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Secured Transaction / Commercial Paper 1 S ECURED T RANSACTIONS ARTICLE 9 I. Overview A. Scope of Article 9 – applies to consensual B. Attachment (i.e. create an enforceable S/I in debtor’s collateral) – VCR (value, contract, rights in the collateral) C. Perfection – by placing the world on (i) record notice or (ii) constructive notice of the creditor’s existence D. Priority – when more than 1 creditor has a stake in the same collateral, the 1 st to perfect takes 1 st E. Default – if debtor defaults, the Article 9 creditor has II. Scope of Article 9 A. Article 9 applies to voluntary or consensual security interests in personalty (i.e., goods) or fixtures 1. If collateral is personalty or fixtures , apply Article 9 NOTE: if collateral is real estate , apply the law of mortgages 2. Article 9 applies only to voluntary/consensual collateralizations, & therefore does NOT apply to statutory or mechanics liens B. Definitions 1. Debtor – entity that owes the money 2. Secured party/secured creditor – entity that lends the money 3. Security agreement – the contract/record 4. Security interest – the right that creditor has in debtor’s personalty or fixtures 5. Collateral – personalty or fixtures that creditor can look to for satisfaction on the debt a. Consumer goods – items used for personal or familial purposes (e.g. car, oven, refrigerator, car) b. Equipment – items used in business (e.g. Macy’s cash registers, dentist’s chair) c. Inventory – goods held for sale or lease (e.g. Ethan Allen’s furniture line) d. Farm products – crops, livestock, & supplies used in farming operations (e.g. eggs, corn) e. Fixtures – items annexed to realty (e.g. lighting fixtures, sprinkler systems, furnaces) f. Intangible or Semi-intangibles – e.g. patents, trademarks, copyrights, stocks, bonds, mutual funds, proceeds received upon the sale of collateral, accounts (right to pmt for goods or services), promissory notes & drafts NOTE: the key to classifying collateral is the primary use in the hands of the debtor (Subjective Test - e.g., golf clubs in the hands of a golf store are inventory, while in your hands they are consumer goods while in Tiger Woods’ hands they are equipment III. Attachment – creation of an enforceable Security Interest A. Requirements VCR 1. V alue must be given by creditor (secured party) 2. C ontract – parties must agree to create the Security Interest, by a. Security agreement – must be authenticated (signed or electronically marked) by the debtor & reasonably identify the collateral; OR b. Possession of the collateral (no need for a security agreement) 3. R ights in the collateral – debtor must have rights in the collateral B. “After-acquired collateral clauses” – are enforceable (e.g. secured party lends 500K to store, taking a security interest “in all of store’s inventory, whether now held or
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This note was uploaded on 09/22/2011 for the course LAW LAW taught by Professor Concordia during the Spring '11 term at Concordia AB.

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