purchase goods and reserves a security interest in those goods.
A PMSI in __________ is perfected as soon as it attaches.
Consumer goods.
A PMSI in consumer goods is perfected as soon as it attaches.
The original filing of a financing statement generally is effective for _ ___ from the date of filing.
5 years.
The original filing of a financing statement is effective for 5 years from the date of filing.
This does not include filings for transmitting utilities or manufactured home transactions.
To continue the effectiveness of a financing statement, a continuation statement must be authorized by:
A The debtor only.
B The secured party only.
C Either the debtor or the secured party.
D Both the debtor and the secured party.
B The secured party only.
Only the secured party must authorize the continuation statement; the debtor need not do so.
In general, Article 9 applies to contractual security interests in _________________, but not other forms of real property.
Personal property and fixtures.
In general, Article 9 applies to contractual security interests in personal property and fixtures, but not other forms of real property.
E.g., Article 9 does not apply to a sale or mortgage of a single family home or a mechanic’s lien on a commercial building.
Collateral Descriptions
An attorney’s set of Southwest Reporters would be classified as _________________.
Equipment.
Equipment refers to goods that are not consumer goods, farm products, or inventory.
Which of the following are not considered “proceeds” under Article 9?
A
Funds the creditor has agreed to loan the debtor in the future, secured by the same collateral.
B
Cash received when the collateral was leased to a third party.
C
An item traded in exchange for the collateral.
D
Money received from an insurance company for damage to the collateral.
A
Funds the creditor has agreed to loan the debtor in the future, secured by the same collateral.
Funds the secured party has agreed to loan the debtor in the future are future advances, not proceeds.
“Proceeds” include whatever is received upon the sale, lease, exchange, license, collection, or other disposition of collateral or proceeds.
This can include cash received from a lease of the collateral, an item traded for the collateral, and money received from an insurance company for damage to the collateral.
What is the ‘Garage Sale’ rule?
If the buyer of consumer goods resells the goods to another consumer (i.e., a buyer who buys for his own personal, household, or family use), the second buyer takes the consumer goods free of the security interest, so long as the second buyer’s purchase is:
1) Without knowledge of the security interest,
2) For value, and
3) Before a financing statement covering the goods has been filed.
