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Secured Transactions > Secured Transactions > Flashcards

Secured Transactions Flashcards

1
Q

4 Types of Goods

A
  1. consumer goods
  2. inventory
  3. farm products
  4. equipment
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2
Q

3 Factors of Goods

A
  1. movable
  2. tangible
  3. personal property
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3
Q

Types of Collateral

GIDCDCAGI

A
  1. goods
  2. instruments
  3. documents
  4. chattel paper
  5. Deposit
    Account
  6. Commercial Tort Claim
  7. Accounts
  8. General Intangible
  9. investment property
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4
Q

who possess Documents

A

Person in possession is entitled to possess goods

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5
Q

Question to determine what kind of good an object is

A

What is it in the hands of the Debtor?

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6
Q

What are consumer goods?

A

items bought personal, family, household purposes

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7
Q

What are farm products?

A

born and unborn livestock, growing stuff, etc.

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8
Q

What is inventory?

A

goods held for sale or lease, materials used up, goods for service contracts

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9
Q

What is equipment?

A

any goods not consumer goods, farm products, or inventory. Used as part of business but not “used up”

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10
Q

What is an intangible?

A

valuable personal property that takes no physical form

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11
Q

What is a quasi-intangible?

A

valuable property that has physical form, but it is not the form that makes it valuable.

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12
Q

What are accounts?

A

(accounts recievable)

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13
Q

what is an instrument

A

checks, promissory notes, etc.

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14
Q

what are documents?

A

documents of title

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15
Q

what are general intangibles?

A

trademarks, licenses, patents, copyrights, tax refund claims

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16
Q

commercial tort claims

A

an intangible that must be a business claim and cannot be for a PI suit or death suit

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17
Q

3 requirements for attachment

A
  1. debtor has rights in collateral
  2. value has been given
  3. valid security agreement
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18
Q

When is value given?

A

this is very liberal, Debtor’s promise to pay can be the value, past consideration can also be value.

The question is usually did the creditor give value - by extending credit or giving a loan

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19
Q

Two ways a debtor has rights in collateral

A
  1. debtor has rights on his own

2. debtor has power to transfer rights in the collateral to a third party

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20
Q

is naked possession enough to justify rights in collateral?

A

no.

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21
Q

Estoppel re: rights to collateral

A

a true owner of property is estopped from claiming that a debtor does not have rights in collateral where the owner allows the debtor to appear as the owner and the appearance reasonably misleads a creditor.

(creditor has a duty to make reasonable efforts to determine the true owner)

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22
Q

Security Agreement PLUS

A

you need a written authenticated (by the debtor) agreement in all situations except when a creditor takes possession of the item, then an oral contract will suffice

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23
Q

What is sufficiency in a description for a security agreement?

A

it must “reasonably identify” the collateral

  • specific listing
  • category
  • collateral specifically defined in UCC (all inventory)
  • quantity
  • plain language (tv, fridge)
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24
Q

what is insufficient in description for security agreement?

A

“all the debtors assets”

“all the debtors personal property”

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25
Q

Two types of PMSIs

A
  1. Seller sells goods to buyer on credit and retains security interest in that good
  2. financier provides funding to buy a specific good and retains security interest in that good
26
Q

PMSI: Close nexus test

A

there must be a close nexus between acquisition of collateral and the secured obligation

27
Q

When is a security interest perfected?

A

where the interest has attached and the other requirements are satisfied

28
Q

4 methods of perfection

A
  1. filing
  2. possession
  3. control
  4. automatic possession
29
Q

Perfection by Filing

A

must be in the right place and must be sufficiently filed

30
Q

Whose law governs filing?

A

law where debtor is located

31
Q

Where is the debtor located: individual

A

place of principal residence (sole proprietor = individual)

32
Q

Where is the debtor located: organization not registered with only one place of business

A

place of business

33
Q

Where is the debtor located: organization not registered with more than one place of business

A

place of its chief executive office

34
Q

Where is the debtor located: registered organization

A

place where registered

35
Q

3 requirements for filing to be sufficient

A
  1. name of debtor
  2. name of creditor
  3. description of collateral covered (more loose than agreement requirement)(generic description is fine)
36
Q

When is the name of the debtor sufficient?

A
  1. not seriously misleading

2. safe harbor

37
Q

Sufficient filing: name of debtor is not seriously misleading (individual) (2 tests)

A

only-if state: must use the name on the non expired drivers licenses

safe harbor state: safe if you use the name on the expired drivers license

38
Q

Sufficient filing: name of debtor is not seriously misleading (partnership)

A

name of partnership if available, if not use the names of the partners

best practice: give all the names

39
Q

Sufficient filing: name of debtor is not seriously misleading (organizations)

A

registereed name, not bda

40
Q

sufficient filing: Test for when an incorrect name on a filing will not be seriously misleading

A

if it comes up in the search for that individual’s name (this is dependent on the state’s standard search logic)

41
Q

Sufficient filing: when is collateral sufficiently identified?

A

generic descriptions are okay. descriptions like those in the security agreement are okay.

ex. an incorrect serial number for a tractor is okay if the debtor only has one tractor, but this would be insufficient if the number refers to another tractor that was not contemplated in the security agreement.

42
Q

How long is a filing sufficient to perfect a security interest? when does it need to be continued?

A

5 years. amendments must be made within 6 months of the filing expiring.

43
Q

when does a filing statement need to be amended?

A
  1. Debtor moves - 4 month grace period after move
  2. Debtor changes name - 4 month grace period after change
  3. Collateral moves - 1 year grace period
44
Q

Filing: Lapse

A

where there is a lapse, collateral ceases to be effective and interest is treated as unperfected.

45
Q

What collateral requires a Termination statement and when must it be filed?

A

consumer goods and if must be filed with 1 month after there is no obligation secured by the collateral or within 20 day after secured party receives an authenticated demand from the debtor

46
Q

In what collateral is perfection by possession available?

IGMC

A
  • negotiable instruments
  • goods
  • instruments
  • money
  • chattel paper
47
Q

Perfection by automatic perfection

A

requires a PMSI in consumer goods

48
Q

Perfection by Control is available for

A

a security interest in deposit accounts, letter-of-credit rights, electronic chattel paper (certificated securities, uncertificated securities, entitlements)

49
Q

3 ways to perfect in a deposit account by control

A
  1. secured party is the bank where the account is held
  2. debtor, creditor, and bank agree in an authenticated record that the secured party can control the account without further consent by the debtor
  3. secured party becomes the bank’s customer with respect to the deposit account.
50
Q

perfection by controlling certificated securities

A
  1. bearer form - certificated security is delivered to the secured party
  2. registered form - the debtor endorses the certificate to the secured party or registers it in the name of the secured party
51
Q

Priority: General Rule

perfected v. perfected

A

first to file or perfect gets priority

52
Q

Priority: General rule

unperfected v. unperfected

A

first to attach

53
Q

Priority: Perfected v. unperfected

A

perfected wins

54
Q

Priority: PMSI rule 1

When there is a PMSI in goods other than inventory or livestock

A

A PMSI is goods other than inventory or livestock, you have priority over other interests in the same goods or proceeds if your PMSI is perfected at the time the debtor receives the collateral or within 20 days thereafter

55
Q

Priority: PMSI rule 2

When there is a PMSI in inventory

A

Priority IF perfected at time of possession

AND

send authenticated notice to others who already have security interest within 5 years.

56
Q

Priority: PMSI v. PMSI

A

seller financed wins over financer financed

57
Q

Priority: Art. 9 v. non art 9 (general)

A

security interest follows the collateral

58
Q

Priority: Art. 9 v. non art 9 (authorized sale exception)

A

Creditor authorizes the sale free of competing interests. Can be express or implied

ex. selling inventory to an ordinary consumer (implied), ex. creditor doesn’t stand in the way of sale (acquiescence)

59
Q

Priority: Art. 9 v. non art 9 (buyer in ordinary course)

A

Buyer in ordinary course of business takes free of the security interest even if he knows the interest is perfected.

Buyer in ordinary course:

(1) good faith
(2) don’t know it violates secured person’s rights (not that you don’t know there is a security interest, but that you don’t know it violates) and
(3) seller deals in goods of that kind

60
Q

Priority: Art. 9 v. non art 9 (consumer to consumer sale rule) (garage sale rule)

A

buyer takes free of sec interest if he doesn’t know about the sec interest, buys for value, and for household purpose

UNLESS secured party files a statement before the sale

61
Q

Proceeds: General Rule

A

security interest continues in any identifiable proceeds

62
Q

Proceeds: Identifiable Commingled Funds test

lowest intermediate balance rule

A

if proceeds are depleted below the secured amount, the security interest on the funds on deposit abates accordingly.

you get the lowest amount in the commingled account from the time proceeds were deposited to the time this test is being administered.

Ex. Account has $1000 in it, proceeds are added

Secured Transactions (1 decks)

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