Secured Transactions MEE Flashcards
Security Interest
—an interest in personal property or fixtures that secures payment or performance of an obligation
Agreement
a consensual agreement that provides for the SI; the substance of the transaction controls, not the form
Secured Party
—the person in whose favor the SI is created under the security agreement
Obligor
—the person who must pay (or otherwise perform) with respect to the obligation that is secured by the SI
Debtor
the person who has interest, other than the SI or other lien, in the collateral, such as its sole owner (the debtor is usually also the obligor)
Collateral
property subject to the SI
Goods
anything that is moveable at time that the SI attaches; the debtor’s principal use at the time the SI attaches determines the class of the goods
Consumer goods
—goods acquired primarily for personal, family, or household purposes
Farm products
—goods that are crops or livestock or products of crops or livestock, and supplies that are used or produced in farming
Inventory
—goods, other than farm products, held for sale or lease; are furnished under a service contract; or consist of raw materials, works in process, or materials used or consumed in a business in a short period of time (e.g., fuel)
Equipment
—catchall class; consists of goods that are not consumer goods, farm products, or inventory
Software
—software embedded in goods is treated as part of goods in which it is embedded; software not embedded in goods is treated as a general intangible
Other collateral
—classification is determined without reference to the debtor’s use
Chattel paper
one or more records that evidence both (i) a monetary obligation and (ii) a security interest in specific goods or a lease of specific goods
Document
—a document of title, which confers on the holder ownership rights in goods held by a bailee
Instruments
encompasses both negotiable and nonnegotiable instruments
Investment property
—includes both certificated and uncertificated securities, as well as securities accounts
Accounts
—the right to payment for property sold, leased, or licensed, or services rendered
Commercial tort claims
—excludes tort claims by an individual for personal injury or death
General intangibles
a residual category; e.g., copyrights
Eligible Transactions
- General rule—Art. 9 governs a transaction that creates an SI in personal property or a fixture
- Leases—covered under Art. 9 when the transaction, although in the form of a lease, is in substance a secured transaction
- Consignments—if subject to Art. 9, the consignor’s SI in the consigned goods is treated as a PMSI in inventory
- Liens—generally not generally subject to Art. 9
- Agricultural liens—unlike other liens, generally subject to Art. 9
- Purchases—generally, the sale of personal property is not subject to Art. 9
- Real property transactions—not generally subject to Art. 9; but can apply to an SI in a secured obligation (e.g., a promissory note) even though the obligation is itself secured by a transaction or interest to which Article 9 does not apply (e.g., a real property mortgage)
Attachment of SI
In general—an SI that is enforceable against the debtor with respect to the collateral is said to have “attached” to the collateral
- Requirements—(i) value given by the secured party; (ii) the debtor has rights in the collateral; and (iii) the debtor has authenticated a security agreement that describes the collateral, or the secured party has possession or control of the collateral
Value given by the secured party
can be consideration sufficient to form a contract, extending credit, accepting delivery under a preexisting contract, or in satisfaction of a preexisting claim
- Future advances—may also be secured by collateral
- New value—when new value is required to perfect a security interest or have priority, it can consist of:
* Money;
* Money’s worth in property, services, or new credit; or
* Release by a transferee of an interest in property previously transferred to the transferee.
Debtor’s rights in collateral
- Generally—the SI attaches only to the rights that the debtor has in the collateral
- Consignments—if the consignor retains title to the consigned goods, the consignee does not have rights in them