Ny: Secured Transactions And Commercial Paper

Front 1

What is the general scope of Art. 9?

Back 1

Art. 9 applies to consensual security interests in fixtures or certain types of personal property

Front 2

A security interest (aka a chattel mortgage( can be attached to a debtor's property that is ....

Back 2

1) Commercial PAPER
2) INTANGIBLE property; or
3) GOODS

Hint 2

PIG property

Front 3

What are the three requirements for attachment (i.e. creation of an enforceable security interest)?

Back 3

1) value
2) contract
3) rights in collateral

Front 4

What are the five categories of tangible collateral for the purposes of secured transactions?

Back 4

1) Consumer goods
2) Equipment
3) Inventory
4) Farm products
5) Fixtures

Front 5

What are the requirements of an attachment contract for the purposes of secured transactions? When is a contract not required?

Back 5

The record must:
1) Be authenticated by the debtor
2) Reasonably identify the collateral

A contract is not required if the secured party has taken possession

Front 6

What is "perfection" of a security interest? What are the three general types of perfection?

Back 6

Perfection is something that the secured party does to put the world on record or constructive notice of the secured party’s existence

Types of perfection
1) secured party takes possession of the collateral
2) automatic perfection (PMSIs)
3) Secured party files notice of the security interest in the public records

Front 7

What is a purchase money security interest?

Back 7

A PMSI is a security interest in specific goods that enables the debtor to purchase those goods

Front 8

What are the three requirements of a valid financing statement?

Back 8

1) Debtor’s name and address
2) Creditor’s name and address
3) Description of collateral

Front 9

Where is filing generally made? Where is it specifically made w/r/t (1) an individual debtor, (2) a registered organization, and (3) collateral that is timber, minerals, or fixtures?

Back 9

Filing is done centrally, with the state Secretary of State, in the state where the debtor is located

1) individual debtor: state of principal residence

2) registered corporation: state under whose laws it is organized

3) collateral that is timber, minerals, or fixtures: file locally in the county where the realty is located

Front 10

What is the order of priority for possible claimants to collateral?

Back 10

1) buyer in the ordinary course
2) perfected attached creditor
3) lien creditor
4) non-ordinary course buyer
5) attached perfected creditor
6) general unsecured creditor

Front 11

Is the interest of an attached unperfected creditor enforceable against the debtor?

Back 11

Yes

Front 12

What is the general rule re: priority between two (or more) claimants of the same category (i.e. between two perfected attached creditors)?

Back 12

First in time, first in right

Front 13

What must a PMSI do in order to achieve priority over an after-acquired collateral financier?

Back 13

Equipment:
1) File properly
2) w/in 20 days

Inventory:
1) file properly before AACF takes possession, and
2) Notify AACF before debtor takes possession

Front 14

How is default defined for the purposes of a secured transaction?

Back 14

Not defined in Art. 9; breach is what the security agreement says it is

Front 15

What are a creditor's possible remedies after a default in a secured transaction?

Back 15

1) self help repossession
2) repossession by judicial action
3) strict foreclosures
4) sale
5) deficiency judgment

Front 16

When is self-help possession permissible after a debtor defaults in a secured transaction?

Back 16

Self-help repossession is permissible, so long as the creditor-debtor does not breach the peace

Front 17

What is required in order for a creditor to use self help repossession to repossess an item in the debtor's home?

Back 17

voluntary and contemporaneous consent

Front 18

What is strict foreclosure w/r/t secured transactions?

Back 18

Strict foreclosure occurs when the secured party retains the collateral in full satisfaction of the debt

Front 19

What is required in order to strictly foreclose?

Back 19

Secured party must send a written proposal to retain the collateral in satisfaction of the debt. Sent to:

When the collateral is consumer goods:
1. Debtor
2. Secondary obligors (guarantors)

Collateral is not consumer goods
1. Debtor
2. Other secondary parties who have told the foreclosing creditor of their security interest in the collateral
3. Perfected creditors
4. Secondary obligors

Front 20

What is the time period for a party to object to notice of a strict foreclosure?

Back 20

20 days after the notice is sent

Front 21

What is the 60% rule w/r/t strict foreclosures?

Back 21

If the collateral is consumer goods and the debtor has paid 60% of the loan (in the event of a non-PMSI) or 60% of the cash price (in the event of a PMSI), strict foreclosure not allowed

Front 22

What is the standard for determining whether a sale of secured collateral is valid?

Back 22

Must be commercially reasonable

Front 23

To whom must notice be sent for a sale of secured collateral?

Back 23

If the collateral is consumer goods, notice must be sent to
1) Debtors
2) Secondary obligors

If the collateral is not consumer goods, notice must be sent to
1) Debtor
2) Those secured parties who have advised the foreclosing creditor of their security interest
3) Perfected creditors
4) Secondary obligors

Front 24

What is the outcome of a secured party sells collateral at a low price to an insider buyer?

Back 24

The price that an independent third party would have paid, rather than the actual amount paid, is the price that will be used in calculating the deficiency

Front 25

What are the two types of negotiable instruments?

Back 25

1) promissory notes
2) drafts

Front 26

What are the three parties to a draft?

Back 26

1. Drawer gives the order
2. Drawee is ordered to do the paying
3. Payee is the beneficiary of the order

Front 27

What are the requirements of a negotiable instrument?

Back 27

1) in writing
2) payable to "order" or "bearer"
3) signed by the maker or drawer
4) reciting a sum certain
5) containing an unconditional promise or order, and no additional promises or orders
6) payable on demand or at a definite time
7) payable in currency

Front 28

If an instrument is silent as to the time of payment, can it still be negotiable?

Back 28

Yes

Front 29

What are the two theories of recovery regarding commercial paper?

Back 29

1) contract or signature liability
2) warranty or transfer liability

Front 30

Who is liable on a contract/signature liability theory w/r/t commercial paper?

Back 30

1) the maker of a promissory note
2) the indorser (signs name on back of instrument
3) the drawer of a draft

Front 31

What do the words "without recourse" mean when accompanying a signature on commercial paper?

Back 31

Represents a disclaimer of liability. Passes title but signer assumes no liability

Front 32

Who may be sued under a warranty or transfer liability theory?

Back 32

Any transferor who sells the negotiable instrument

Front 33

Who is entitled to sue the defendant for breach of warranty (w/r/t commercial paper) if defendant indorsed the instrument?

Back 33

Any plaintiff in possession

When D indorses, warranties run w the instrument

Front 34

Who is entitled to sue the defendant for breach of warranty (w/r/t commercial paper) if defendant did not indorse the instrument?

Back 34

Only the D’s immediate transferee

Front 35

What are the five warranties made by D when he transfers a piece of commercial paper?

Back 35

1. P has good title to instrument
2. All signatures are genuine and authorized
3. Instrument has not been materially altered
4. No defense or claim good against the D (i.e. instrument is enforceable)
5. No knowledge of any bankruptcy or insolvency action against the maker or drawer

Front 36

What does "due negotiation" mean w/r/t commercial paper?

Back 36

Due negotiation means that there has been a proper transfer of the instrument. If the instrument has been properly transferred, the transferee is a holder and may be eligible to be a holder in due course

Front 37

How is an instrument properly negotiated if it is "payable to order"?

Back 37

Delivery of the instrument to that payee. Any further negotiation requires that the payee indorse the instrument and deliver it to the transferee

Front 38

How is an instrument properly negotiated if it is "payable to bearer"?

Back 38

Indorsement is not required. All that is required is delivery.

Front 39

What is a special indorsement? Must that instrument be signed in order for the instrument to be further negotiated?

Back 39

The special indorsement is one that names a particular person as “indorsee”

Indorsee must sign in order for the instrument to be further negotiated

Front 40

What is a blank indorsement? Must that instrument be signed in order for the instrument to be further negotiated?

Back 40

A blank indorsement is one that does not name a specific indorsee. It may be negotiated by delivery alone

Front 41

What is a holder in due course?

Back 41

A holder in due course is a holder who takes the instrument:
1) For value
2) In good faith
3) Without notice that it is overdue or has been dishonored or is subject to any defense or claim

Front 42

What is the effect of being a holder in due course?

Back 42

A holder in due course takes the instrument free from claims, free from personal defenses, and subject only to real defenses

Front 43

What are the "personal defenses" that a holder in due course escapes?

Back 43

1. Lack of consideration
2. Unconscionability
3. Waiver
4. Estoppel
5. Fraud in the inducement

Front 44

What kinds of defenses does a holder in due course take subject to?

Back 44

Real defenses:
1) Material alteration
2) Duress
3) Fraud in the factum
4) Incapacity
5) Illegality
6) Infancy
7) Insolvency