UCC Flashcards
UCC Art. 1
Defines basic terminology.
UCC Art. 1: Security Interest
An interest in personal property or fixtures, which secures payment or performance of an obligation.
· Consensual encumbrance on personal property or fixtures usually made in connection w/ a loan
· Protects creditor in cases where the debtor is unable or unwilling to pay a debt when it comes due
· Security interest induces creditor to extend financing
UCC Art. 9: GENERAL
Provides a comprehensive set of rules that, if followed, permit creditors to look to particular personal property of insolvent debtors to help satisfy outstanding obligations.
UCC Art. 1: Debtor
Anyone that has an ownership interest in collateral.
· Also includes particular sellers
–> SUCH AS: Those selling accounts OR promissory notes.
· Does not need to have an obligation of payment or other performance ALTHOUGH DEBTORS CAN BE OBLIGORS.
UCC Art. 1: Obligor
Anyone that owes payment or other performance of an obligation.
· Responsible for paying back the debt incurred from a creditor
–> SUCH AS: Someone guaranteeing a loan, parent co-signing a car loan
· Doesn’t necessarily need to be responsible for the whole obligation
–> May take responsibility for part of a payment or other performance obligation
UCC Art. 1: Creditor
One to whom a debtor or obligor owes payment or performance of an obligation.
· May refer to a:
–> General creditor;
–> Secured creditor;
–> Lien creditor; OR
–> Any representatives of creditors.
UCC Art. 1: Insolvent Debtor
Unwilling or unable, in the ordinary course of business, to meet its financial obligations as they become due
· Someone that cannot pay their debts
· BUT if there’s a BONA FIDE DISPUTE of what is owed
–> AND the debtor ceases to pay for that reason
= is NOT considered insolvent
UCC Art. 1: Money
Actual currency adopted by a domestic of foreign government.
· NOT cryptocurrency b/c hasn’t been adopted as actual currency
UCC Art. 1: Bank
Entity engaged in the business of banking
· Providing financial services
Secured Transactions: GENERAL
The mutually consensual commercial transaction creating a security interest in personal property.
UCC Art. 9: Agricultural Lien
Statutory lien that is non-consensual.
· Statutory lien on farm products.
· Secures payment OR performance of an obligation relating to goods or services provided in connection w/ debtor’s farming operation.
Four Types of Commercial Transactions: UCC Art. 9
- Security Interest in Fixtures
- Agricultural Lien
- Consignments
- Sale of Certain Types of Quasi-Tangible and Intangible Assets
UCC Art. 9: Fixtures
Tangible goods that are intertwined with real property
· So related to particular real property that it makes sense for an interest in them to arise under real property law
UCC Art. 9: Consignments
Marketing procedure whereby an owner of goods (consignor) turns the goods over to a retailer (consignee) for sale to the public.
· Consignor retains control over the terms of the retail sale
· MUST satisfy very specific requirements to qualify as a consignment under Art. 9
UCC Art. 9: Statutory Liens
Liens that arise by operation of law.
· Art. 9 generally doesn’t include statutory liens because liens are NON-CONSENSUAL
UCC Art. 9: Consignments: REQUIREMENTS
- Consignor MUST delivery goods to a merchant NORMALLY DEALING IN GOODS OF THAT KIND under a name other than the name of the person making the delivery.
- Merchant MUST NOT be an auctioneer
–> NOR the merchant generally known by its creditors to be substantially engaged in selling the goods of others. - Each delivery of goods MUST have an aggregated V of $1k OR MORE AT THE TIME OF DELIVERY.
- Must NOT be classified as consumer goods BEFORE delivery.
Collateral
Personal property that is subject to a:
· Security Interest; OR
· Agricultural Lien
UCC: Goods
All things that are movable at the time the security interest attaches to the goods.
UCC: Goods: CATEGORIES
How the DEBTOR uses the collateral will determine if:
1. Consumer Goods
2. Farm Products
3. Inventory
4. Equipment
Consumer Goods
Goods that are used primarily for personal, family, or household purposes.
· Purchased for individual consumption
Farm Products
Goods that are used or produced by a farmer.
· Include farmer’s crops, aquatic goods, livestock, and supplies
–> Also include PRODUCTS of crops AND livestock
Farmer
A debtor is a farmer if the fact pattern indicates that the debtor is engaged in a farming operation.
Inventory
Goods that are leased, held for sale or lease, or furnished by a person under a contract of service.
· Includes goods that are RAW MATERIALS or materials used or consumed in a business
–> Things sold, leased, or quickly consumed in the debtor’s business
· Does NOT include farm products
Equipment
CATCH-ALL for goods. If it isn’t:
· Inventory
· Farm Products
· OR Consumer Goods
==> EQUIPMENT
UCC: Quasi-Tangible Property
Tends to consist of important pieces of paper recording obligations or V.
UCC: Quasi-Tangible Property: CATEGORIES
- Instruments
- Chattel Paper
- Documents
- Investment Property
- Letter-of-Credit Rights
Instrument
A writing evidencing a right to payment of monetary obligation.
· i.e. Promissory Note
Chattel Paper
A record evidencing a monetary obligation PLUS a security interest in SPECIFIC GOODS.
Quasi-Tangible Property: Documents
Record of title
· Could be a receipt of title
Investment Property
Stocks and bonds
· Includes company stock, as well as municipal and treasury bonds
Letter-of-Credit Rights
A right to payment or performance manifested in a written or electronic record
· Recognizable b/c of letter format (bank letterhead)
· Letter will generally inform the potential beneficiary that the debtor has a particular amount of money available for its use, whether or not the beneficiary has yet demanded payment OR performance from debtor
Collateral: CATEGORIES
- Goods
- Quasi-Tangible Property
- Intangible Property
Intangible Property: GENERAL
Impossible to touch and move and cannot be made tangible by recording it on paper.
Intangible Property: CATEGORIES
- Accounts
- Deposit Accounts
- Commercial Tort Claims
- General Intangibles
Accounts
Right to payment of a monetary obligation.
· AKA Accounts Receivable
· May be created when property is:
–> Sold
–> Leased
–> Assigned
–> OR otherwise disposed of
–> AS WELL AS when services are rendered OR expected to be rendered
Deposit Accounts
A bank account.
Commercial Tort Claims
A claim arising in Tort.
· MUST be EITHER:
–> An organization OR an individual; AND
–> the claim itself MUST be tied to the claimant’s business or profession
–> does NOT include individual’s personal injury OR death
General Intangibles
CATCH-ALL. If it isn’t a Commercial Tort Claim, Deposit Account, or Account, it’s GENERAL INTANGIBLES.
Attachment
Means the SI is ENFORCEABLE against the debtor.
4 Statutory Requirements for a Security Interest to Attached
- The creditor MUST provide some V to the debtor;
- The debtor MUST have rights in the collateral;
- The debtor MUST authenticate a written agreement that grants the creditor rights in specific collateral; AND
- The written agreement MUST reasonably describe the collateral.
Attachment Requirements: V to the Debtor
Met when the secured party extends credit to the debtor OR obligates itself to do so in the future.
Attachment Requirements: Rights to the Collateral
Debtor is the legal owner of the personal property that it wants to use as collateral
· T4: It MAY use that property as collateral in a secured transaction.
Attachment Requirements: Authenticating the Security Agreement
Most common is the debtor to authenticate an agreement, normally a security agreement, that provides a reasonable description of the collateral.
· MUST indicate their assent to the transaction through measures BUT NOT A STRICT SIGNING REQUIREMENT
Attachment Requirements: Description of the Collateral
Security agreement MUST provide a description of the collateral.
· More than SUPERGENERIC DESCRIPTION
· ENOUGH to descript the class of collateral.
