ST: Intro/Definitions Flashcards
Secured Transaction
Transaction intended to create a SI IN PERSONAL PROPERTY OR FIXTURE. Involves a sale on credit or a loan in which the seller of the lender obtains a lien on some or all of the D’s property as security for payment.
ST–> Look for:
(1) credit transaction and (2) an agreement that creates a lien in factor of the C in the D’s personal property to secure debt.
Debtor
The person who owes payment or performance of the obligation secured
Secured Party (SP)
A lender, seller, or other person in whose favor there is a security interest
Security Agreement
The agreement between the D and the SP THAT CREATES THE SI
Security Interest (SI)
An interest in personal property or fixture which secures payment or performance of an obligation. It is a contingent property interest in D’s collateral that the D grants to the C. When the contingency, which is DEFAULT occurs the property interest springs to life and C has rights in the D’s collateral
Collateral
The property subject to a SI. Collateral is property that the SP can repossess upon default to insure that the debt is paid.
Purchase Money Security Interest (PMSI)
Two Kinds:
1. Seller financed PMSI: SP sells D collateral on credit and retains a SI in the item sold.
2. Financer Financed PMSI: An enabling loan; a loan to D that enabled the debtor to buy specific collateral and the C takes SI in the specific collateral
NOTE: the credit or loan proceed MUST ACTUALLY be used to acquire collateral
C loans D $1000 for TV and takes SI in the TV. D actually uses the $1000 from C to buy the TV. Is there a PMSI?
Yes.
What if D had used the $1000 from C to go to Vegas and the D had instead purhcased the TV with $1000 from D’s own savings account? Does C have a SI in the TV? Is it a purchase money security interest?
YES–SI
NO PMSI
After Acquired Property Clause:
SP often will want to obtain a SI not only in D’s present property but also in property that the D will obtain in the future. SAs typically contain A-AP clause
Future Advance Clause
SP often contemplates making future loans to the D and wants to secure these future advances in the present SA. SA typically contains a future advancement clause in which case a new SA is not needed when a future advance is made.
Attachment
Deals with those steps legally required to tie the SP a SI in the collateral that is EFFECTIVE AS AGAINST THE D.
*A C is not a SC until attachment
Perfection
Deal with those steps legally required to give the SP an interest in the collateral that is EFFECTIVE AGAINST OTHER CREDITORS.
*process of giving public notice of the SI to the world.
Financing statement
Document generally used to provides public notice of the SI, and so to perfect the SI.
Goods
All things which are movable at the time the SI attaches, and include the unborn young of animas and growing crops. Goods also include fixtures.
Classification
- Consumer Goods– used or bought (personal use)
- Equipment - primarily in business
- Farm products–crops, livestock, supplies
- Inventory– held by person who holds them for sale or lease
A guitar purchased by HH as a present for his son Marvin?
Consumer good because it is bought for use primarily for family purposes and HH bought it for his son.
Guitar bought by SS, a professional musician to be used on tour
Equipment because it is used or bought for use primarily in business and SS will use this on tour.
Milk in the hands of a farmer (who got it from his cows)
Farm products, because products of crops or livestock in their unmanufactured state and milk is unmanufactured state in the hands of the farm owner.
Milk in the hands of the grocery store’s customer who is buying for his family’s consumption
Consumer goods because it is a good being purchased for household use and customer is buying for his family.
Automobiles held by a local car rental agency
Inventory. It is inventory when it is held by a person who holds them for sale or lease and the cars are being held by a local car rental agency.
Pencils and other stationary supplies used by Sears or some other large retailer in its credit offices
Can be Equipment–goods used or bought for use primarily in business (stationary is used in business) OR Inventory –materials being used or consumed in a business in a short period of time because pencils and stationary are materials that can be used up in a short time.
Semi-intangible and Intangible Property *
- Instruments
- Documents
- Chattel Paper
- Investment Property
- Accounts
- Deposit Accounts
- Commercial Tort Claims
- General Intangibles
Instruments
Negotiable instruments and any other writing which evidences a right to the payment of a monetary obligation, and which are in the ordinary course of business transferred by delivery with any necessary endorsement or assignment (does not include investment property)–
Things like checks, drafts, etc
Documents
a document which in the regular course of business is treated as evidencing that the person in possession of it is entitled to receive, hold, and dispose of the document and the goods it covers (eg. bill of lading, warehouse receipt)
Chattel Paper
Record or records which evidence both a monetary obligation and a security interest in or a lease of specific goods. A “record” is information that is stored in either a tangible medium or an intangible medium. Chattel paper that is stored in an electronic medium also is called “electronic chattel paper.”
Investment Property
Includes items such as stocks, bonds, mutual funds, and brokerage accounts containing such items.
Accounts
A right to payment [not evidenced by an instrument or chattel paper] (1) for goods; (2) for services.
(3) for real property, (4) for a policy of insurance issued or to be issued; (5) for a secondary obligation incurred or to be incurred; (6) for energy provided or to be provided; (7) for the use or hire of a vessel, (8) arising out of the use of a credit card, or (9) as lottery winnings. Health care insurance receivables are included.
A contractual obligation arising from a loan of money is NOT an account–it is a General intangible.
Deposit Accounts
An account maintained with a bank. NOTE: Art 9 only applies to NONCONSUMER DEPOSIT ACCOUNT and deposit accounts that are claimed as proceeds of collateral
*NOT personal bank accounts of consumers
Commercial Tort Claims
A claim arising in tort with respect to which the claimant is an organization or where the claimant is an individual and the claim arose in the claimant’s business or profession and does not include damages for personal injury or the death of an individual
General Intangibles
Any personal property not coming within the scope of the other definitions (eg. software, patent and trademark rights, copyrights, goodwill). A general intangible under which the account debtor’s principal obligation is a monetary obligation is a payment intangible.
*default for intangibles.
How would you classify: A promissory note?
Instrument
How would you classify: A stock certificate
Investment property
How would you classify: A receipt given to a farmer by a silo operator when the farmer stored her grain there
Document
How would you classify: A written K in which a car buyer purchasing on credit promises to pay the car dealership for the car and grants the dealership a SI in the car
Chattel Paper
How would you classify: Big T sells tires on credit. What its customers’ obligations?
Accounts
How would you classify: A hospital has patients who come in for treatment sign paperwork authorizing the hospital to seek payment from their health insurance coverage provider. Can the hospital use the monies due from the various health plans as collateral?
Yes as Accounts
How would you classify: Credit Card Company issues millions of credit cards to cardholders, who use them in transactions with merchants. Mercants the resulting paperwork to Credit Card Company for reimbursement (minus certain fees). Can Credit Card Company use these credit transactions as collateral?
Yes, as accounts.
How would you classify: The checking account that you have at your bank
Deposit account—> bank cannot take SI in personal propert
How would you classify: Patient and trademark rights, copyrights, goodwill, a tax refund claim, a liquor license, a commercial clamming license, a right to the return of a security deposit held by a LL.
General Intangibles!
How would you classify: A right to sue a corporation for wooing away a trusted employee
Commercial Tort Claim
How would you classify: A claim arising in tort that has been settled and reduced to contractual obligation to pay
Payment Intangible
How would you classify: A Computer Program
General Intangible (software itself). If in computer can be equipment, consumer good, etc.
Article 9 applies to?
- ANY transaction, regardless of its form, that creates a SI in personal property or fixtures by K.
- Agricultural lien;
- A sale of accounts, chattel paper, payment intangibles, or promissory notes (unless the sale is for the purposes of collection only, or the sale is part of the sale of a business).
- Certain consignments
- A Secured sale disguised as a lease.
D rents a stall at Ark Self Storage and stores his goods there. The rental agreement provides that Ark has “a contractual lien” on the contents of the stall, and that if D defaults in his rental payments, Ark has the right to enter the stall, seize the contents and sell them to satisfy the rental obligation. No mention is made of the creation of any security interest. Nevertheless, SI has been created that is governed by Art. 9
Any transaction.
