CH 29 Business Law Notes - CH 29 Secured Transactions...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
CH 29 Secured Transactions Whenever the payment of a debt is guaranteed, or secured, by personal property owned by the debtor or in which the debtor has a legal interest, the transaction becomes known as a secured transaction. - The concept of the secured transaction is a basic to modern business practice as the concept of credit. - Logically, sellers and lenders do not want to risk nonpayment, so they usually will not sell goods or lend funds unless the promise of payment is somehow guaranteed. - Indeed, business as we know it could not exist without laws permitting and governing secured transactions. Terminology (1) A secured party is any creditor who has a security interest in the debtor’s collateral. This creditor can be a seller, a lender, a cosigner, or even a buyer of accounts or chattel paper. (2) A debtor is the party who owes payment or other performance of a secured obligation. (3) A security interest is the interest in the collateral (such as personal property, fixtures, or accounts) that secures payment or performance of an obligation. (4) A security agreement is an agreement that creates or provides for a security interest. (5) Collateral is the subject of the security interest. (6) A financing statement AKA UCC-1 form- is the document that is normally filed to give public notice to third parties of the secured party’s security interest. - These basic definition form the concept under which a debtor-creditor relationship becomes a secured transaction relationship. Creating a Security Interest - A creditor has two main concerns is the debtor defaults. (1) Can the debt be satisfied through the possession and usually sale of the collateral? (2) Will the creditor have priority over any other creditors or buyers who may have rights in the same collateral? - To become a secured party, the creditor must obtain a security interest in the collateral of the debtor. - Three requirements must be met for a creditor to have an enforceable security interest: (1) Either (a) the collateral must be in the possession of the secured party in accordance with an agreement, or (b) there must be a written or authenticated security agreement that describes the collateral subject to the security interest and is signed or authenticated by the debtor. (2) The secured party must give the debtor something of value. (3) The debtor must have rights in the collateral. - Once these requirements have been met, the creditor’s rights are said to attach to the collateral.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
- Attachment give the creditor an enforceable security interest in the collateral. Written or Authenticated Security Agreement - When the collateral is NOT in the possession of the secured party, the security agreement must be either written or authenticated, and it must describe the collateral. -
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 9

CH 29 Business Law Notes - CH 29 Secured Transactions...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online