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64 Cards in this Set

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  • Back
Scope: What does article 9 cover?
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 promisory notes
Scope: What is exempted from article 9?
a sale as a part of an entire buisness, a sale for collection only, or a sale of a single iten in satisfaction of a debt
Scope: What is excluded from article 9?
It does not apply to statutory liens for services or materials, landlord liens, an assignment of wages, an assignment of a judgment and liens on real property
Attachment: When SI attaches it . . .
a security agreement is generally effective againist the parties, creditors and purchasers according to its terms
Attachment: 3 Main Requirements for Attachment
1. value
2. the debtor has rights in the collateral
3. a signed security agreement with a description of the collateral OR a security agreement together with possession or control may be sufficent for some collateral without a signed agreement
Value: Definition
is consideration sufficient if it is adequate to support a simple contract
SI: After Aquired Property
A SI may provide for attachment of after acquired property EXCEPT for consumor goods, other than accessions, unless the debotr acquires the property within 10 days after the secured creditor gives value.
SI: Future Advances
collateral may secure future advances
Attachment: Proceeds
attachment in collateral automatically includes proceeds
Proceeds: include
anything received upon disposition of collateral
Types of Collateral:
accounts receivable, equipment inventory, instruments, goods, consumer goods, general intangibles, proceeds, cash, deposit accounts, chattel paper, farm products, and fixtures
Purchase Money Security Interest: Definition
means a SI that secures a debt used all or in part for the purchase price of the collateral
Sufficiency of the Description in the SI:identifying collateral
may identify the collateral by specific listing, category, type, quantity, formula etc. provided, HOWEVER "all the debtor's assets" or "all the debtor's personal property" or similar words are not adequate for commercial tort claims and consumer goods. A financing statement is not subject to this rigorous rule.
Financing Statement: "Name"
a FS must use the registered name of registered organizations, the name of the decedent and an indication that it is an estate for an estate, the individual name for an individual debtor, or organizational name of a debtor and, if no organizational name, the name of the members
FS: a FS substanially satisfying the requirements
is effective UNLESS the errors are seriously misleading
SI: Does it continue after sale?
as a general rule, a SI continues in the collateral after sale UNLESS permission is given to sell free of the interest
SI: Permission to sale free of SI
may be implied from the circumstances
SI:Proceeds (attach)
A SI attaches to any identifiable proceeds
SI: Perfected SI (continues)
a perfected SI continues to be perfected with respect to
1. identifiable cash proceeds
2. other proceeds, except proceeds obtained w/ cash proceeds, if filing in the same office would have been appropriate to prefect w/ respect to such proceeds; and
3. other proceeds if perfected within 20 days after receipt
SI: Does SI remain effective as to collateral sold?
a SI remains effective as to collateral sold, exchanges, leased, or otherwise disposed of even where the secured party consents to the disposition.
FS: Seriously Misleading/ Effective
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 (such as inventory becoming fixtures)
FS: Seriously Misleading/ Filing required elsewhere
If the change of collateral would require a filing elsewhere, the FS is not just misleading, it is not effective as to the new type of collateral.
FS: Seriously Misleading/ 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
SI: Buyer in the ordinary course of Buisness
takes free of the SI even where the buyer is aware of the SI except for farm goods
SI: Buyer of goods for value "Yard Sale Rule"
w/o knowledge of a SI, from a seller who used the goods for personal, family, or household purposes who intends to use the goods similarly takes free of the SI IF no FS is of record.
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.
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 ordinary course
transferee of money
a transderee of money from a deposit account takes free of any SI in the account absent collusion to defraud
may take effect even though it is prohibited in the agreement between the creditor and seller
What are the 4 main ways to Perfect SI
1. Filing
2. Possession
3. Control
4. PMSI in Consumer Goods
Perfection: Filing
default rule, applies to all collateral except money and desposit accounts; Exclusive for accounts receivable and general intangibles
possession/ priority: general rules
A good faith purchaser for value w/ possession takes priority over filing if the collateral is negotiable instruments (i.e. checks), warehouse receipts, bills of lading, and securities (this is collateral where title is generally transferred by signature)
Perfection: Possession
collateral subject to being possessed such as goods, tangible negotiable documents, chattel paper etc.; Exclusive way to perfect money (except for proceeds that can be traced)
Perfection: Control
applies to collateral held by an agent but not subject to a negotiable document; Exclusive way to perfect deposit accounts (bank accounts and letters of credit)/ alternative for electronic paper, investment property, electronic chattel paper/documents
Perfection: PMSI in Consumer Goods
no filing or other means necessary, perfection is automatic
Filing: Filing Early?
early filing BEFORE attachment is allowed
Filing: Where to file?
central office (state office)except for timber to be cut, extracted collateral, and fixtures (which are filed in count office)
Filing: How long effective?
effective from 5 years from the date of filing
Filing: Continuation atatement
must identify the original filing by file number & must be filed w/in 6 months preceding termination date
Filing: Upon Lapse
SI deemed never to have been perfected as to a purchaser for value/ this result is not true for judgment lien holders & bankruptcy trustees
Filing: Termination Statement
must be filed or prepared & furnished to the debtor upon authenticated demand w/in 20 days of demand (this assumes the debt has been paid and no possibility of any further debt; Failure to comply results in $500 plus dmgs.; no demand is necessary for consumer goods. Filing is automatically required w/in 1 month of payment of debt or 20 days after demand, whichever is earlier.
Default: Defined
code not not define; basically failing to comply w/ terms of agreement
After Default:
secured party may proceed w/ action under the code and in accordance w/ the agreement of the parties after default
Accelerating Debt
a creditor must act in good faith in accelerating a debt under an agreement
Possession When Default
the secured party has the right to take possession of collateral immediately upon default HOWEVER taking possession may not breach the peace
Disposition of Property Upon Default: what can SP do w/ property
the secured party may sell, lease, license, or otherwise dispose of the collateral in a public or private sale in a commercially reasonable manner
Disposition of Property upon Default: What must be commercially reasonable?
time, pace, manner of sale etc. (this CANNOT be waived)
Disposition: time
1. consumer goods: if 60% of the original debt has been paid w/ respect to consumer goods, the sale must be held w/in 90 days of the taking or w/in such longer time as agreed to after default
2. Promptness: is required for a commercially reasonable sale

Disposition: What happens if sale is not commerically reasonable?
there is a presumption that the amount of the debt owed would have obtained at such a sale
Default: Notice
1. general rule- SP must send a reasonable notice of sale to the debtor and other persons who have an interest in the collateral
2. This provision can only be waived AFTER default
3. Non-Consumer Goods- 10 days notice is deemed reasonable
4. Notice may be waived- where the collateral will spoil or there is an established market establishing the price
Default: Full or Partial Satisfaction/ general rule
after default, w/ consent of the debtor, the creditor may accept the collateral in full or partial satisfaction of the debt. HOWEVER, no partial satisfaction is allowed in consumer transactions.
Default: full or partial satisfaction/ debtor's consent
C may send an proposal & if D fails to respond w/in 20 days the proposal is deemed accepted.
- oral objection is allowed
- consumer goods: if 60% of the purchase price paid then consent must be in writing
Default: full or partial satisfaction/ C keeping collateral
In order to keep the collateral there must be no objection made w/in 20 days from others having an interest in the collateral and for consumer goods the consent must be given after repossession
Right of Redemption
D has a right to redeem the collateral up until it has been disposed of
What happens when C fails to comply with the rules?
a purchaser in good faith takes free of the debtor's rights where the secured creditor fails to comply w/ the rules HOWEVER dmgs. may be awarded to the debtor.
- consumer goods: a 10% penalty of the principal amount plus the service charge may be recovered in addition to dmgs.
Forfeiture/ Penalty Clauses
the law generally abhors forfeiture or penalty but allows for agreed dmgs. where actual dmgs. are difficult to determine
What is required to file a financing statement?
permission to file a financing statement is required in order to do so. Permission by signed writing is required except it is automatic by virtue of execution of a security agreement and w/ respect to that collateral and proceeds.
Continuous Perfection
is allowed by switching means of perfection
Results of Failure to Comply w/ the code
may result in payment of dmgs. for any loss caused & a service charge of 10% of the principal amount for consumer goods and $500 for failure to file a termination statement where it is required
Perfected Security Interests: Priority
1. Among perfected SI. priority of filing or perfection by other means prevails.
2. Perfected SI trumps unprofected SI.
3. between unperfected SI the first to attach prevails
Df: Tangilble Property
consumer goods, farm products, inventory, equipment
Df: Intanglible Goods
money, investment property, letter of credit, chattel paper, negotiable instrument, deposit account, docs. such as warehouse bills , general intangilbes
df. chattel paper
records constituting a secured transaction or a lease of specific goods
Requirements of a financing statement
1. name of debtor
2. name of secured party or its representative
3. an indication of the collateral covered