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20 Cards in this Set

  • Front
  • Back
Types of intangible collateral covered by article 9
Patent, trademark, copyright
Stocks, bonds, mutual funds
Notes and Drafts
Requirements for attachment
Value - creditor must give value
Contract - transaction evidenced by Security agreement
Rights - Debtor must have rights to the collateral
Requirements of Security agreement
Must be authenticated by debtor AND must reasonably describe the collateral
Methods of perfection
Filing financing statement or security agreement
Where SP takes possesion
or - PMSI in consumer goods (perfects automatically)
Priority of creditors
PAC defeats all but
PAC's that filed first
PMSI (with additional requirements)
For PMSI holder to take priority over an earlier perfected AACF he must:
- for inventory
- for equipment
Equipment: must file properly within 20 days of debtors possession of the collateral

For inventory: must file properly BEFORE debtor takes possession of the inventory AND must notify the competing creditor of its interest before debtors possession
SP's Remedies for default
Self help repossession - if can be accomplished without breach of peace

Repossession via judicial action - where SP goes to court to get a writ ordering sheriff to repossess

After repossession: SP can
1. Strict Foreclosure - where the SP retains the collateral in full satisfaction of the debt (subject to the 60% rule for consumer goods)

2. Sale - must be commercially reasonable AND reasonable notice must be sent

3. Defeciency judgment
Notice of strict foreclosure (that SP will retain collateral in satisfaction of debt) must be sent to
WHere collateral is consumer goods: any secondary obligors (guarantor of underlying debt) and debtor
Where collateral is not consumer goods: debtor, other SP's who told foreclosing party of their interest in the collateral, perfected creditors, and secondary obligors

If any of these parties objects within 20 days - no strict foreclosure; must be a sale
Where is strict foreclosure not allowed
- where notified parties object within 20 days


- 60% rule for consumer goods - where debtor has paid back 60% of the value/price of collateral no strict foreclosure - or conversion; instead must sell within 90 days
Notice of sale of repossessed property must be sent to whom:
If consumer goods: debtor and secondary obligors

If not consumer goods:debtor and SP’s that told the foreclosing party of their interest
and perfected creditors and secondary obligors
Additional requirements of notice of sale of consumer goods
- must include how defeciency will be calculated
- must provide a way for debtor to redeem
presumptively reasonable time to send notice in nonconsumer transaction
10 days before sale
Distinguishing a negotiable instrument from a contract
- W - Writing
- O - Payable to order or bearer
- S - Signed by the maker or the drawer
- S - States a Sum certain
- U - unconditional promise or order (no additional promises or orders allowed)
- P - Payable on demand or at a definite time
- P - Payable in currency
Who can be liable under the contract/signature theory of liability for commercial paper
Maker - by signing name to the instrument enters into a contract
Indorser - by signing instrument (usually on back) contract providing that if maker/drawee/drawer does not pay (and indorser has notice of failure to pay) he will be liable
Drawer - by signing the draft (check) enter into a contract that if the check bounces drawer must pay
Who is liable under the transfer/warranty theories of liability for commercial paper
Anyone who sells a negotiable instrument (so no donors)
Warranties that give rise to warranty liability on a negotiable instrument (transfer warranties)
D promises that:
- D has good title to the instrument
- that all signatures are authorized and genuine
- that the instrument has not been materially altered
- that there is no claim or defense against the D
- that D has no knowledge of any insolvence or BK proceedings against the maker/drawer
Requirements of a HDC
Must be a holder
Must take for value - must be more than a mere promise (but old value is good value)
Must take in good faith- honesty in fact (subjective) and observance of reasonable commercial standards of fair dealing (objective)
Must take without notice of any claimse or defenses - or that it is overdue or dishonored
Personal defenses
(HDC takes free of these)
1. lack of consideration
2. Fraud in the inducement
3. Unconsionability
4. Waiver and estoppel
Real defenses
(HDC does not take free of these)
- MA - Material Alteration (change in the terms of the agreement)- but if maker is negligent he is estopped from this defense
- D - Duress
- FIF - Fraud in the factum (misrepresenting what the person is actually signing)
- I - Illegality
- I - Insolvency
- I - Incapacity
- I - Infancy