Mizzou MANGMT 3540 - Chapter 16: Secured Transactions (8 pages)

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Chapter 16: Secured Transactions



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Chapter 16: Secured Transactions

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ch.16


Lecture number:
20
Pages:
8
Type:
Lecture Note
School:
University of Missouri
Course:
Mangmt 3540 - Introduction to Business Law
Edition:
1
Unformatted text preview:

MANGMT 3540 1st Edition Lecture 20 Outline of Last Lecture I Rules of Indorsements II Holder in Due Course III Defenses Against a holder in due course Outline of Current Lecture IV General Terms Relevant to Article Nine of the UCC V Types of Collateral Governed Under Article 9 of UCC VI Creating a Security Interest by Attachment VII Perfecting a Security Interest VIII Financing Statements Public Notice of Security Interest IX Floating Liens A security Agreement in X Priorities to Collateral XI Rights and Duties of Parties upon Default XII Effect of Disposition of Collateral at a Repossession Sale XIII Termination Statement Current Lecture I General Terms Relevant to Article Nine of the UCC A Security Interest These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute 1 Interest in personal property or fixture which secures payment or performance of an obligation formerly called chattel mortgages B Fixtures 1 Personal property permanently attached to real estate C Collateral 1 Property subject to a security interest D Debtor 1 Party owing money or an obligation secured by the security interest E Secured party 1 Person who holds owns security interest F Financing statement 1 Notice of security interest filed with a government office G Lien 1 Right to sell property on default 2 Examples mortgage some judgments and security interests II Types of Collateral Governed Under Article 9 of UCC A Goods 1 Things tangible and movable or fixture Article 9 adds fixtures to Article 2 definition E g a book B Quasi Tangibles 1 Paper instruments which in themselves evidence a right e g negotiable instruments ex A check C Intangibles 1 Property with no aspect of physical existence 1 Accounts receivable 2 Goodwill of business D Art 9 When Inapplicable 1 Article 9 regulating security interests does NOT apply to real estate OR to the process of obtaining perfection of security interests in motor vehicles III Creating a Security Interest by Attachment A Attachment defined 1 Attachment is the moment in time when a security agreement becomes enforceable against a specific piece of collateral B Three requirements for attachment 1 A valid written security agreement or possession of the collateral 1 Written Security agreement a With language transferring a security interest in collateral b Signed by the debtor and c Containing a description of collateral sufficient to identify it 2 An oral security agreement is enforceable if the secured party takes of the collateral 2 The secured party gives value 1 Value past or present consideration 3 Debtor has rights in the collateral 1 Ownership or permission from the owner to pledge the collateral 4 Once these three requirements are met the security agreement has now attached to the collateral IV Perfecting a Security Interest A Perfection defined 1 Perfection is the process to make the security interest enforceable against third parties parties other than the secured party and the debtor who take a later interest in the collateral B Three ways to perfect a security interest 1 By possession 1 Common law pledge 2 Pawn shop 2 By attachment of security interest if the holder has a purchase money security interest PMSI in consumer goods other than motor vehicles or fixtures 1 PMSI secured party provides the money or credit to purchase collateral 2 Consumer goods purchased for non business use 3 By filing a financing statement effective 5 years typical way to perfect in business transactions V Financing Statements Public Notice of Security Interest A Contents 1 Name and address of the debtor 2 Name and address of the secured party 3 Description of collateral type of collateral enough puts public on notice B When financing statements required 1 Required method of perfecting for most business transaction must file if no possession of collateral and no PMSI in consumer goods C Where to file 1 Generally the secretary of state office VI Floating Liens A security Agreement in A Proceeds 1 Whatever is received by the debtor in exchange for transferred collateral 2 Example cash B Future Advances 1 Loans advances to be made by a secured party in the future that is some time after the promissory note is signed collateral is security for line of credit C After acquired property 1 Property of a type similar to the collateral acquired by the debtor after the signing of the security agreement 2 Example inventory VII Priorities to Collateral A Five types of secured or other parties in order of priority 1 Buyer of goods in the ordinary course of business takes free of security interests in seller s inventory 2 Secondhand purchaser of consumer goods Takes free of security interest perfected by attachment garage sale 3 Purchase Money Security Interest the holder of a non inventory PMSI if perfected within 20 days of attachment has priority over other liens its priority date relates back to time of attachment to receive priority under 4 below 4 First to Perfect or Become Lien Creditor 1 Perfection of a security interest in any of the three ways possession attachment or filing 2 Lien Creditor a Someone with a judgment and an execution lien Trustee in Bankruptcy 5 First to attach if no one perfected VIII Rights and Duties of Parties upon Default A Ignore the security interest 1 A secured party may obtain a judgment based upon the amount owed rather than repossessing the collateral B Repossession 1 A secured party may take possession of collateral covered by a security agreement 2 No breach of peace is allowed in repossessing collateral C Repossession Sale 1 A secured party may dispose of collateral and apply the proceeds to the obligation D Retaining Collateral 1 A secured party may sometimes keep the collateral as satisfaction payment in full of the obligation This requires notice a right to redeem the collateral and proper protection of consumers IX Effect of Disposition of Collateral at a Repossession Sale A Transfer of Good Title 1 A purchaser at a valid repossession sale takes title free of ownership claims of the debtor and SP B Order of distribution of proceeds 1 Expenses of the repossession sale possessing holding and preparing for sale attorney fees 2 Satisfaction of debt of 1st lienholder 3 Subordinate lower priority SI holders who gave written notification 2nd lien 3rd lien etc 4 Debtor is entitled to any surplus Or liable for deficiency X Termination Statement A When the debt is paid or


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