General
Definition: property subject to a security interest
What is collateral?
Three conditions for attachment of a security interest
What is (1) value being given by the secured party, (2) the debtor having rights in the collateral, and (3) having a security agreement or the secured party having possession/control of the collateral?
Requirements for a valid financing statement
What are the debtor’s and secured party’s name, and a description of the collateral?
Types of claimants whose interests may conflict with a secured party’s interest
Creditors, Transferees, Buyers
Definition of default
Types of tangible collateral
What is consumer goods, farm products, inventory, and equipment?
Requirements for a valid security agreement
What is the agreement being in a tangible record, reasonably identifying the collateral (not super generic), and being authenticated bu the debtor?
Methods of perfection
What is filing a financing statement, possessing the collateral, having control over the collateral, and automatic perfection?
Priority rule between perfected security interest vs perfected security interest and PMSI v PMSI (same rule)
What is the first to file or perfect?
Standard for disposition of collateral
What is the commercially reasonable standard?
The ways value may be given to create a security interest
What is providing consideration, extending credit, accepting delivery under a preexisting contract (for buyers), or satisfying part or all of a preexisting claim?
Rule of attachment for after-acquired collateral, and the exception
What is that a security interest may apply to after-acquired collateral if there’s an after-acquired collateral clause or the situation suggests that after-acquired collateral was intended to be included?
What is that after-acquired clauses are not effective if the collateral is consumer goods? (Unless debtor acquires them within 10 days after the secured party gives value)
How long a secured party has to file an amendment to a financing statement if the debtor changes their name, and how long a filing statement lasts
Amendment: What is four months?
Length of perfection from filing statement: what is five years?
Requirements to be a buyer in the ordinary course of business
What is a person who (1) buys goods (other than farm products); (2) in the ordinary course; (3) from a seller who is in the business of selling goods of that kind; (4) in good faith; (5) without actual knowledge that the sale violates the rights of another in the same goods?
Note: a BOCB takes free of a security interest created by the buyer’s seller (even if perfected) and even if the buyer knows of the security interest’s existence.
Order of application of cash proceeds from disposition
What is reasonable disposition expenses, then to satisfy the secured obligation, then to satisfy subordinate security interest’s, and then any remainder to the debtor?
Circumstance in which a lease is treated as a security interest
What is the economic reality of the lease being a security interest?
Also, what is the lessee paying consideration to the lessor for the right to have the goods for the lease term, the lessee not being able to terminate the payment obligation, and meeting one of these conditions?:
(1) The original term of the lease ≥ the remaining economic life of the goods
(2) The lessee must renew the lease for the remaining economic life of the goods or must become the owner of the goods
(3) The lessee can renew the lease for the goods’ remaining economic life or can become the owner of the goods for no additional consideration (or nominal consideration)
What is (1) accounting information from the secured party and (2) the secured party notifying account debtors when they don’t have to keep paying the secured party?
Types of collateral perfected by possession
What are goods, instruments, negotiable documents, money, tangible chattel paper, and certificated security?
Mnemonic: Good Investors Never Make Terrible Choices
Difference in priority rule between a judicial lien creditor and a statutory/common-law lien creditor
What is is the judicial lien creditor has priority over an unperfected security interest only, and a statutory/common-law lien creditor has priority over a perfected security interest?
Time limit on redemption of collateral
What is redemption is not permitted after disposition or foreclosure?
The nine types of other collateral that are not tangible collateral
What is chattel paper, documents, instruments, investment property, accounts, commercial tort claims, deposit accounts, letter-of-credit rights, and general intangibles?
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Rights and risks arising from the secured party’s (SP‘s) possession or control of collateral
What is SP’s right to charge for reasonable expenses, SP’s right to use or operate collateral, SP’s right to hold proceeds, and the risk of loss or damage being on the debtor?
Types of collateral perfected by control
What are deposit accounts, letter-of-credit rights, investment property, electronic chattel paper, and electronic documents?
Subsequent owner rule applicable to the garage sale exception and the BOCB exception
What is: if a buyer obtains goods under the garage sale exception or under the BOCB exception, and then gives (not sells) the goods to a third party, the third party doesn’t take the goods free of a security interest created by the buyer’s seller?
Strict foreclosure rules for consumer debtors
What is that accepting collateral in partial satisfaction is not allowed in consumer transactions (only full satisfaction), and if the consumer goods are in the secured party’s possession, no strict foreclosure is allowed if the debtor paid at least 60% of the obligation?