Chapter 38pt1

Chapter 38pt1 - Chapter 38 Secured Transactions Chapter and...

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Unformatted text preview: Chapter 38: Secured Transactions Chapter and Suretyship and BUL 3350 - Chapter 38 1 Topics Covered in this Chapter I. Secured Transactions In Personal Property A. Essentials of Secured Transactions A. B. Classification of Collateral B. C. Attachment C. D. Perfection D. E. Priorities Among Competing Interests E. F. Default F. II. Suretyship A. Nature and Formation A. B. Rights of Surety B. C. Defenses of Surety and Principal Debtor C. BUL 3350 - Chapter 38 2 Secured Transactions Secured in Personal Property in Definition of Secured Transaction – an agreement by which one party obtains a security interest in the personal property of another to secure the payment of a debt another Debtor – person who has an interest in the Debtor collateral other than a security interest; typically is the person obligated on the debt secured by the security interest secured Secured Party – person in whose favor a Secured security interest in the collateral is created or provided for under the security agreement provided BUL 3350 - Chapter 38 3 Secured Transactions Secured in Personal Property in Collateral – property subject to a security Collateral interest interest Security Agreement – agreement that creates Security or provides for a security interest or Security Interest – right in personal property Security that secures payment or performance of an obligation obligation Purchase Money Security Interest – security Purchase interest in goods purchased; interest is retained either by the seller of the goods or by a lender who advances the purchase price lender BUL 3350 - Chapter 38 4 Rights Fundamental Rights of Debtor Fundamental • – to redeem collateral by payment of the debt debt • – to possess general rights of ownership to Fundamental Rights of Secured Party Fundamental • – to recover amount of debt to • – to have collateral applied to payment of debt upon default debt BUL 3350 - Chapter 38 5 Classification of Collateral Goods – things that are movable when a Goods security interest attaches security Indispensable Paper Intangibles Intangibles BUL 3350 - Chapter 38 6 Types of Goods Types Consumer Goods –bought or used primarily bought for personal, family, or household purposes for Farm Products –part of a farming operation part including crops, livestock, or supplies used or produced in farming produced Inventory –non-farm product goods (1) held non-farm for sale, lease, or to be furnished under a service contract, or (2) raw materials, work in process, or materials used in a business process, BUL 3350 - Chapter 38 7 Types of Goods Types Equipment – goods not included in the Equipment definition of consumer goods, inventory, or farm products or Fixtures – goods that are so related to Fixtures real property that they are considered part of the real estate part Accession – goods installed in or firmly affixed to personal property affixed BUL 3350 - Chapter 38 8 Indispensable Paper Chattel Paper – tangible or electronic record Chattel that evidences both a debt and a security interest in specific goods interest Instruments – negotiable instruments or any Instruments other writing that evidences a right to payment of money that is transferable by delivery with any necessary indorsement any Documents – documents of title Documents documents Investment Property – investment security (stocks and bonds), security accounts, commodity contracts, and commodity accounts commodity BUL 3350 - Chapter 38 9 Intangibles Account – right to payment for (1) goods sold, Account leased, licensed, or otherwise disposed of or (2) services rendered. (2) General Intangibles – catch-all category; General software, goodwill, literary rights, interests in patents, trademarks, and copyrights. patents, Proceeds – whatever is received upon sale, lease, license, exchange, or other disposition of collateral. of Deposit Accounts – a demand, savings, time, or similar account maintained with a bank. or BUL 3350 - Chapter 38 10 Attachment Definition – security interest that is Definition enforceable against the debtor. enforceable Value – consideration under contract law, a Value binding commitment to extend credit, or an antecedent debt. antecedent Debtor's Rights in Collateral – a debtor is Debtor's deemed to have rights in personal property the deemed debtor owns, possesses, is in the process of acquiring, or has the power to transfer rights to a secured party. secured BUL 3350 - Chapter 38 11 Security Agreement An agreement between debtor and An creditor creating a security interest: creditor must be in a record authenticated by the must debtor, unless, in the case of most types of collateral, the secured party has possession of the collateral, and -must contain a reasonable description of. contain BUL 3350 - Chapter 38 12 Sample Security Agreement SECURITY AGREEMENT August 22, 1996 Daniel Debtor of 113 Hillsborough Street, City of Raleigh, County of Wake, State of North Carolina, hereinafter called the “Debtor,” does hereby grant to S.P. & Assoc., Inc., of Raleigh, North Carolina, hereinafter called “S.P.,” its successors and assigns, a security interest in the following described property, hereinafter called the “Collateral,” to-wit: One (1) Deluxe Personal Computer Serial number VDL16794321 Manufacturer: Apex Mechanical Equipment Co. Model 420A to secure the payment of Debtor’s note or notes of even date herewith in the aggregate principal or aggregate face amount of Seven Thousand Five Hundred Dollars ($7,500.00), together with interest and any renewal or extension thereof, in whole or in part, and any and all other debts, obligations, and liabilities of any kind of Debtor to S.P., however created, arising, or evidenced, whether direct or indirect, joint or several, whether as maker, indorser, surety, guarantor or otherwise, whether now or hereafter existing, whether due or not due, and however acquired by S.P. (all hereinafter called the “Obligations”). BUL 3350 - Chapter 38 13 Sample Security Agreement (cont.) (cont.) Sample DEBTOR WARRANTS AND AGREES THAT: 1. Except for the security interest hereby granted, the Debtor will use the proceeds of advances made hereunder, which proceeds may be paid by the S.P. directly to the seller of the Collateral, to become the owner of marketable title to the Collateral free from any prior lien, security interest or encumbrance, and the Debtor will defend the Collateral against all claims and demands of all persons at any time claiming an interest therein. 2. The Collateral is and will be used primarily for personal, family, or household purposes, and the Debtor’s residence is that shown at the beginning of this Agreement. 3. The Collateral will be kept at the Debtor’s address shown at the beginning of this Agreement. 4. There are no financing statements covering any of the Collateral on file in any public office, and the Debtor has not executed in favor of other secured parties financing statements that could be placed on file prior to any of the S.P.’s financing statements BUL 3350 - Chapter 38 14 Sample Security Agreement (cont.) (cont.) Sample 5. DEBTOR AGREES THAT: A. He will pay to S.P. all amounts due on the note or notes mentioned above and the other Obligations secured hereby as and when same shall be due and payable, whether by maturity, acceleration, or otherwise, and will pay to S.P. reasonable attorney’s fees incurred by S.P. in collection of said Obligations or enforcement of this Security Agreement. B. He will maintain all mechanical equipment and machinery hereby covered in sound and efficient operating condition, including the procurement and installation of such new parts, attachments, and replacements as may be necessary or desirable to maintain said Collateral in proper operating condition. C. He will maintain such insurance upon all of the Collateral as S.P. may require, payable to Debtor and S.P. as their interest may appear, in an amount not less than the actual value of the Collateral. BUL 3350 - Chapter 38 15 Sample Security Agreement (cont.) (cont.) Sample D. He will pay all insurance premiums and taxes, licenses, or other charges assessed against the Collateral or required to be paid in connection with the use and ownership of the Collateral. If Debtor shall fail to pay such insurance premiums, taxes, licenses, or other charges when they are due, S.P., at its option, may pay the cost thereof, and the amounts so paid and advanced shall be added to the indebtedness secured hereby and shall bear interest at the maximum rate permitted by Law. E. He will not (a) permit any liens or security interest to attach to any of the Collateral; (b) permit any of the Collateral to be levied upon under any legal process; (c) sell or dispose of any of the Collateral without prior written consent of S.P.; (d) permit anything to be done that may impair the value of the Collateral or the security intended to be afforded by this Agreement. F. He will immediately notify S.P. in writing of any change of the Debtor’s place of residence, place or places of business, or the location of the Collateral. G. He will not remove the Collateral from the State of North Carolina without prior written consent by S.P. BUL 3350 - Chapter 38 16 ...
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