Security Interests & Agreements Flashcards
What law governs secured transaction?
UCC Art. 9
In 2 steps, how does Secured Transactions generally work?
(1) one debtor receives something from a creditor (or secured party) without paying immediately;
(2) to ensure debtor will pay eventually, debtor gives creditor rights to a piece of debtor’s property as collateral (security interest).
What is a Secured Interest and what does it do?
It’s a right given to creditor in debtor’s property.
This right allows the creditor to take or sell property if the debtor fails to fulfill the credit obligation (debtor doesn’t pay creditor).
What is a collateral?
Property in which creditor obtains rights.
Where is a security interest memorialized in?
In a security agreement.
What is Attachment and what happens when an SI attaches?
“…collateral is used”
Process by which collateral is used to secure the creditors interest.
Once a SI attaches, creditor has right to take the collateral if debtor defaults.
What is Perfection?
Process by which creditor secures her rights in the collateral as it relates to third parties.
When does perfection arise and why is it important?
Arises where third parties also have an interest in the same piece of collateral.
Creditor must perfect her SI to have a greater interest in the collateral over third parties.
Does UCC 9 apply to any transaction intended to create an SI in property and fixtures?
Yes.
What are the 4 instances in which Art 9 does not apply to transactions?
(1) Transactions governed by the government
(2) real property transactions involving interests or liens on land (does not apply to mortgages on real property).
(3) assignment of tort claims (except with respect to proceeds and priority in proceeds from tort claims).
(4) assignment of claims for wages
What’s the difference between Secured Transactions vs. Contracts?
Contract law and UCC Art 2 are about rules governing transactions of goods and services.
Secured transactions and UCC Art 9 are about protecting or securing the exchange of goods and services, not the rule’s governing how one can make such an exchange.
What are the 4 types of Tangible goods covered as collateral?
Farming Goods: items used/produced in farming (crops).
Inventory Goods: goods kept for sale or lease.
Consumer Goods: items used for personal household purposes.
Equipment: catch all for tangible items that do not fit above (factory machinery).
Remember F.I.C.E
What are the 5 types of Intangible goods covered as collateral?
Accounts: right to payment not evidenced by an instrument or chattel (accounts receivable). For example, money owed to a dentist after seeing a patient.
Chattel Paper: record evidencing an obligation and SI in goods or a lease of goods (promissory note).
Instruments: writings representing the right to be paid money (checks).
Documents: writings representing the right to receive goods (receipts).
General Intangibles: patent rights, software.
Remember A.C.I.D.-G
What are consignments?
Transactions where an owner of goods/consignor (manufacturer or wholesaler) delivers goods to a merchant (consignee) for the purpose of sale.
When must a Consignor (wholesaler or manufacturer) need comply with Art 9 to protect her interest in consigned goods?
(1) consigned goods are $1000 or more
(2) consignor did not use goods for personal/family/household purposes
(3) consignee deals with goods of that kind, is not an auctioneer, and is not known as typically selling those types of goods.
