Secured Transactions

Question 1

Conditions required to make a security interest enforceable against the debtor

Answer 1

(i) value has been given by secured party
(ii) debtor has rights in the collateral, and
(iii) debtor has authenticated a security agreement that describes the collateral, or secured party has possession or control of the collateral pursuant to a security agreement

Question 2

define “goods” and list four types

Answer 2

“goods” = collateral moveable at the time that a security interest attaches

1. consumer goods
2. farm products
3. inventory
4. equipment

Question 3

define inventory

Answer 3

items traditionally sold by a business; includes what they actually sell and items used to create their goods

Question 4

define consumer goods

Answer 4

goods acquired primarily for personal, family, or household purposes

Question 5

define farm products

Answer 5

goods that are crops grown, growing, or to be grown; livestock born or unborn; supplies used or proceed in farming and products of crops or livestock in their unmanufactured states (but not including standing timber for which no K to cut or remove)

Question 6

define equipment

Answer 6

catchall class consisting of goods that are not consumer goods, farm products, or inventory

usually primarily used or bought for use in a business

Question 7

define chattel paper

Answer 7

one or more records that evidence a monetary obligation and a security interest or lease of specific goods

Question 8

define accounts

Answer 8

rights to accounts supposed to be receiving from customers, including right to payment for goods sold, property licensed, or services rendered

also right to payment for issuance of insurance policy, use of credit card, winning lottery

Question 9

define PMSI

Answer 9

gives lenders security interest in goods that have been purchased with funds borrowed from them or purchased on credit from them

1. sec party gives value to debtor and debtor uses loan to acquire rights in or use of collateral or
2. sec party sells collateral to debtor, and enters agreement requiring to pay secured party all or part of purchase price

Question 10

define accession

Answer 10

Accessions are good that are physically united with other goods in such a manner that the identity of the original goods is not lost, such as memory installed in a computer, or tires installed on a car. A security interest that is created in collateral that becomes an accession is not lost due to the collateral becoming an accession

Question 11

requirements for authenticated security agreement

Answer 11

1. record in tangible medium
2. contains description of collateral
3. must be authenticated (usu signed) by the debtor

Question 12

four methods for perfecting security interest set forth in article 9

Answer 12

1. filing
2. possession
3. control
4. automatic perfection

Question 13

requirements for financing statement

Answer 13

1. debtor’s name
2. name of secured party
3. collateral covered in financing statement

Question 14

two main exceptions to first in time, first in right for priority

Answer 14

1. buyer in the ordinary course of business
2. PMSI

Question 15

requirements for buyer in the ordinary course of business

Answer 15

person who
1. buys goods (not farm products)
2. in the ordinary course of business
3. from a merchant in the business of selling goods of that kind
4. in good faith, AND
5. without knowledge that the sale violates the rights of another in the same goods

Question 16

define consumer buyer

Answer 16

1. buys consumer goods for value
2. for his own personal family or household use
3. from a consumer seller AND
4. without knowledge of the security interest

Question 17

define general creditor

Answer 17

one who has a claim including a judgment but no lien or security interest wrt property in question

does not have claim to particular property owned by debtor; secured party will always prevail

Question 18

define judicial lien creditor

Answer 18

one who acquires a lien on the collateral by judicial process, rather than operation of law

priority over unperfected security interest (usually)