Term
| Creation of a security interest |
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Definition
- Security agreement
- Secured party taking possession of the collateral |
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Term
| What is a security agreement? |
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Definition
- In writing
- Contain a "granting" clause
- Description of collateral
- Signed by debtor |
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Term
| What must happen for security interest to "attach"? |
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Definition
- Security agreement or possession of collateral
- Value must be given
- Debtor must have rights in collateral |
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Term
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Definition
- Goods (consumer, inventory, farm products, equipment)
- Tangible intangibles (instruments, documents, chattel paper)
- Intangible intangibles (accounts, general intangibles) |
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Term
| When repossessing the collateral, the creditor must: |
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Definition
- Account to debtor for surplus
- Sale must be commercially reasonable (notice if possible)
- Sell collateral if consumer goods, unless debtor agrees creditor can keep |
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Term
| If debtor wishes to redeem, redemption must happen before: |
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Definition
- collateral has been sold
- contract for sale has been made
- secured party has accepted collateral in satisfaction of obligation |
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Term
| A PMSI (purchase money security interests) is: |
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Definition
- taken or retained by seller of collateral to secure all of parts of its price
OR
- taken by person who gives value to enable debtor to purchase collateral (if value is in fact so used) |
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Term
| Secured party may perfect by: |
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Definition
- Taking possession of the collateral
- By filing
- Perfection is automatic when security interest attaches if interest is PMSI in consumer goods |
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Term
| Automatic temporary perfection: |
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Definition
- For 21 days after security interest attaches for instruments/documents
- For 20 days after debtor receives proceeds if collateral proceeds
- 20-day grace period for PSMIs - perfection reverts back to security interest attachment |
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Term
| Financing statement or security agreement must contain, to perfect: |
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Definition
- Names and addresses of debtor and creditor
- Description of collateral
- Signature of debtor |
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Term
| Priority rules - secured parties vs. other creditors w/o security interest: |
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Definition
"First in time, first in right."
- If secured party perfected first, ze prevails.
- If lien attached first, lien creditor prevails.
- If no perfection or attachment, secured party prevails |
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Term
| Priority rules - secured party vs. other secured parties (not PMSI): |
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Definition
"First in time, first in right."
- Both interests perfected, priority dates from filing/perfection.
- If only one perfected, perfected interest wins.
- When neither perfected, first in time (from attachment). |
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Term
| Priority rules - PMSI vs. other secured parties: |
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Definition
- PMSI prevails over all other security interests if perfected w/in 20 days of debtor receiving possession
- If collateral is inventory, PMSI prevails over all other security interests, if PMSI person perfects before debtor receives possession and gives notice in writing to all other secured parties. |
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Term
| Priority rules - secured parties vs. collateral transferees: |
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Definition
- If purchased before interest perfected, purchaser wins.
- Buyer in the ordinary course takes free of all security interests, even if perfected.
- Consumer buyers take free and clear of all unfiled security interests |
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Term
| Definition of "buyer in the ordinary course" |
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Definition
| One who buys, in good faith and without knowledge that sale is in violation of security interest, in the ordinary course of business from a person in the business of selling goods of that kind. |
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