Term
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Definition
| Perfection is a means of publishing our interest and letting third parties know of its existence. Must have attached for perfection to exist; consideration must be given and the debtor must have rights in the collateral or rights to transfer title. |
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Term
| The 4 types of perfection |
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Definition
| Perfection by possession (applies to physical property), registration, control, and temporary perfection. In Alberta, the most important thing is the timing of registration. If you registered first, you get priority. |
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Term
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Definition
| What counts as perfection by possession? Creditor had allowed Raymond to keep using machinery, so the creditor was not considered ot have taken possession. It is necessary to take the physical property, or to render it inoperable in order to claim perfection by possession. |
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Term
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Definition
| CIBC claimed they had priority as they had perfection through possession. Both the receiver and the banks agent were the same person, so conflict of interest/bias was present. If same individual is acting as the debtor and creditor, they cannot take possession. Sperry was given priority as he had perfected his interest first. |
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Term
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Definition
| Leasor never registered their security interest in a car leased to Giffen. The lease agreement gave Giffen a proprietary interest in the car due to her rights of its use and possession. The trustee steps into the shoes of the bankrupt, and takes the car free and clear of the lessors security interest. this shows the importance of perfecting your interest. |
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Term
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Definition
| One party registered their interest, and the other didn't, but they gave notice of their interest. The PPSA overrules the bad faith doctrine, and notice is not considered relevant. The registered security interest takes priority. |
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Term
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Definition
| Licenses can be considered property under the PPSA if they represent rights to property, or rights to future streams of benefit. |
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Term
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Definition
- Secured > Unsecured
- Among secured: Registered > Unregistered
- Among registered/perfected/attached: Earliest
- Exception: PMSI allows you to leap ahead in priority line
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Term
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Definition
| CIBC registers interest in book debt. Crendall doesn't register interest in mortgage. Crendall gets priority as a mortgage is an "interest-in-an-interest in land". Land not covered by the PPSA. |
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Term
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Definition
| PMSI needs two things: allows the debtor to acquire rights/assets AND the debtor must use the loan towards the new rights/assets. Non-inventory PMSI must be registered 15 days after debtor acquires new rights/assets, and inventory PMSI must be registered before. For inventory PMSI, you must notify all other parties of your interest. |
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Term
| Agricultural Credit Corp. of Saskatchewan v. PettyJohn |
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Definition
| Proceeds can be traced, and the holder of a PMSI gets rights in proceeds up to the amount of the original collateral. |
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Term
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Definition
| Unisource registered a GSA, then decided to call it a PMSI. This case shows that it doesn't matter what you call an agreement, what matters is the parties intentions and what the parties do/intend with the agreement. |
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Term
| Clark Equipment of Canada Ltd. v. Bank of Montreal |
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Definition
| This case shows that a PMSI takes priority over a secured interest, as long as proceeds can be traced. It also shows that the description of collateral does not need to be extensive, but is valid as long as the collateral can be distinguished. PMSI is seperated from other interests held by the same party, and each interest in subject to its own specific priority rules. |
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Term
| Ellingsen (trustee of) v Hallmark Ford Sales |
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Definition
| Ellingsen bought truck from Ford, but they allowed him to drive the truck away before making any payments or signing any agreements. Ellingsen then goes bankrupt. The courts give the rights to the truck to Ford, as there was never actually a sale and ellingsen never had any rights in the truck. |
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Term
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Definition
| Governed by the Canadian Consumer Protection Safety Act. Businesses cannot knowingly sell or advertise goods that have been recalled. Products that are recalled are recalled at the expense of the seller. |
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Term
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Definition
| The BIA and CCAA govern bankruptcy proceedings. The CCAA is more useful for larger, more complicated businesses than is the BIA. Corporations must have in excess of $5 million in debt to qualify for the CCAA. The BIA is a statute driven process, where as the CCAA is court driven. Switches are permitted between the two at the beginning of the process, and requires restarting the entire process under the BIA, as its statute driven. |
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Term
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Definition
| Capacity is a person's legal ability to enter into a contract. When necessaries are sold and delivered to a minor or to a person who by reason of mental incapacity or drunkness is incompetent to contract, the minor or incompetent person must pay a reasonable price for the goods. This concept is important when considering whether an employee has the capacity to enter into a security agreement on behalf of a corporation, as it can be held void if the employee does not. |
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Term
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Definition
| Freedom of contract is the freedom for individuals or corporations to form contracts without government intervention. |
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Term
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Definition
| Translates to "meeting of the minds". Both parties to the contract must have the same understanding of the terms of the agreement for it to be valid. |
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Term
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Definition
| Consideration in the form of a promise is given by both parties, and they are both bound by the agreement. In contrast, unilateral agreements are those where one party promises to compensate the other party if the other party performs his/her obligations under the contract, and only if the other party performs his/her obligations. |
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Term
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Definition
| A contract is unconscionable if the contract unjust or extremely one-sided in favor of the person who has superior bargaining power. |
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Term
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Definition
| PPSA is a codifying system, meaning it creates a system of arranging laws or rules. Aimed at simplifying credit arragements. It balances the need to keep the credit system flowing, and the need to create certainty and predictability of creditors rights in the case of default; balance between protecting the rights of debtors and their ability to access credit, and the rights of the debtor in securing his assets and rights. |
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Term
| Differences between the CCAA and BIA |
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Definition
| Both the CCAA and BIA allow the business subject to the process to retain possession of their assets and remain in business during the stay of proceedings. The CCAA is court driven and allows more flexibility to corporations, making it more useful to larger, more complex businesses. The CCAA does not have a statutory time limit for filing a plan, where as the BIA has a 6-month time limit. Under the BIA, if a proposal is rejected, the business is automatically declared bankrupt. The CCAA does not have this automatic provision. Proceedings under the BIA are obtained by filing a notice of intention with an administrative officer. The CCAA requires a court order to begin proceedings. Costs are lower under the BIA as it contains a detailed code of procedures and mandates a shorter time frame, which lead to fewer court applications. The CCAA requires debt to be in excess of $5 million, where as the BIA has no such restrictions. |
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Term
| What are the three steps to create a security interest under the PPSA and what is needed for each step |
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Definition
| To create a security interest there must be agreement, attachment and perfection. Agreement must be consensual and entered into by a party with the capacity to enter such an agreement. It is an agreement that creates a security interest or evidence in writing of such an agreement. For attachment to be created, the debtor must have rights in collateral or the power to transfer rights, and the secured party must give value. Perfection is created through possession, registration, control, or temporary possession. |
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Term
| Difference between a security agreement and a security interest |
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Definition
| A security interest is an interest securing payment or performance. A security agreement is an agreement that creates a security interest, or evidence in writing of such an agreement. |
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Term
| Fraudulent Conveyance and Preference |
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Definition
| Fraudulent conveyance is the transfer of property to a party (usually a family or friend) in an attempt to have the property excluded as property subject to bankruptcy proceedings. Fraudulent conveyance is usually characterized by transfers for amounts significantly below market value. Fraudulent preference is the tranfer of property to a party that gives said party more benefit than they would otherwise have received. |
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