Term
| How does a secured interest in personal property become enforceable against the debtor? How does it become enforceable against other interest holders? |
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Definition
| A secured transaction becomes enforceable against the debtor when it attaches 9-203 and enforceable against other interest holders when it is perfected. |
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Term
| What is required for a security interest to attach? |
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Definition
1. Value must be given
2. The debtor must have rights in the collateral
3. The debtor must authenticate a security agreement OR the collateral of a certain type and controlled by the secured party. |
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Term
| What is required for an authenticated security agreement? |
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Definition
1) The debtor must sign or provide a symbol that indicates authentication
2) The security agreement must provide a description of the collateral. |
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Term
| What is required for an appropriate description of collateral in an authenticated security agreement? |
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Definition
| A collateral description is sufficient so long as a it reasonably identifies what is described 9-108(a) Description by UCC collateral type is permissible. |
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Term
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Definition
9-102(a)44
Goods that are bought primarily for personal family or household use |
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Term
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Definition
| 9-102(a)34 Goods related to an actual farming operation either as product or implement of the operation. |
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Term
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Definition
9-102(a)48
Goods that are leased, sold, furnished under contract or raw materials consumed in a business AND are not farm products. |
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Term
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Definition
9-102(a)33
The "catch all" category for goods. Equipment is goods that are something other than consumer goods, farm equipment or inventory. Materials used in a business over a long time are generally equipment. |
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Term
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Definition
9-102(a)2
The right to receive payment of a monetary obligation. |
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Term
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Definition
9-102(a)47
A negotiable instrument or any other writing that evidences a right to payment including promissory notes.
DOES NOT INCLUDE--investment property, letters of credit, writings that evidences a right to payment by way of a credit card. |
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Term
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Definition
| A record or records that evidence a monetary obligation and a security interest in specific goods |
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Term
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Definition
9-102(a)42
Anything other than the enumerated goods or intangibles. It includes "payment intangibles" under 9-102(a)61. |
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Term
| When does a security interest attach to after-acquired property? |
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Definition
1) When the security agreement includes an after-acquired property clause subject to the normal rules of contract interpretation
2) The jurisdiction recognizes the Filtercorp exception and the inventory falls into the scope of the exception. |
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Term
| What is the Filtercorp exception? |
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Definition
| Filtercorp is a minority jurisdiction rule whereby after-acquired property clause can be read into a security agreement if the security agreement is for inventory and the inventory in question is of a rapidly turning over type. |
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Term
| How are proceeds effected by a security interest? |
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Definition
| A security interest in collateral automatically attaches to the identifiable proceeds of collateral 9-315a(2). |
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Term
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Definition
| 9-102(a)64 Proceeds are whatever is acquired upon the sale, lease license or other disposition of collateral. Whatever is collected or distributed on account of the collateral. To the extent of the value of the collateral, claims arising from the loss of the collateral. To the extent of the collateral, insurance payable by reason of loss or damage or collateral. |
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Term
| When are proceeds identifiable? |
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Definition
| Proceeds are identifiable when they can be identified by some recognized of tracing |
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Term
| When are proceeds not identifiable when commingled with other property? |
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Definition
| Proceeds commingled with goods are still identifiable to the extent that they can be traced, and are NOT goods. |
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Term
| Commingled goods definition |
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Definition
| 9-336(a) commingled goods are goods that are physically united with other goods in such a manner that the identity of the goods are lost. |
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Term
| How does a security interest attach to commingled goods? |
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Definition
| If the goods are commingled in such a way that the identity is lost, the security interest attaches to the product mass. |
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Term
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Definition
| An accession is when goods are affixed to other goods in a manner whereby the identity of the goods are not lost. The security interest continues in the collateral that is part of the accession. |
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Term
| How can the requirement of an authenticated security interest be satisfied? |
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Definition
| 1) Authenticated security interest with description of collateral. 2) Composite document rule 3) Debtor's control of certain types of collateral. |
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Term
| What is the composite document rule? |
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Definition
| A court may find that there is an authenticated security agreement when two or more documents, authenticated by the debtor, in combination with one another objectively evidence an intent between the parties to create security interest. |
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Term
| For what types of collateral can the secured party satisfy the security agreement requirement by acquiring control of the collateral? |
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Definition
Deposit accounts
Investment property
Letter of credit rights
Electronic Chattel Paper
Electronic documents of title |
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Term
| What is the value requirement? |
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Definition
| The value requirement mandates that the secured party provide to debtor something of value "Consideration" in simple contract terms. The security agreement must indicate what obligation is secured, if not a specific value. 9-203(c). This includes future advances 9-204(c) |
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Term
| What is the rights in collateral requirement? |
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Definition
| The requirement that the debtor have rights in the collateral essentially requires the debtor have either ownership rights in the collateral, or at very least the rights to transfer or convey the property. |
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Term
| What types of security interests attach automatically? |
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Definition
1) Investment property--when collateral is a securities account, the security agreement attaches to the all securities and entitlements in the account.
2. Same for commodities
3. When rights in a secured obligation are used as collateral, the security agreement automatically attaches.
4. to a 3rd party guarantor of an obligation
5. Rights in a secured obligation |
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Term
| To what transactions does U.C.C. Article 9 apply? |
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Definition
| Article 9 applies to any secured transactions, regardless of form. |
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Term
| When does a contract intended to be a lease fall into article 9 as a secured transaction? |
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Definition
When the lease includes
1) A term that exceeds the useful life of the goods.
2) the lease makes it unlikely that the the goods will revert back to the leasor. |
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Term
| When does article 9 apply to true sales? |
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Definition
| Article 9 applies to the certain true sales. This includes the sale of accounts, chattel paper, promissory notes, or sales of payment intangibles 1-201(b) |
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Term
| When is Article 9 inapplicable to true sales of payment intangibles, accounts, promissory notes or chattel paper? |
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Definition
1) When the sales of the payment intangibles derives from the sale of a business from which they arose.
2) Does not apply when the sales are assignments for collection purposes only. |
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Term
| When are parties barred from creating an Article 9 security interest? |
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Definition
Once a debtor files a bankruptcy petition, an automatic stay prevents any attempt to create a security interest including:
1) Property acquired, even if it would normally be covered by an after-acquired property clause.
2) Security interest WILL attach to proceeds generated by collateral so long as the rights in the collateral were acquired by the secured party prior to the bankruptcy petition. |
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Term
| What is the perfection step? |
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Definition
| Perfection is required in order to enforce the secured party's interest in the property against other secured parties. |
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Term
| Generally, how can a secured party perfect a security interest? |
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Definition
1) Filing with state office
2) Alternative filing requirements
3) Possession/Control
4) Automatic perfection |
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Term
| How may a perfect a security interest by filing? |
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Definition
| Secured party may perfect by filing a financing statement with the appropriate office, usually the secretary of state's office. |
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Term
| What are the essential elements of a valid statement? |
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Definition
1) Debtor's name.
2) Secured party's name
3) Description of the collateral |
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Term
| How must a debtor's name be listed on a financing statement? |
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Definition
| The name of the debtor must be listed as the correct name in the public records of the debtor's jurisdiction. A name listed incorrectly is still effective so long as the error is not "seriously misleading." 9-506. |
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Term
| When will a listing of debtor's name be seriously misleading. |
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Definition
| Generally, if a search by the debtor's name as listed in public records will turn up the correct debtor, the listing will not be seriously misleading. |
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Term
| What the the required, but "non-essential" elements of a financing statement. |
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Definition
1) Debtor's address
2) Debtor's jurisdiction of organization.
3) Organizational number
4) Secured party's address.
5) Identity of business entity |
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Term
| When does a secured party have the authority to file the financing statement? |
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Definition
| A secured party has valid authority to file once the debtor authorizes the filing. The debtor authorizes the filing by debtor's authentication of the security agreement. |
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Term
| What is the effect of a secured party filing the financing statement prior to having authority? |
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Definition
| A debtor may file a financing statement prior to having valid authority. The financing statement is giving retroactive effect once the security agreement is authenticated or other authority is given. |
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Term
| For how long is a filing statement effective? |
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Definition
| In general, filing is valid for 5 days after the date of filing. Once the 5 years lapses, the security interest is unperfected and secured party may lose out to other interests. |
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Term
| How may a secured party avoid a lapse in perfection? |
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Definition
| Secured party may avoid a lapse in the perfection by filing a continuation statement. |
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Term
| When can a secured party seeking to extend the perfection of his interest file a continuation statement? |
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Definition
| Secured party may file a continuation statement within 6 months of the anticipated lapse of the financing statement 9-102(a)(27). |
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Term
| When does article 9 defer to other forms of filing a security interest? |
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Definition
| Article 9 defers to Federal filing requirements for certain types of collateral and to state Certificate of title statutes (esp. for motor vehicles). Article 9 also defers to other miscellaneous state requirements for specified collateral. |
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Term
| What collateral types are subject to federal filing rules? |
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Definition
1) Civil Aircraft
2) Railroad cars, locomotives, or "rolling stock."
3) Registered copyrights, but not trademarks or trade names. |
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Term
| What collateral MUST be perfected by possession? |
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Definition
| Money MUST be perfected by possession. |
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Term
| What collateral CAN be perfected by possession, among other methods. |
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Definition
| Goods, instruments, tangible documents of title, tangible chattel paper. |
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Term
| How may a secured party perfect by possession? |
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Definition
1) Personal possession.
2) Possession through an agent.
3) Possession by a 3rd party bailee. |
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Term
| How may a secured party perfect collateral by possession through an agent? |
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Definition
| A secured party may possess through any agent 9-313. But the debtor may NOT serve as an agent for this purpose. |
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Term
| How may a secured party perfect by possession if the collateral is in the hands of a 3rd party bailee? |
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Definition
1) If bailee has not issued a document of title, getting the bailee to acknowledge that it holds collateral for secured party's benefit in an authenticated statement.
2) If there is a document of title, getting the bailee to issue the document of title in the name of the secured party or notiftying bailee of the secured party's interest.
3) If bailee has issued a negotiable document of title, secured party must either file against the document of title or take possession of the document of title. |
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Term
| What collateral types require a secured party to perfect by control? |
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Definition
| Deposit accounts and letter of credit rights as original collateral. |
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Term
| For what collateral types is perfection by control a non-mandatory option? |
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Definition
| Investment property, electronic chattel paper and electronic documents of title. |
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Term
| How does a secured party gain control of a deposit account for perfection purposes? |
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Definition
1) The secured party IS the bank at which the account is maintained.
2) The debtor, secured party and bank agree in an authenticated statement that the bank will comply with secured party's instructions regarding the disposition of the contents of the account.
3) The secured party becomes the bank's customer with regard to the account, even if the debtor maintains access to the funds. |
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Term
| How can a secured party gain control of letter of credit rights as original collateral? |
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Definition
| A secured party gains possession to the extent of any right to payment by the issuer if the issuer has consented to an assingmentof the proceeds of the letter of credit. |
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Term
| How is perfection by control limited? |
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Definition
| Perfection by control is limited in that the perfection is maintained by maintaining control of the collateral. Relinquishing control will cause perfection to be lost. However, a secured party may maintain control even if the debtor still has access to the collateral. |
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Term
| When does a security interest perfect upon attachment. |
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Definition
| A security interest perfects upon attachment when it is a purchase money security interest for in consumer goods. |
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Term
| When is a security interest a purchase-money security interest? |
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Definition
| A purchase money security interest is a purchase-money obligation secured by purchase-money collateral. |
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Term
| What is a purchase-money obligation? |
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Definition
| A purchase money obligation is an obligation incurred by the debtor in order to acquire rights or use of the collateral, if in fact so used. |
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Term
| What is purchase money collateral? |
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Definition
| Purchase money collateral is collateral that secures the purchase money obligation. |
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Term
| When does a secured party in goods enjoy the benefit of temporary automatic perfection? |
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Definition
| 1) When the collateral is goods and the secured party makes the goods or documents representing the good available to the debtor for either the ultimate exchange or sale or for loading/transporting/shipping. |
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Term
| When does a secured party in a security certificate or instrument enjoy the benefits of temporary automatic perfection? |
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Definition
| When the instrument is presented to the debtor for ultimate sale/exchange or presentation, collection, enforcement, renewal, registration or transfer. |
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Term
| When does a secured party in health care insurance receivables enjoy the benefit of a temporary automatic perfection? |
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Definition
| When the receivables are being assigned and the assignee is the to the health care provider. |
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Term
| When does a security interest in a promissory note subject to an automatic perfection? |
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Definition
| When a security interest is in a promissory note that has been sold. |
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Term
| Where must a secured party file a financing statement? |
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Definition
| The general rule is that the financing statement must be filed in the debtor's jurisdiction, with several recognized exceptions |
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Term
| When will a secured party need to file a financing statement in the jurisdiction in which the collateral is located? |
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Definition
1) When the secured party perfects by possession.
2) When the collateral is fixtures or real estate related and the party is perfecting by fixture filing.
3) When the collateral is timber to be cut. |
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Term
| What are the exceptions to the debtor-jurisdiction rule based on collateral type? |
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Definition
1)9-303: When collateral is covered by a certificate of title, must be filed in the state that issued the certificate of title.
2) When collateral is deposit account, the local law of jurisdiction governs perfection.
3) When the collateral is investment property, the local law of the state where the security certificate is located governs perfection.
4) When collateral is letter of credit rights the local law of the issuer's jurisdiction governs perfection. |
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Term
| Where is an individual debtor located for perfection purposes? |
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Definition
| Place of principal residence. |
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Term
| Where is a registered organization chartered by a state located for perfection purposes? |
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Definition
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Term
| Where is a registered organization chartered by the US located for perfection purposes? |
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Definition
| Place designated by the US, or DC if no place is indicated. |
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Term
| Where are Organizations having a CEO in a non-filing jurisdiction located for perfection purposes? |
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Definition
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Term
| Where is a an organization having a CEO in a non-filing jurisdiction located for perfection purposes? |
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Definition
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