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Terms in this set (29)
What is attachment?
Attachment is an arrangement linking a debt to a particular collateral. Upon attachment, the SI becomes enforceable against debtor's collateral.
Requirement for attachment
1. agreement to create a security interest evidenced by Creditor taking control or possession agreement describing the collateral.
2. Creditor must give value in exchange for the interest. The Debtor must have rights in the collateral.
Requirement for security agreement
An record authenticated by debtor that reasonably describes the collateral
What is a security agreement?
The contract/promise to pay principal and interest between Debtor and Secured Party that creates a secured interest and attaches the collateral to the loan.
What is the scope of security interest re after-acquired property clause?
After acquired property is allowed but if no clause, then the SI only attaches to collateral that exists at the time SA is executed
What is the scope of security interest re accession and commingled goods?
Accessions are goods that are physically united w/ other goods so that the identity of the original good is not lost. If collateral becomes an accession, then SI in collateral is not lost.
Commingled goods are goods that are physically united w/ other goods that their identity is lost. If commingled good, SI is lost in original good and continues in larger product. (SI in flour that is used in cookies)
Scope of SI re proceeds
if a SI attaches to original collateral, it also attaches to proceeds automatically
How to qualify as PMSI?
only if good/software
needs 2 things:
- value given allows debtor to acquire goods/software AND
- goods or software acquired secure the loan.
Six ways to perfect (Famous People Can't Avoid Attention)
4. alternate perfection systems
5. perfection under state's certificate of title law (like cars)
6. Automatic perfection (temporary/permanent)
When is perfection by filing allowed?
any collateral except for deposit accounts, cars, money, letters of credit
How to perfect by filing?
file a financing statement with FL's secured transaction registry
reqs for financing statement
must file in state where debtor is located and include:
-name of debtor
-name of secured party
-description of collateral
standards for errors in financing statement
minor errors do not affect perfection unless seriously misleading like errors in debtor's name
How long does financing statement last?
FS lapse 5 years after date of filing unless continued. You continue by filing a continuation statement w/in 6 months before FS lapses. If lapses, secured party loses perfection but can re-perfect... just loses priority
When obligation is paid, termination statement voids a financing statement
How to perfect by possession?
soon as secured party has possession, interest is perfected
what can be perfected by possession?
tangible chattel paper
how to perfect by control?
by taking control of collateral
What can be perfected by control?
electronic chattel paper
letter of credit rights
What is perfection by control exclusive for?
deposit accounts and letter of credit rights
Priority - perfected vs perfected
first in time to file or perfect takes priority
Priority - perfected vs unperfected
perfected SI beats unperfected
Priority - unperfected vs unperfected
first SI to attach or become perfected wins
Priority - perfected v lien creditor
Priority - unperfected vs lien creditor
lien creditor wins unless filed but unattached
Reqs for buyer in ordinary course of business (BIOCB)
1. buyer buys goods from merchant;
2. in ordinary course of merchant's business;
3. buyer acts in good faith and without knowledge that sale violates rights of others in same goods; AND
4. seller is engaged in business of selling goods and not a pawn broker.
reqs for garage sale exception
1. buyer buys consumer goods for value;
2. for their own personal, family, or household use
3. from a consumer seller
4. without knowledge of SI
5 UNLESS secured party filed financing statement covering goods before purchase
what happens when debtor defaults?
2. right to redeem
How does creditor repossess?
creditor can repossess by self help if there is no breach of peace or by judicial action via writ of replevin
What are a debtor's redemption rights?
debtor can redeem collateral by paying entire obligation and expenses and must occur before secured party has sold collateral or accepted collateral in satisfaction of debt.
Debtor's redemption right cannot be waived
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