Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key


Play button


Play button




Click to flip

22 Cards in this Set

  • Front
  • Back
Scope of Article: 9
1.) covers- a SI, regardless of form, in personal property, or fixtures obtained by contract, agricultural liens, consignments and sales of accounts, chattel paper, payment intangibles and primissory notes (except for a sale as a part of an entire buisness, a sale for collection only, or a sale of a single item in satisfaction of a debt)
2.) Does not cover- statutory liens for services or materials, landlord liens, an assignment of wages, an assignmnet of a judgement, and liens on real property.
1.) If attached- a SA is generally effective against the parties, creditors, and purchasers according to its terms
2.) When does SI attaches- when it becomes enforceable againist the D
3.) 3 requirements for attachment: (a) value, (b) D has rights in the collateral, (c) a signed SA w/ a description of the collateral OR a SA w/ possession or control is sufficent for some collateral (i.e. collateral that can be perfected by possession/control) w/out a signed agreement
4.) Value- consideration sufficient if it is adequate to support a simple contract
5.) Attachment in Proceeds- attachment in collateral automatically includes proceeds
6.) Attachment of After acquired Property: A SI may provide for attachment of after acquired property
- except for consumer goods, other than accessions, unless the debtor acquires the property w/in 10 days after the secured creditor gives value.
Df: Proceeds
anything received upon the dispostion of collateral
Types of Collateral & Dfs.
1.) accounts recievible- i.e. billing account for a buisness
2.) deposit accounts- bank account i.e. savings
3.) inventory-
4.) instruments-
5.) goods-
6.) Consumer Goods- those acquired or used primarily for personal, family, or household purposes
7.) general intanglibles
8.) Proceeds
9.) cash
10.) Chattel Paper- the records constituting a secured transaction in, or a lease of, specific goods
11.) farm products-
12.) Fixtures-
Purchase Money Security Interests (PMSI)
1.) df- a SI that secures a debt used all or in part for the purchase price of the collateral.
2.) Perfection- a PMSI in consumer goods is perfected automatically without filing
3.) Inventory: a PMSI for the purchase of one item of inventory may extend to other items of inventory subject to seperate PMSIs.
Creation of Security Interest
1.) Security Agreement
2.) Attachment of SI
3.) Perfection (including 4 ways to perfect and/or financing statement)
4.) Priority
Future Advances
Collateral may secure future advances
Sufficiency of the description in the security agreement
1.) Identifying Collateral- may identify collateral by specfic listing, category, type, quanity, formula, etc.
- NOT ACCECTABLE- "all the debtor's assests" or "all the debtors personal property" are not adequate.
2.) Identifying Commerical tort claims and consumer goods- a description by TYPE is not adequate
3.) A FS is not subject to this rigorous rule
Financing Statement
1.) Requirements to be legally effective (a) debtor's name, (b)name of secured party or representative, (c) an indication of the collateral covered
2.) A financing statement substanially satisfying these requirements is effective unless the errors are seriously misleading
3.) A FS remains effective even after it becomes misleading due to a change in the description of the collateral (such as inventory becoming equipment) SO LONG AS a different type of filing would not be necessary to cover the changed nature of the collateral (i.e. inventory becoming fixtures)
4.) Change of filing location- if a change would require filing elsewhere, the FS is not just misleading, it is NOT effective as to the new type of collateral
5.) Change in name- a change in name leading to a seriously misleading financing statement makes it INEFFECTIVE after 4 months as to new collateral acquired thereafter but not as to the old collateral
6.) Permission- permission to file a FS is required in order to do so.
- Permission by signed writing is required except it is automatic by virtue of the execution of a security agreement and with proceeds.
Sale/Transfer/disposition/buying of collateral and effect on Security Interest
1.) General rule- a SI continues in the collateral after sale unless permission is given to sell free of interest.
-Permission- to sale may be implied from the circumstances
2.)SI attaches- to any identifiable proceeds
3.) A SI remains effecive as to collateral sold, exchanged, leased, or otherwise disposed of even where the secured party consents to the dispostion.
4.) Buyer in the ordinary course of business- takes free of the security interest even where the buyer is aware of the security interest except for farm goods.
5.) A buyer of goods for value, without knowledge of a SI, from a seller who used the goods for personal, family, or household purposes, who intends to use the goods similarily takes free of a SI if no FS is of record.
6.) a purchaser in good faith for value obtains a good title to the goods even where the seller deceived his predecessor, issued a bad check for the goods, or obtained them by fraud.
7.) Any Entrusting of goods to a merchant who deals with goods of that type allows the merchant to transfer good title to the goods to a purchaser in the ordinary course of buisness.
8.) Transferee of money from a deposit account takes free of any security interest in the account
9.) A transfer of collateral may take effect even though it is prohibited in the agreement between the creditor and the seller.
1.) Ways to Perfect (a) Filing- default rule, applies to all collateral except money and deposit accounts, exclusive for accounts receivable and general intangibles (b) Possession- collateral subject to being possessed such as goods, tangilbe negotiable documents, chattel paper, etc.; Exclusive way for money except for traceable proceeds (c) Control- collateral held by an agent but not subject to a negotiable document; exclusive for deposit accounts and letters of creditl; alternative for electronic paper, investment property, electronic chattel paper, and documents (d) Pruchase Money Security Interest- no filing or other means necessary, pefection is automatic
2.) A Perfected SI continues-to be perfected with respect to (a) identifiable cash proceeds (b) other proceeds, except proceeds obtained with cash proceeds, if filing in the same office would have been appropriate to perfect with respect to such proceeds, and (c) other proceeds if perfected within 2 days after receipt
3.) Continuous Perfection is allowed by switching means of perfection
1.) A good faith purchaser for value with possession takes priority over filing if the collateral is negotiable documents, warehouse recepits, bills of lading, and securities (i.e. collateral where title is generally transferred by signature)
2.)Among Perfected Security interests, priority of filing or perfection by other means prevails
3.) Perfected SI trump unperfected SI
4.) As between unperfected SI, the first to attach prevails
-the above (2,3,4) don't apply where someone acquires property subject to a perfected SI
5.) A PMSI, except for inventory and livestock, has priority over a conflicting SI in the same collateral IF the PMSI is perfected no later than 20 days after the debtor takes possession.
6.) A seller's PMSI takes priority over a cash lenders PMSI (i.e. bank)
7.) As between 2 lenders (i.e. banks), the first to file wins, even though a lender may think it has 20 days to file.
8.) A PMSI Priority also includes proceeds except inventory (where proceeds only extend to chattel paper, cash, and instruments); note that it excludes accounts; even here special rules apply that purchasers of chattel paper ans instruments take priority and secured parties with control of deposit accounts take priority
9.) In order to obtain priority for a PMSI involving the sale of inventory, the PMSI financer must have perfected when the debtor recieves the inventory (no 20 day grace peroid)and given notice to the inventory lender, which notive will expire in 5 years.
10.) A SI, even though perfected, is subordinate to a lien of a creditor to the extent that it secures advances made more than 45 days after the person became a lien creditor unless the advances are made without the knowledge of the lien or pursuant to a commitment entered into without knowledge of the lien,
1.) Early filing before attachment is allowed
2.) where to file- central state office except for timber to be cut, extracted collateral, and fixtures
3.) Effective for- 5 years from the filing date
4.) Continuation statement- must identify the original filing by #; must be filed within 6 months [receding termination date
5.) Upon Lapse- SI deemed never to have been perfected as to a purchaser for value; not true for judgement lien holders and bankruptcy trustees
6.) Termination Statement- must be filed or prepared and furnished to the debtor upon authenticated demand within 20 days of the demand. This assumes the debt has been paid and no possibility of further debt. Filing is automatically required within 1 month of payment of debt or 20 days whichever is earlier.
- no demand is necessary for consumer goods
-Failure to Comply- $500 + dmgs
the law generally abhors forfeiture or a penalty but allows for agreed damages where actual damages are difficult to determine
1.) df.- failing to comply with the terms of the agreement
2.) Upon Default- the party may proceed with any action under the code and in accordance with the agreement of the parties
3.) Acceleration- a C must act in good faith in accelerating a debt
4.) Poessession- the SP has the right to take possession of the collateral immediately upon default, provided, however, that SP can not breach the peace
5.) Disposition of property-
the SP may sell, lease, license or otherwise dispose of the collateral in a public or private sale in a COMMERCIALLY REASONABLE MANNER.
-the time,place, and manner of sell, etc. must all be commercially reasonable:
THIS OBLIGATION cannot be waived
-If 60% of the original debt has been paid with respect to consumer goods, the sale must be held within 90 days of the taking or within such longer time as agreed to after the default
-Promptness is required for a commercially reasonable sale
-when the sale is not commercially reasonable, there is a presumption that the amount of the debt owed would have been obtained at sale
- Notice: SP must send reasonable notice of the sale to the debtor and to other persons who have an interest in collateral.
For Non-Consumer Goods 10 days notice is deemed reasonable: This provision may only be waived after default
-Notice may be waived where the collateral will spoil OR there is a established market establishing a price
6.) Full/Partial Satisfaction- with the consent of D the creditor may accept the collateral in full or partial satisfaction of te D.
-However, no partial satisfaction is allowed in consumer transactions
- C may send a proposal and if D fails to respond within 20 days the proposal is deemed accepted, oral objection is allowed
- In order to keep the collateral, there must be no objection made within 20 days from others having an interest in the collateral
-and for consumer goods consent must be given after repossession
-if the consumer has paid 60% of the purchase price involving consumer goods, the consent must be in writing
7.) Right to Redeem- D has a right to redeem the collateral up until it has been disposed of
8.) A purchaser in good faith takes free of the debtors rights where the secured creditor fails to comply with the rules
- However, damages may be awarded to the debtor
-For consumer goods, a penalty of %10 of the principal amount plus the service charge may be recovered in addition to damages
Failure to comply with Code
may result in payment of damages for any loss caused and (a) a service charge of 10% of the principal amount for consumer goods and (b) $500 for failure to file termination statement when and as required
Law Governing Transaction
1.) As a general rule, the debtors jurisdiction governs the law of perfection and priority.
2.) Exceptions to General Rule (a) it does not apply to perfection of SI by possession, fixture filings, and secutiry interests in extracted collateral and accounts with banks where the law of the place of the location applies.
-Furthermore, the law of the place of location governs priority of SI in goods, certificates of title, deposit accounts, investment property or letters of credit rights: this rule is intended to allow the place of location to determine priority and preclude the jurisdiction of residence of the debtor from determining the law of priority where the collateral is located
Location of Debtor
1.) an individual is deemed to be located at the place of principal residence (a term not defined by the code)
2.) Registered Organizations are deemed to be located at its place of organization
3.) Other organizations are deemed located at thier place of buisness, and if more than one, at thier chief executive office
- an organization: is defined to include 2 or more persons haveing a joint interest
Commingled Goods
1.) If a SI is perfected before the goods are commingled, the SI attaches to the whole
2.) If there is more thatn one perfected SI, they rank equally and share prorate based upon the value of the goods
1.) an accession is a commingling where the identity is not lost
2.) A SI may be obtained in an accession and continues in same after it becomes an accession.
3.) If perfected it continues to be perfected
4.) The SI in the accessions is subordniate to one obtained by a certificate of title.
5.) After default, the secured party may remove an accession if it has priority but has to reimburse the other secured parties for damages to the collateral but not for any diminution in value.
Prior Certificates of Title
1.) cease to be effective once another state issues a certificate
2.) however a perfected SI continues to be perfected thereafter except to as a purchaser for value unless it is perfected in the new state within 4 months
A SI perfected under the laws of a state
remains perfected until the expiration of 4 months after the debtor changes location to another state or 1 year after a transfer of the collateral to a person in another state who assumes the debt (a merger)
- If the SP fails to perfect in the new state within the time allowed by the rule, an unperfection relates back to the date of the original perfection as to a purchaser for value