UCC Flashcards

Question

Special Indorsements***

Answer 1

Created with payee's signature plus designation of new person to whom instrument is payable Effect: Creates order paper. Thus, further negotiations will require the indorsement of the person to whom it was made payable

Answer 2

Limits what may be done with the instrument E.g., "For deposit in my Bank of America account #395482302 only."

Answer 3

1. Intent of issuer determines initial payee | 2. Multiple Payees (and/or)

Answer 4

1. Transferee's Right to Transferor's Endorsement: If instrument is transferred for value, transferee has specifically enforceable right to transferor's endorsement 2. Depositary Bank Becomes Holder Without Transferee's Signature: Depositary bank becomes a holder even if payee deposits check in payee's account without indorsing it 3. Payee May Indorse with Incorrect or Real Name 4. Payee Lacking Capacity May Effectively Indorse

Answer 5

Most important: Right to enforce payment

Answer 6

When obligor raises a defense to payment

Answer 7

1. Negotiable Instrument 2. Holder 3. Authenticity Not Apparetnly Questioned 4. Holder Must Pay Value 5. Good Faith (honesty in fact (subjective), observance of reasonable commercial standards of good faith and fair dealing (objective)) 6. Without Notice of Defense at Time of Instrument Acquisition 7. Shelter Rule (transfer of instrument vests in the transferee the rights the transferor) 8. Burden of Proof on Person Seeking HDC Status

Answer 8

1. Actual knowledge (subjective test) 2. Receipt of a notices coupled with a reasonable time to act on it 3. From all the facts and circumstances known to the person at the time in question, the person has reason to know it exists 4. Merely filing in the public records does NOT put a person on notice

Answer 9

1. Instrument (principal) Overdue 2. Instrument Dishonored (e.g. insufficient funds) 3. Uncured default with respect to payment of another instrument issued as part of the same series 4. Unauthorized signature 5. Alteration 6. Any defense or claim in recoupment (obligor's claim against payee arising from the transaction giving rise to the paper)

Answer 10

Transferee has rights of a transferor. 1. Even if a holder does not qualify as an HDC (e.g., because he did not pay value or had notice the note was overdue), he may still have rights of HDC by shelter 2. Exception: Person who was a party to fraud or illegality affecting the instrument cannot get HDC rights by shelter

Answer 11

1. Infancy (to the extent it is a defense in contract law) 2. Duress 3. Lack of Legal Capacity Making Obligation Void 4. Illegality Making Obligation Void 5. Fraud in the Execution 6. Discharge in Bankruptcy 7. Omission of Required Consumer Protection Language 8. Statute of Limitations 9. Payment to Former Holder 10. Alteration 11. Unauthorized Signatures & Forgeries

Answer 12

Also called Fraud in the Factum a. Signer lacked knowledge of the instrument's character or essential terms and b. Signer lacked reasonable opportunity to learn of the instrument's character or essential terms

Answer 13

a. Note: 6 years from due date b. Unaccepted Draft: Earlier of 3 years after dishonor or 10 years after issue c. Mortgage Note: 4 years

Answer 14

Unless the obligated party received proper notice that the note was transferred and that payment is to be made to the new holder Notification is adequate only if it is signed by the transferor or transferee, reasonably identifies the transferred note, and provides an address at which payments subsequently are to be made

Answer 15

Including, without limitation: 1. Failure of consideration 2. Breach of warranty 3. Fraud in the inducement

Answer 16

NO claimant can take an instrument from HDC; HDC is a "perfect defendant"

Answer 17

Primary basis is a person's signature

Answer 18

Follow general law. Assume agent signs agent's name and principal is bound. Agent escapes personal liability if: 1. Principal identified in instrument 2. Signature unambiguously shows it was made on behalf of principal If these two elements are not satisfied: a. Agent liable to HDC unless agent can prove the HDC had notice of the representative nature of agent's signature b. Agent liable to non-HDC unless agent can prove the original parties did not intend the agent to be liable c. Special rule for checks--no liability if principal's name on check If agent is not authorized, it is a forgery and agent is bound but not principal

Answer 19

1. Maker must pay instrument when it is due according to its terms at the time it was issued 2. Maker liable to holder or indorser who paid instrument 3. Maker may raise defenses, but effectiveness depends on status of holder

Answer 20

1. Drawer may not disclaim liability on a check, but may disclaim liability on other drafts 2. Drawer only liable after two conditions are satisfied: a. Presentment to drawee within 30 days b. Dishonor (drawee refuses to pay upon proper presentment)

Answer 21

1. Liability of Disclaimer Allowed - (e.g., "without recourse, Paul Parsons" prevents incurring contract liability and merely passes title) 2. Order of Liability*** - Indorsers liable to each other in order of signatures 3. Secondary Liability - Indorser liable only after: a. Presentment b. Dishonor c. Notice of dishonor within 30 days

Answer 22

1. General Rule: A drawee makes no negotiable instruments contract 2. Acceptance or Certification - Drawee may agree to pay the draft by signing the draft Drawee has no obligation to accept a draft and cannot be sued for failing to accept. Certification discharges the drawer and all prior endorsers. 3. Final Payment - Once a drawee bank finally pays a check, contract actions may no longer be pursued and drawee bank may not recover on the check from the persons it paid unless there is a breach of presentment warranty 4. Conversion liability if drawee receives delivery and pays on a forged indorsement

Answer 23

a. Bank may continue to pay checks until it knows the drawer has died and has a reasonable opportunity to act on that knowledge b. Drawee bank may pay for no more than 10 days after drawer's death. Must comply immediately with requests to stop payment by someone claiming an interest in the account.

Answer 24

Definition - A person who signs an instrument to lend his or her credit to another party but does not receive any direct benefit (e.g., co-signers, sureties, and guarantors)

Answer 25

1. Liable only in capacity in which accommodation party signs 2. May limit liability to collection only with express language 3. Entitled to reimbursement from accommodated party 4. May demonstrate accommodation by express language or anomalous indorsement (i.e., an indorsement outside the chain of title)

Answer 26

Implied warranties arise automatically Warranty liability arises from the instrument, since warranties are created by the transfer or presentment, not indorsement Possession of the instrument is not needed to take advantage of the warranty Warranty liability survives the final payment

Answer 27

Transferor must receive consideration Warranties made to immediate transferee and subsequent transferees if transferor indorsed Drawee and maker cannot sue for breach of transfer warranty

Answer 28

a. Warrantor is entitled to enforce the instrument (warranty of good title) b. All signatures authentic and authorized c. No alteration d. No good defenses against transferor (perfect plaintiff warranty) e. No knowledge of insolvency proceedings against relevant parties (only warranty where warrantor's lack of knowledge is relevant) f. If remotely-created item, the person identified as the drawer authorized the item

Answer 29

Checks: Cannot disclaim Non-Checks: Can disclaim ("without warranties")

Answer 30

Mutually exclusive with transfer warranties. A P can only have one of theses warranty causes of action although a person might make both warranties Made by presenter and previous transferors Made to parties who pay in good faith (e.g., maker, drawee acceptor (plaintiff))

Answer 31

a. Warrantor entitled to enforce draft or obtain payment b. No alteration c. No knowledge of unauthorized signature d. If remotely created item, that person identified as the drawer authorized the item

Answer 32

If P Is Holder: If payor has not paid the instrument (e.g., check bounces) then holder will sue indorser on the indorser's contract If P is Payor: If payor has paid and alter discovers the payor should not have paid (e.g., check was forged or note was altered), then payor will attempt to sue the indorser for breach of warranty

Answer 33

Holder may discharge obligation by surrendering instrument to obligor, destroying it, canceling it, etc.

Answer 34

1. Payment by Cert. Check, Cashier's Check, or Teller's Check - Underlying obligation discharged as if person was paid in cash 2. Uncertified Checks and Notes - Underlying obligation suspended. If check or note is dishonored, holder may sue on either instrument or underlying obligation

Answer 35

1. Enforcement by Person Not in Possession: a. Person entitled to enforce when loss occurred, b. Loss not due to transfer or lawful seizure, and c. Person cannot reasonably obtain original 2. Protection for payor (e.g., security or bond) required

Answer 36

Banks may pay postdated checks unless customer gives bank notice that describes the check with reasonable certainty

Answer 37

Can only be made by Drawer (bank customer) Unenforceable in TX without dated, signed writing, describing the item with certainty Valid for 6 months but can be renewed For cashier's checks, remitter cannot stop payment but bank can

Answer 38

a. Order did not comply with requirements | b. No loss (customer would have to pay the check even if payment had been stopped)

Answer 39

Def. - Drawee dishonoring a properly payable check Drawer can bring action against drawee, payee cannot Drawer may recover all damages resulting from wrongful dishonor

Answer 40

a. Payment would overdraw account | b. Check is more than 6 months old (may be honored in good faith)

Answer 41

A check or accompanying communication on which the drawer conspicuously indicates that cashing the check acts as payment in full of existing obligation that is unliquidated or subject to a bona fide dispute Effect: Operates as an accord and satisfaction if cashed by payee Exceptions: a. Payee returns money within 90 days b. Payee is an organization and had previously notified the drawer of a particular person or address to send payment in full checks

Answer 42

Whose signature was forged? Different rules apply based on the identity of the victim

Answer 43

1. Alleged maker not liable, but conduct may ratify the forgery 2. Forger is liable

Answer 44

1. Alleged drawer not liable 2. Drawee bank must recredit alleged drawer's account as check was not properly payable unless drawee bank has defense 3. Bank unable to pass on loss unless breach of presentment warranty Drawee takes risk that drawer's signature was unauthorized unless presenter knew it was unauthorized

Answer 45

a. Drawer's negligence | b. Banks Statement Rule -- Duty to Inspect Statement

Answer 46

General Rule: Customer has duty to inspect bank statement and cancel checks in a timely manner, and to report forgeries to bank. If customer does not and bank can prove a loss beyond original mistaken payment, customer precluded Forged signatures must be reported to bank within 1 year

Answer 47

If same person is forging a series of checks, the drawer must report the forgeries within 30 days of when statement was available. If the drawer does not do so, the bank will not recredit the account for the subsequent forgeries by the same person

Answer 48

a. Bearer Paper - Since indorsement is not necessary to negotiate bearer paper, forgery is irrelevant b. Order Paper - Forgery breaks chain of title and check is not properly payable. Accordingly, the drawer may demand that the drawee bank recredit the drawer's account.

Answer 49

a. Impostor Rule - Issuer, maker or drawer will be estopped from denying the validity of a forged indorsement when deemed to have acted carelessly in issuing the check and thus to have contributed to the forgery b. If employer entrusts employee with responsibility with respect to an instrument and the meployee makes a fraudulent indorsement, the indosement is effective (e. g., drawee does not verify the payee's true identity, verify the nature of payee's authority, does not supervise its employees/agents, etc.)

Answer 50

a. Conversion liability to payee, OR b. Drawer of check can sue payor/drawee bank since a check with a forged payee's name is not properly payable No double liability

Answer 51

1. Impostor Rule 2. Fraudulent indorsement by employee entrusted with check 3. Drawer's negligence 4. Failure to timely sue (3 years)

Answer 52

Drawee bank can sue presenter and those prior to the presenter for breaching the presentment warranty of entitled to enforce (forged indorsement broke the chain of title so no one could become a holder)

Answer 53

Presenter who loses to payor for breach of presentment warranty of good title may sue entities further up the chain for breach of the various transfer warranties of 1. Entitled to enforce, 2. All signatures authentic or authorized, and 3. No good defenses

Answer 54

Change in Obligation (e.g., amount, name of payees or interest rates) Unauthorized Completion (Altered check is not properly payable)

Answer 55

Change in Obligation - Holder in due course may enforce for original amount, but not enhanced amount Unauthorized Completion - HDC may enforce as completed

Answer 56

Fraudulently Made by Holder - Total discharge of obligor Not Fraudulently Made - Obligor liable under original terms

Answer 57

1. Negligence of drawer 2. Bank Statement Rule (alterations must be reported within 1 year) Remedy: Drawer bank can sue up the chain of banks for breach of presentment warranty of no alteration and the presenting bank may sue up the chain for breach of the transfer warranty of no alteration.

Answer 58

1. Is the transaction within the scope of Art. 9? 2. Classify the collateral 3. Determine if a security interest has been created, that is, has attachment occurred? 4. Determine if the security interest has been properly perfected 5. Determine the persons who are making claims to the collateral 6. Apply proper priority rules and rules regarding default and repossession

Answer 59

Any transaction which is intended to create a security interest in personal property or fixtures. Collateral Property may be: a. Already owned by debtor b. To be acquired with a loan, that is, a Purchase Money Security Interest (PMSI) c. After-Acquired

Answer 60

The outright sale of accounts, chattel paper, payment intangibles, and promissory notes are covered by Art. 9

Answer 61

A consignment is a bailment by the owner/bailor/consignor under which the bailee/consignee has authority to sell. To the world, consignee appears to own the goods and thus the true owner (consignor) may be required to comply with Art. 9 to gain protection over consignee's other creditors

Answer 62

a. Consigned goods worth $1,000 or more b. The consignor did not use the goods for personal, family, or household purposes, and c. Potentially deceptive consignee (e.g., consignee is in a position to deceive potential creditors because he deals with goods of that kind under a name other than the consignor's name, consignee is not an auctioneer, and consignee is not generally known by consignee's creditors to be substantially engaged in selling consigned goods)

Answer 63

Art. 9 covers agricultural liens, that is, nonpossessory liens on farm products such as crops and livestock created by state law in favor of a person who provides the goods to the farmer

Answer 64

Art. 9 does not govern true leases of personal property in any manner. Thus, when the lease term is over, lessor can recover the leased property without complying with Art. 9 free of lessee's creditors. But leases that are actually installment sales are covered.

Answer 65

Lessee cannot terminate lease and: a. Lease term is equal to or greater than remaining economic life of the goods, or b. Lessee owns property at end of lease term, or c. Lessee has option to buy for nominal consideration at end of lease term

Answer 66

1. Rights governed by federal law 2. Real property (except fixtures) 3. Tort claims (but commercial tort claims are covered. e.g., unfair competition) 4. Deposit accounts in consumer transactions 5. Statutory liens (e.g. landlord's lien, mechanic, storage dry cleaner) 6. Wage Assignments

Answer 67

Many rules regarding perfection, priority, repossession, resale, etc. depend on the type of collateral involved Overview: Mutually Exclusive - Any particular item can only be one type of collateral Debtor's Use Determinative - Classify collateral from the debtor's perspective

Answer 68

a. Movable items and fixtures b. Specific Inclusions: Standing timber, growing crops, unborn young of animals c. Specific Exclusions: 1. Money 2. Minerals before extraction 3. Collateral that fits other categories

Answer 69

a. Consumer Goods - Personal, family, or household purposes b. Equipment - Business purposes (default category) c. Inventory - Goods held for sale or lease in the ordinary course of business d. Farm Products (e.g. crops and livestock) - Must be in possession of farmer and in an unmanufactured condition e. If multiple uses, principal use is determinative

Answer 70

1. Instruments - Represent money (e.g., promissary notes, drafts, checks) 2. Documents - Written or electronic representations of goods, that is, docs of title under Art. 7 (e.g., warehouse receipt for goods in storage or bill of lading for goods in transit) 3. Chattel Paper - Single writing or group of writings evidencing two things: a) Monetary obligation (e.g., promissory note), plus b) security interest in or lease of goods 4. Account - Any right to payment of money for goods sold or leased or for services rendered not evidenced by an instrument of chattel paper (e.g., the typical accounts receivable for a business, contract rights not yet earned by performance, computer software license fees and credit card receivable) 5. Deposit Accounts 6. Investment Property (e.g., stocks, bonds, mutual funds, etc.) 7. Commercial Tort Claims 8. General Intangibles

Answer 71

Proceeds are whatever is received upon the disposition of collateral Proceeds may include collateral a creditor could not have a security interest in if originally used as collateral, such as cash

Answer 72

Attachment is the process by which a security interest is created and becomes enforceable against the debtor so the creditor can repossess the collateral if the debtor does not pay

Answer 73

1. Creditor gave value 2. Contract (Security Agreement) 3. Debtor has rights in collateral No attachment until all elements are satisfied

Answer 74

The contract between the debtor and creditor in which the debtor gives the creditor a security interest in the collateral 1. Oral: Security may be oral only if collateral is in creditor's possession (this is a 'pledge'). Creditor has duty to take reasonable care of collateral 2. Authenticated Record 3. Control: Creditor has right to sell or cash in the collateral without further action from the debtor

Answer 75

a. Evidence of Record - Record may be written or electronic as long as it is signed or marked electronically with present intent to identify the debtor and adopt the agreement b. Description of Collateral - Must reasonably ID the property

Answer 76

A debtor cannot give a security interest in property without having rights in the property such as ownership or identification to a contract. Debtor cannot use another person's property as collateral without that person's permission.

Answer 77

1. Using New Property as Collateral for Old Loan - Debtor can agree that new acquisitions of property will serve as additional collateral for an old loan. (this is a floating lien and is common with inventory) 2. Consumer Good Exception - An after acquired property clause will work only for consumer goods acquired within 10 days of the creditor giving value 3. Commercial Tort Claim Exception - After-acquired property clauses will not work with commercial tort claims

Answer 78

Debtor can agree that the collateral will serve as collateral for new loans, as well as the current loan. A line of credit arrangement.

Answer 79

Perfection is the process by which the creditor protects the security interest from most other claimants to the same collateral If the fight is between the debtor and creditor, go to the default analysis. The creditor will usually prevail if the creditor has attached. If fight is between the creditor and a third party claiming the same collateral, perfection is relevant

Answer 80

1. Attachment 2. Appropriate act of perfection. Depends on type of collateral. a. Possession of collateral by creditor b. Filing of financing statement by creditor c. Automatic Permanent - Attachment alone is sufficient d. Automatic Temporary - Attachment alone is sufficient for short period of time e. Control f. Notation of Security Interest on Certificate of Title

Answer 81

Almost all collateral may be perfected by possession Exceptions: a. Accounts b. Deposit accounts c. Nonnegotiable documents d. E-documents e. E-Chattel Paper f. General Intangibles Loss of Possession General Rule: Perfection is lost But, 20-day exception for instruments, negotiable docs, and certified securities

Answer 82

Almost all collateral may be perfected by filing Exceptions: a. Deposit accounts b. Money Requirements of Financing Statement 1. Names of debtor and creditor 2. Addresses of debtor and creditor 3. Debtor's authorization in an Authenticated Record (cannot be oral) d. Description of collateral 5. Description of the land if collateral is timber, minerals, fixtures, or crops Authorization of the financing statement is automatic if the debtor authenticated the underlying security agreement Minor Errors that are not seriously misleading are excused

Answer 83

a. Individual's name b. Registered organization - Name under which entity is organized (must be an exact match with the public record) c. Trade Name must be extremely similar to debtor's name If debtor undergoes name change, perfection continues as long as debtor has collateral at the time or acquires it within 4 months of change. Perfection ends unless refiled under new name within 4 month period

Answer 84

Generally, with Secretary of State Fixtures, minerals, and timber to be cut in the county where a mortgage on the real estate would be filed

Answer 85

A financing statement is effective for 5 years Exception: A recorded real property mortgage covering fixtures continues until the mortgage is realized or satisfied Continuation can be filed within 6 months to extend a filing

Answer 86

a. Required for Consumer Goods - Creditor must file a termination statement in a timely manner. (within 20 days after debtor's written demand or 1 month after there is no outstanding secured obligation b. Required upon debtor's request for non-consumer goods (within 20 days)

Answer 87

1. PMSI in Consumer Goods - This rule is only for consumer goods that are not certificate of title items or fixtures 2. Assignment of Insignificant Amount of Debtor's Accounts 3. Sale of Promissory Notes

Answer 88

1. Proceeds (20 days) 2. New Value for Instruments, Negotiable Documents, and Certified Securities (20 days) 3. Delivery of Instrument, Negotiable Document, or Certified Security to Debtor (20 days for certain purposes)

Answer 89

1. Investment Property, Nonconsumer Deposit Accounts, Electronic Documents, and Electronic Chattel Paper 2. Defined: Control means the creditor has the right to sell or cash in the collateral without further action from the debtor (e.g., deliver stocks and bonds endorsed) If a deposit account, secured party has control if it is the bank in which the deposit account is maintained

Answer 90

Covers motor vehicles, boats, and manufactured housing If collateral consumer goods or equipment, notation on certificate of title 3. Perfection if collateral inventory = file or take possession

Answer 91

Perfection continues automatically for 20 days a. Same Office - Original security interest perfected by filing. A financial statement covering the proceeds would be filed in the same place covering the original collateral b. Identifiable Cash Proceeds c. Proceeds Perfected Within the 20-Day Period

Answer 92

General Rule: Use version of UCC from state where debtor is located (principal residence for individuals, law of state where organized for a registered business, and place of business for unregistered business) Follow law of collateral's location for: a. Security interests perfected by possession b. Fixtures c. Timber d. Agricultural liens (state where farm product is located) Certificate of Title Items - Law of state which issued most recent certificate of title Deposit Accounts - Law of state in which bank has its chief executive office

Answer 93

General Rule: If debtor moves, perfection continues for 4 months Perfection by Possession - Perfection continues as long as perfected under new state's law Certificate of Title Items - Perfection continues for as long as it would have under the original certificate of title

Answer 94

Two-Step Process: 1. Classify persons claiming collateral 2. Determine who prevails Subordination - By contract, the competing parties may agree to a priority order different from the normal rules

Answer 95

Secured creditor prevails. Perfected status of secured creditor is irrelevant.

Answer 96

1. Both creditors unperfected: First to attach prevails 2. One creditor perfected: Perfected creditor prevails 3. Both creditors perfected: a. General Rule - First to either 1) file OR 2) perfect c. Exception if one creditor has PMSI in inventory, PMSI creditor prevails if: (1) PMSI creditor perfected at time debtor receives possession of the inventory, and (2) Proper notice to holders of conflicting security interests

Answer 97

PMSI prevails if interest is perfected at the time debtor receives possession of the collateral or within 20 days of that time

Answer 98

PMSI creditor prevails if: 1. PMSI creditor perfected at time debtor receives possession of teh inventory, and 2. Proper notice to holders of conflicting security interests - -Authenticated notification to all creditors who have already filed with respect to the collateral. Notice must explain the creditor is obtaining a PMSI in inventory, describe the collateral, and be given before the debtor receives possession of inventory Notice is effective for deliveries of the same type of collateral for 5 years

Answer 99

Same rules as PMSI in inventory

Answer 100

Secured party with control prevails

Answer 101

Secured party with control over investment property has priority over secured party who does not have control (e.g., a secured party who perfected by filing)

Answer 102

If a debtor makes a gift of the collateral to a donee, the collateral remains subject to the security interest in the donee's hands

Answer 103

1. General Rule: Secured party prevails | 2. Debtor has permission to sell: Purchaser prevails

Answer 104

a. General Rule - Purchaser wins if: (1) Buyer gives value (2) Buyer receives delivery of the item, and (3) Buyer has no knowledge of security interest at time of delivery b. PMSI Exception - If PMSI creditor perfects within 20 days after debtor receives the collateral but after the debtor sells collateral to purchaser, creditor will prevail over the "gap" purchaser

Answer 105

A BIOCB can prevail even over a perfected creditor if the following requirements are satisfied: a. Good faith b. Without knowledge of a security interest violation c. Purchase of goods that are not farm products d. Ordinary purchase (e.g., computer from electronics store) e. Security interest created by the seller f. Creditor not perfected by possession

Answer 106

Purchaser Prevails if: a. Consumer goods in sellers hands b. Consumer goods in buyers hands c. Buyer has no knowledge of security interest d. Buyer pays value e. Creditor not perfected by possession f. Creditor's interest is unfiled prior to purchase

Answer 107

The creditor gives more money to the debotr based on collateral that the debtor has already sold to a purchaser who does not qualify as a buyer in the ordinary course of business. A non-buyer in the ordinary course of business can prevail over a secured creditor for future advance amounts made after the first of these events occurs: a. Secured creditor obtains knowledge of the purchase, or b. 45 days have elapsed from date of the purchase

Answer 108

HDC will prevail over earlier perfected interests in teh negotiable instrument

Answer 109

"Lien Creditors" includes creditors who have acquired a judicial lien by a levy on the debtor's property and bankruptcy trustee General Priority Rules a. If secured creditor unperfected at time lien attached - Lien Creditor Prevails b. If secured creditor perfected at time lien attached - Secured Creditor Prevails PMSI exception when PMSI creditor files within 20 days of debtor's receiving possession Future Advances - Secured creditor will always lose priority to a lien creditor for future advances after both of the following things occur: 1. Secured creditor obtains knowledge of the lien, and 2. 45 days elapse from the date of the lien

Answer 110

Statutory Lien prevails if following conditions are satisfied: 1. Person furnished services or materials with respect to the goods covered by the security interest 2. Furnishing was in ordinary course of business, and Collateral is in the possession of the statutory lien holder

Answer 111

Priority for proceeds is the same as the priority in the original collateral as long as the security interest in the proceeds is perfected

Answer 112

Secured party may win if: a. Perfected before Real Estate Interest Recorded, and b. Perfected with a fixture filing (financing statement that meets two additional requirements: 1) Describes the real property, and 2) filed in office where a mortgage on the real property would be recorded) PMSI exception if: a. PMSI Creditor perfected by fixture filing b. Perfected within 20 days of becoming a fixture (installation), and c. Competing real estate interest is not a construction mortgage A security interest in fixtures that is perfected in any manner prevails over a later-acquired judicial lien, even if the perfection was not done via a fixture filing

Answer 113

A perfected security interest in crops has priority over a conflicting interest in the land on which the crops are growing regardless of who filed or perfected first

Answer 114

Bankruptcy of the Debtor may change the normal priority rules. LIKELY AREA FOR CROSSOVER ISSUE

Answer 115

Remedies triggered by debtor's default. Default clearly means not paying, but may also include other things specified in the security agreement

Answer 116

1. Upon default, creditor may repossess 2. No judicial process needed 3. Creditor need not give debtor notice 4. Limitation on repossession--No breach of the peace (if repo person breaches peace, creditor is strictly liable, possibly for conversion, actual damages, and even punitive damages) After proper repossession, creditor has option to resell collateral and sue for deficiency or strictly foreclose

Answer 117

1. Notice Required 2. Debtor generally has right to redeem 3. Commercially reasonable standard of care for all aspects of the sale, including method, manner, time, place, and terms 4. Creditor may be able to purchase at resale

Answer 118

No notice required for: 1. Perishables, 2. Items threatening to decline speedily in value, or 3. Collateral customarily sold on a recognized market

Answer 119

1. Description of debtor and secured party 2. Description of collateral 3. Method of sale 4. Statement that debtor is entitled to accounting and the charge, if any 5. Time and place of public sale; time after which a private sale will be made (earliest date of sale) 6. If collateral is for consumer goods, notice must also explain debtor is liable for deficiency, provide phone number of person from whom debtor can obtain amount needed to redeem the collateral, and phone number or address from which debtor can get additional info about the sale Notice must be sent a reasonable time before the sale (for consumer goods 10 days is reasonable) Debtor, sureties, and other creditors entitled to notice

Answer 120

Debtor has ability to cure default and regain collateral if these requirements are satisfied: a. Creditor has not yet sold or entered into a contract to sell collateral b. Strict foreclosure has not yet occurred c. Debtor has not waived the right to redeem after default d. Debtor must tender fulfillment of all obligations secured by the collateral e. Debtor must tender creditor's reasonable expenses

Answer 121

a. Public Sale: Yes b. Private Sale: Only if: 1. Collateral is customarily sold in a recognized market 2. Collateral is subject to widely distributed standard price quotations

Answer 122

The reselling creditor warrants title, possession and quiet enjoyment of the collateral by the purchaser unless the creditor takes steps to disclaim warranties

Answer 123

1. Reasonable expenses of reselling creditor 2. Satisfaction of debt 3. Satisfaction of subordinate creditors 4. Surplus, if any, to debtor Creditor is unsecured for deficiency amount

Answer 124

a. Creditor liable for actual damages b. For consumer goods, creditor automatically liable for amount equal to finance charge plus 10% of the principal even without proof of damages c. Effect on Creditor's ability to Recover in Deficiency 1) Consumer Transactions - Absolute bar 2) Nonconsumer Transactions - Rebuttable presumption that value of collateral was equal to amount of debt

Answer 125

1. Creditor retains collateral 2. Requirements to use strict foreclosure: a. Debtor consents (express or implied by debtor's failure to object within 20 days of notice) b. Creditor sends authenticated notice to retain collateral to: - -Debtor - -If collateral not consumer goods: Notice to creditors who have perfected by filing, notation on certificate of title, or who have given notice to creditor c. No timely objection (20 days) 3. Exception for High Equity (debtor has paid 60% of total price) Consumer Goods - Resale necessary within 90 days of repossession

UCC Flashcards

(149 cards)