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25 Cards in this Set
- Front
- Back
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Three questions of secured transactions?
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1. Is there a security interest?
2. Has the creditor successfully attached? 3. Has the creditor perfected? |
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How do you classify tangible goods for article 9?
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Look for the primary use in the hands of the Debtor - subjective test
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How does a security interest attach?
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Three requirements: VCR
-Value must be given by creditor -Contract (security agreement) must evidence secured transaction -Rights - debtor must actually have rights in the collateral to give |
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What must the security agreement contain?
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It must have the signature of debtor, and it must reasonably identify the collateral
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What is a floating lien?
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A security interest in collateral acquired after the agreement is signed
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How does a creditor perfect their security interest?
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Must put the world on notice of the interest:
1. by taking possession of the collateral 2. PMSI - automatically perfected 3. by filing financing statement with debtor's and creditor's contact information, and description of collateral |
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What is the order of priority?
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1. Buyer in Ordinary Course
2. Perfected attached creditor 3. Lien Creditor 4. Buyer not in the ordinary course 5. Unperfected attached creditor 6. General Unsecured Creditor |
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If multiple PACs, who wins?
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Geneally the PAC that filed first, but note PMSIs can beat earlier PACs
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What must PMSI holders do to beat other PACs (like after-acquired collateral financiers - AACFs)?
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If equipment, PMSI holder must simply file within 20 days of debtor's possession.
If inventory, PMSI holder must file and notify AACF BEFORE debtor takes possession. |
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If debtor defaults, what may a secured creditor do?
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1. Self-help repossession is available, BUT must not breach the peace = any repossession made over the protest of the debtor
2. repossession by judicial action 3. Strict foreclosure - tkae the collateral and forgive the debt 4. Sale 5. Get a deficiency judgment |
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How does a secured creditor strictly foreclose?
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If Consumer goods: strict foreclosure proposal is sent to debtor and secondary obligors
Otherwise: proposal is sent to debtor, secondary obligors, and other known creditors *If any of the notified parties objects within 20 days, strict foreclosure will not be allowed - collateral must be sold *60% rule - if debtor has paid off 60% of loan for consumer goods, strict foreclosure is not allowed |
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How must sales of collateral be conducted?
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All aspects of the sale must be COMMERCIALLY REASONABLE
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What is the debtor's limited right of redemption?
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Debtor has right to redeem until collateral is sold or strictly foreclosed.
Debtor must pay missed payments plus interest and reasonable expenses Also look for acceleration clause - debtor may have to pay off in full to redeem |
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What is the commercial paper bright-line rule?
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When a negotiable instrument is duly negotiated to a holder in due course, the holder in due course takes the instrument free of all claims to it, free of personal defenses and subject only to real defenses
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What are the two types of negotiable instruments?
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Promissory notes and Drafts
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How does one identify a promissory note?
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It contains an affirmative promise to pay money by a maker to a payee
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What is a draft?
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A check. It contains an order or command by a drawer to a drawee to pay a payee
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What is necessary to qualify as a negotiable instrument?
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Must be a signed writing, payable to order or bearer for a sum certain, containing an unconditional promise or order to pay, be payable on demand or at a definite time, and payable in currency
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What is signature liabilty?
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When you sign an instrument, you promise to pay, and that is how you get sued.
Also applies to indorsers, unless they sign "without recourse" |
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What is warranty or transfer liability?
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Seller's liability for selling a defective instrument. When a seller indorses, the warrantie run with the instrument
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What are the five warranties made by seller of negotiable instruments?
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1. good title
2. signatures are genuine 3. no material alterations 4. no defenses - instrument is enforceable 5. no knowledge of bankruptcy or insolvency action against the maker or drawer |
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What are the types of indorsements?
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Special or Blank and Restrictive or Unrestrictive
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What are the requirements to be a holder in due course?
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A holder in due course must take the instrument for value, in good faith, and without notice of any defense or claim
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What is the benefit of being a HDC?
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HDC takes free from claims and personal defenses and is subject only to real defenses
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What are real defenses?
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MAD FIFI4
Material Alteration Duress Fraud in the Factum Incapacity Illegailty Infancy Insolvency |
