Term
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Definition
| consensual security interests in personal property and fixtures |
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Term
| Typical Security Interests |
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Definition
| one party (the creditor) gives another party (the debtor) something of value in exchange for the debtor's giving the creditor an interest in the debtor's personal property or fixtures (the collateral). The creditor's interest in the collateral is not a full ownership interest, but rather to keep or sell the collateral if the debtor default defaults on his obligation to the creditor |
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Term
| Purchase Money Security Interest |
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Definition
| a special type of SI in goods that has priority over all SI in the same goods if certain requirements are met |
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Term
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Definition
1. a creditor sells the goods to the debtor on credit, retaining a SI in the goods for all or part of the purchase price (creditor and seller are the same person); or
2 a creditor advances funds that are used by the debtor to purchase the goods (creditor and seller are different persons) |
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Term
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Definition
| a creditors interest in debtor's property |
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Term
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Definition
1. judicial liens
2. statutory liens
3. consensual liens (subject to art.9) |
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Term
| Security Interest defined |
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Definition
| a right to seize the property on the debtor's default |
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Term
| Security Agreement defined |
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Definition
| an agreement that creates or provides for a SI |
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Term
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Definition
| a SI must attach to a particular piece or group of collateral |
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Term
| A SI in nonconsumer goods does not lose its status as a PMSI if --> |
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Definition
1. the PMSI collateral also secures an obligation that is not a PMSI
2. Nonpurchase money collateral also secures the PMSI or
3. the purchase money obligation has renewed, refinanced, consolidated or restructured |
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Term
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Definition
| Collateral is the property subject to SI |
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Term
| Description of the collateral |
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Definition
| MUST BE SPECIFIC, MUST REASONABLY DESCRIBE WHAT THE COLLATERAL IS |
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Term
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Definition
| all things that are movable at the time the security interest attaches |
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Term
| types of tangible collateral |
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Definition
1. inventory
2. consumer goods
3. farm products
4. equipment |
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Term
| How to determine what the purpose of the collateral is |
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Definition
| category depends on the primary use to which the debtor puts the collateral at the time the SI attaches |
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Term
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Definition
| goods other than farm products which are held for sale or lease in the ordinary course of business [mostly goods held by business for sale] |
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Term
| Collateral > Consumer goods |
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Definition
goods used or bought for personal, family, or household purposes.
Not used for business use. |
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Term
| Collateral > Farm Products |
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Definition
| if they are used or produced in farming operations and are in the possession of the farmer |
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Term
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Definition
goods other than standing timber, with respect to which the debtor is engaged in farming operation and which are
1. crops grown, growing, or to be grown including (i) crops produced by trees,vines and bushes and (ii) aquatic goods produced in aquacultural operations
2. livestock, born or unborn, including acquatic goods produced in aquacultural operations
3. supplies used or produced in a family operation; or
4. products of crops or livestock in their unmanufactured states |
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Term
| who must possess the farm products |
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Definition
the farmer must be in possession of the farm products, once sold they are no longer farm products
if a farmer holds the items out to be for sale to others then they are inventory |
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Term
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Definition
| not inventory or farm products. Held by a business not for sale. Also a catch all category |
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Term
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Definition
| a fixture will still fit into one of the four primary classes of goods. |
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Term
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Definition
| goods that have become so related to particular real property that an interest in them arises under real property law |
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Term
| Quasi-intangible goods include |
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Definition
instruments
documents
chattel paper
accounts
deposit accounts
investment property
commercial tort claims
general intangibles |
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Term
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Definition
a record or records evidencing both:
1. a monetary obligation and
2. a si in or lease of specific goods
can be both paper form (tangible) or election (intangible) |
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Term
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Definition
| a negotiable instrument or any other writing that evidences a right to the payment of a monetary obligation that is not itself a security agreement or lease and is of a type that is ordinary course of business is transferred by delivery with any necessary indorsement |
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Term
| Collateral > instrument does not include |
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Definition
1. investment property
2. letters of credit |
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Term
| Collateral > instrument may include |
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Definition
| promissory notes, drafts, and certificates of deposit and sometimes are divided into negotiable and nonnegotiable instruments |
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Term
| Collateral > Deposit Accounts |
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Definition
a demand, time, savings, passbook or similar account maintained with a bank
1. includes any type of account maintained with the bank
2. excludes investment property or accounts evidenced by an instrument
3. Article 9 only applies to nonconsumer deposit accounts and deposit accounts that are claimed as proceeds of other collateral |
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Term
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Definition
| refers to documents of title, such as bills of lading and warehouse receipts |
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Term
| Collateral > Investment Property |
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Definition
| includes items such as stocks, bonds, mutual funds and brokerage |
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Term
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Definition
| An account is any right to payment for goods, services, real property, use of a credit card, or lottery winnings that is not evidenced by an instrument or chattel paper. |
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Term
| Collateral > Payment Intangible |
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Definition
| a general intangible that is a monetary obligation |
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Term
| Collateral > General Intangible |
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Definition
property other than personal account, chattel paper, instruments
any item of personal property that does not fall within any of the other definitions is general intangible (includes software) |
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Term
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Definition
| An authenticated security agreement need not be evidenced by a single document |
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Term
| How to determine whether there was a SI intended --> |
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Definition
1. the court must decide whether there is a written document or documents containing language that objectively indicates that the parties intended to create a SI
2. the fact finder must determine whether the parties actually intended to create a security interest |
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Term
| Factors of Composite Document Rule |
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Definition
1. whether the documents are contemporaneous
2. which documents are authenticated by the debtor
3. whether the documents cross reference each other |
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Term
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Definition
Physically united goods with other goods in such a manner that their identity is lost in the product or mass
Security interest no longer exists in commingled goods as such |
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Term
| Attachment of Commingled Goods |
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Definition
| If collateral is perfected before the collateral becomes commingled goods, then it attaches to the product or mass |
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Term
| Perfection of Commingled Goods |
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Definition
| if a SI in collateral is perfected before the collateral becomes commingled goods, the SI that attaches to the product of mass under subsection is perfected |
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Term
| Priority in commingled goods --> |
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Definition
| if dependent on other priority rules, except a SI that is perfected has priority over a SI that is unperfected at the time the collateral becomes commingled goods |
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Term
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Definition
goods that are physically united with other goods in such a manner that the identity of the original goods will not last
a SI will continue to attach if the personality of the goods does not change |
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Term
| Requirements for Attachment |
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Definition
| a SI attaches to collateral when it becomes enforceable against the debtor with respect to the collateral unless an agreement expressly postpones the time of attachment |
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Term
| Attachment elements that must exist in order to have a SI |
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Definition
1. need value
2. have rights in the collateral
3. must have given an agreement that the SI attach |
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Term
| How do you give a SI for attachment |
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Definition
1. an authenticated security agreement
2. possession by the secured party
3. delivery of certificated security in registered form or
4. control of deposit account, electronic chattel paper, investment property, or letter-of-credit rights |
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Term
| Option 1 for attachment (after value and rights in collateral) |
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Definition
a. the debtor has authenticated a security agreement
b. provide an adequate description of the collateral |
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Term
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Definition
to determine if the description of collateral is specific enough -->
must be such that it can be determined there from what collateral the parties intended the security interest to cover. Any method of description is allowed as long as it is not confusing
Collateral cannot be defined by type alone, super generic descriptions are not permitted as well |
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Term
| After-Acquired property --> |
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Definition
a secure party will sometimes want to obtain a SI not only in the debtor's present property, but also in property that the debtor will obtain in the future.
A SECURITY AGREEMENT may create or provide for a SI is after-acquired collateral
even if the SA is intended to cover "after-acquired property" the Si itself only attaches when the debtor acquires the property. |
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Term
| When can an after-acquired property clause not be used: |
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Definition
1. consumer goods, other than accession when given as additional security UNLESS the debtor acquires the rights in them within 10 days after the creditor gives value
also invalid for commercial tort claims |
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Term
| What happens if the Security Agreement is silent to after-acquired property |
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Definition
| most courts hold that you must expressly state in the security agreement that you must acquire rights in after-acquired property |
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Term
| Exceptions to when you do not need to have a clause for after acquired property clause |
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Definition
| Inventory --> if a SA is intended to cover inventory, but also inventory has to be acquired in the future |
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Term
| Authentication of Security Agreement |
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Definition
| To meet the requirements of attachment, there needs to be an authenticated Security Agreement |
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Term
| Security Agreement defined |
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Definition
the bargain of the parties in fact, as found in their language or inferred from other circumstances
does not need to be in writing or a record [an oral security agreement is not enough unless one of the other requirements such as possession is enough] |
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Term
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Definition
includes signing a record, as well as executing or adopting a symbol or encrypting a record in whole or in part with present intent to:
a. identify the authenticating party ANd
b. adopt or accept the record |
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Term
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Definition
| information that is inscribed on an intangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form |
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Term
| Who could authenticate the record --> |
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Definition
1. debtor (only person required to sign an security agreement)
2. obligor
3. secondary obligor
4. secured party |
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Term
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Definition
| the bargain of the parties in fact, as found in their language or inferred from other circumstances |
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Term
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Definition
a SP can include a clause that the collateral in the Security agreement will also be the collateral for a future advance
if there is a future advance clause in the security agreement, then there does not need to be another security agreement filed later |
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Term
| The Value Requirement needed for attachment |
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Definition
the consideration the secured party (the lender) provides in exchange for the security interest.
can be:
- any consideration sufficient to support a simple contract
- security for, or in total/partial satisfaction of a pre-existing claim
- binding commitment to extend credit or the extension of immediately available |
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Term
| Final requirement for attachment -- Rights in the collateral |
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Definition
debtor either have rights in the collateral or the power to convey such rights to the secured party
debtor must have some ownership interest or right to obtain possession |
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Term
| Possession of Collateral (as opposed to have a verified security agreement) |
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Definition
| the collateral is not a certified security and is in the possession of the secured party pursuant to the debtor's security agreement |
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Term
| Rights and duties of the secured party when in possession of the collateral |
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Definition
1. duty of reasonable care
2. right to reimbursement for expenses
3. risk of loss
4. accounting for profits
5. right to repledge |
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Term
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Definition
| the collateral in deposit accounts, electronic chattel paper, investment property, letter-of-credit rights or electronic documentation and the secured party has control pursuant to the security agreement |
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Term
| Types of collateral that may be controlled pursuant to a debtor's security agreement are: |
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Definition
1. deposit accounts
2. investment property
3. letter of credit rights
4. electronic chattel paper
5. electronic documents of title |
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Term
| how to have control over a deposit account: |
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Definition
1. the secured party is the bank with which the deposit account is maintained
2. the debtor, secured party and bank have agreed in an authenticated record that the bank will comply with instructions originated by the secured party directing disposition of the funds in the deposit account without further consent by the debtor; or
3. the secured party becomes the bank's customer with respect to the deposit account |
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Term
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Definition
| a secured party has control of a letter-of-credit right to the extent of any right to payment or performance by the issuer of any nominated person if the issuer or nominated person has consented to an assignment or proceeds of the letter of credit |
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Term
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Definition
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