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46 Cards in this Set
- Front
- Back
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How to create a security agreement
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Security agreements can be perfected by an agreement or by possession.
-Security agreement gives creditor a security interest in certain collateral -Control of deposit account exists where secured party is bank where account is held -Security interests in deposit accounts are perfected only by control not by filing |
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Can a security interest be obtained on a fixture separately from Real Property?
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Yes, a security interest may be created in fixtures separately from real property.
-no perfection if no filing, possession, control, or automatic perfection -security interest cannot be created in interest in real property |
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Agricultural Lien
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Agricultural liens create interest in crop.
-perfect by filing with SCC |
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Is a promissory note subject to a security interest?
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Yes a promissory note reciting collateral is chattel paper. It can be the sujbect of a security interest.
-PMSI if creditor gives value that debtor uses to pruchase collateral: must file to perfect -filing security interest to perfect equipment with SCC is valid |
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Perfection of Security Interest in goods without a title
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Perfection in goods (equipment) if filing or taking of possession
-goods with certificate of title not perfected unless creditor possessed before certification |
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PMSI
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If creditor gives value that debtor uses to purchase collateral:
1. it is PMSI and has priortiy over other secured interests even if obtained later. 2. Otherwise: first security interst in time is first in right 3. Perfection usually takes place at time of filing but PMSI gets a 20 day grace period. |
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Priority of interests
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PMSI has priority over other intersts
Secured interest has priority over unsecured interest |
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How to perfect a security interest
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file a finance statement
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Efffect of security interest in inventory and security interest in accounts
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A security interest inventory automatically creates an interest in afteracquired property
Security interest in accounts also inlcudes after acquired accounts |
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Requirements for a valid security interest
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1. attachment
2. have priority -PMSI, secured, unsecured (first in time-first in right) 3. interest must be perfected |
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Elements of Security agreement
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1. creditor gives value
2. debtor gives rights in collateral |
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Where to file financing statement
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for equipment file where the debtor is located. Location of the equipmentis irrelevant
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Tangible Intangibles
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Intangibles such as K rights and ownership in goods or entities reduced to written form
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Chattel Paper
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record or records evidencing both a monetary obligation and a security interest
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Intangible Intangibles
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monetary rights, or literary obligations, *accounts, *commercial tort claims, and *general intangibles
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Proceeds
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cash proceeds: money, checks, deposit accounts
noncash proceeds: includes all other proceeds |
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Security Interest
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created by a written security agreement or by the secured party taking possession, delivery or control of the collateral with intent to secure debt.
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financing statement
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document that is filed to give notice of the security interest
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Security Agreement
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agrement that creates or provides for a security interest in certain collateral
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Attachment
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>secured party gives value
>debtor has rights in collateral >authenticated security agreement |
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what does art 9 apply to?
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Any transaction that creates a security interest in persona property or fixtures by K, sales of acct rec, chattel paper, neg instr., prom note, and pmt intangibles.
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Types of Collateral
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Primary use determines what type of collateral it is. Use is that which was stated at purchase of the collateral.
-Goods -Instruments (notes, drafts) -Chattel Paper (record of monetary obligation) -Accounts -Money |
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Proceeds from Collateral
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Proceeds from collateral is that which was yielded on sale/lease of the collateral.
It can also be the insurance payment for collateral. A secured party has a right to the proceeds. |
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Kinds of Proceeds
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-Cash
-Noncash |
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Attachment
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Attachment is the process by which a security interest is created and becomes enforceable.
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Requirements for Attachment
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The secured party gives value
Debtor has rights in the collateral Debtor has authenticated a security agreement that describes the collateral (unless sec pty takes possession). |
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Requirements for description of Collateral
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-Description can use UCC terms for collateral such as "inventory or equipment"
-Super generic description not sufficient such as "all property" -After Acquired collateral After acquired collateral is attached. This must be expressed in the security agreement. Exceptions are:inventory and accounts |
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Does attachment survive sale of collateral or other disposition.
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Attachment automatically attached to proceeds and/or disposition of collateral.
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PMSI
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PMSI is a security interest when value is given for the purchase of the collateral.
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Perfection of PMSI
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Perfection happens automatically and secured party has 20 days to file.
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Perfection requirements
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To perfect a security interest the Secured Party must have:
-Attachment+ >filing >possession >control >automatic (pmsi) |
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Requirements for Finance statement.
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Secured party files a Finance Statement. It puts other creditors on notice that they have an interest in Collateral
The finance Statement must have: -name of debtor -name of secured party -description of collateral Can say "all goods" in finance statement must be a reasonable ID |
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Fixtures
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Goods that become so related with RP that the interest in them passes under RP law.
Requirements for Filing on a Fixture: -contain all info in the Finance Statement -Must indicate that it covers fixtures -inidcate that it is to be recorded in clerks office where RP is located -Description of RP that Fixture is attached to -provide name of record owner of RP >Time for Filing Can file before the Security Agreement |
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Post Filing Changes
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Name Change: if debtor changes name the secured party must file an amendment. The security agreement is valid for 4 months
If the Debtor changes location: File new finance statement in location where debtor moved. |
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Disposition of Collateral for proceeds
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The time for filing security interest for collateral is the same as for filing security interest for proceeds
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Time frame that Finance Statements are effective for?
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5 years
must file a continuance within 6 months before the first statement ends If secured party fails to file continuance he loses his priority status. |
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Priorities
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General Rule is 1st in time 1st in right
If unperfected Security Interest then it is 1st to attach 1st in right Exceptions: -PMSI prevails over other if perfected within 20 days for goods -PMSI for inventory *perfect and *send notice to conflicting security party stating it expects to get a PMSI Secured Party against a Lien creditor -fist in time first in right |
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Buyers Rights when he buys collateral
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General Rule: Security interest will survive the sale
Exception: If the buyer is in ordinary course of business >good faith >no knowledge of violation of rights > |
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Garage Sale rule
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buyer buys consumer goods from a consumer:
-buys without knowledge -for value -for buyers personal use -before filing if finance statement |
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HDC vs. Perfected Security Interest
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HDC takes priority over perfected security interst.
protects BFPs |
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Priorities concerning Fixtures
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Gen Rule: 1st in time 1st in right
Exceptions: PMSI-2nd in time 1st in right if perfection before goods become fixtures or within 20 days of purchase |
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Default
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Rights of secured party in default:
-can get judgment -forclose -can repossess tangible collateral if no breach of peace "self help" |
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Disposition after repossession
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>Can sell
>sale must be commercially reasonable -method -manner -time Must give notice to debtor and secondary obligors -must be in writing -does not apply to perishables, time sensitive or sold in a recognized market -send within reasonable time >reasonable time is after default and 10 days before disposition |
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Application of proceeds of disposition
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1st pay expenses related to repossession and sale
2nd pay creditor who is first in priority if any left pay subordinate creditors if any left after all are paid rest to purchaser |
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Deficiency judgment
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If sell of collateral does not pay debt that is owed the party in default will have to pay secured party the difference
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Debtor Remedies
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Debtor can seek lost profit or lost surplus
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