Secured Transactions

Question 1

fixture

Answer 1

tangible goods intertwined with real property

Ex: furnaces, ac systems, elevators, and escalators

Question 2

inventory

Answer 2

Goods (not including farm products) that are leased, held for sale or lease, or furnished by a person under a contract of service

Question 3

obligor

Answer 3

owes payment or other performance

Question 4

consumer goods

Answer 4

goods used primarily for personal, family or household uses.
Goods consumers buy and use for own consumption

Question 5

equipment

Answer 5

Everything not in consumer goods, farm products, or inventory

Question 6

account

Answer 6

right to payment of a monetary obligation

Question 7

deposit account

Answer 7

bank account (checking, savings, demand, CD)

Question 8

insolvent

Answer 8

unwilling or unable, in the course of ordinary business to meet financial obligations as they become due

Exception: bona fide dispute

Question 9

letter of credit right

Answer 9

a right to payment or performance manifested in a written or electronic record

• bank letterhead
• line of credit

Question 10

instrument

Answer 10

A writing evidencing a right to payment of a monetary obligation

(Ex: Promissory Note)

Question 11

chattel paper

Answer 11

A writing evidencing a right to payment of a monetary obligation plus a security interest in specific goods

Can be tangible or electronic

Question 12

document

Answer 12

a record or receipt of title

Question 13

Article 9 does not apply to

Answer 13

1) Federal statutes that preempt Article 9
2) landlord’s liens
3) state and federal statutory liens (tax liens)
4) interests in real property

Question 14

Scope of Article 9

Answer 14

All security interests by mutual agreement and 1 exception to statutory liens
Mutual agreement interest include:
1) security interests in fixtures
2) consignments
3) types of quasi-tangible and intangible assets (accounts, chattel paper, payment intangibles, & promissory notes)
Exception to statutory liens:
1) agricultural liens

Question 15

Specific requirement to qualify as consignment under Article 9

Answer 15

3 basic categories of requirements governing:

(1) the parties
(2) the goods, and
(3) the existence of a security interest.

First, for the parties, there must be a person who delivers goods to a merchant for sale. That merchant must be one that: (1) deals in goods of that kind under a name other than the name of the person making the delivery, (2) is not an auctioneer, and (3) is not generally known by its creditors to be substantially engaged in selling the goods of others.

Second, to be a qualifying consignment, each delivery of goods both must be worth $1,000 or more at the time of delivery (in the aggregate) and must not be consumer goods immediately before delivery.

Third, the transaction must not create a security interest that secures an obligation.

Question 16

collateral

Answer 16

personal property that is subject to security interest or an agricultural lien

Question 17

farm products

Answer 17

Goods used or produced by a farmer

Ex: crops, aquatic goods, livestock & supplies & product of crops or livestock

Question 18

Quasi-tangible & intangible assets

Answer 18

1) accounts
2) chattel paper
3) payment intangibles
4) promissory notes

Question 19

investment property

Answer 19

stocks & bonds

Question 20

Types of collateral

Answer 20

1) Goods - all things move able at the time security interest attaches to the goods
A) consumer goods
B) Farm Products
C) Inventory
D) Equipment

2) Quasi-tangible property - paper recording obligations or value
A) instruments
B) Chattel paper
C) Documents
D) Investment Property
E) Letter of credit rights

3) Intangible property

Question 21

Types of collateral

Answer 21

1) Goods - all things move able at the time security interest attaches to the goods
A) consumer goods
B) Farm Products
C) Inventory
D) Equipment

2) Quasi-tangible property - paper recording obligations or value
A) instruments
B) Chattel paper
C) Documents
D) Investment Property
E) Letter of credit rights

3) Intangible property - property that is impossible to touch, move, or be made tangible by recording it on paper
A) Accounts
B) Deposit Accounts
C) Commercial Tort Claims
D) General Intangibles

Question 22

Commercial tort claims

Answer 22

1) Claimant bust be either an individual or organization

2) Claim is tortious and tied to claimant’s business or profession

Question 23

General intangibles

Answer 23

“Catch - all

Any personal property that isn’t properly categorized as another quasi-tangible or intangible property

Question 24

Attachment

Answer 24

security interest enforceable against debtor

Requirements:
1) Creditor must provide value to debtor
2) Debtor must have rights to collateral
3) Debtor must authenticate agreement granting rights
A) sign (physical or electronic (SOF)
4) Agreement must reasonably describe collateral

Question 25

After Acquired property clause

Answer 25

Grants a security interest in property acquired after the security agreement goes into effect

Question 26

Future advance clause

Answer 26

Provides that collateral will secure later extensions of credit, regardless of whether the secured party is obligated to extend future credit

Question 27

Ways to Perfect a Security

Answer 27

1. Financing Statement
2. Possession of Collateral
3. Control of Collateral
4. Automatic Perfection
5. State Certificate of Title System