Bài giảng Business Law (13th edition) - Chapter 28: Introduction to Credit and Secured Transactions

CreditIntroduction to Credit and Secured TransactionsSecurity Interests in Personal PropertyBankruptcy6McGraw-Hill/Irwin Business Law, 13/e© 2007 The McGraw-Hill Companies, Inc. All rights reserved.Introduction to Credit and Secured TransactionsPAETRHC28“Creditors have better memories than debtors.”Benjamin Franklin, Poor Richard’s Almanac (1758)Learning ObjectivesThe meaning of a secured transactionSuretyship and guarantyLiens on personal propertySecurity interests in real propertyMechanics and materialman’s liens28 - *In this course, credit refers to transactions in which goods are sold, services are rendered, or money is loanedMost transactions are unsecured: a service was rendered or goods sold and consumer-debtor promises to pay a billTo minimize risk, creditors may require a lien (security interest) on debtor’s propertyOverview28 - *If a debtor defaults on an unsecured credit transaction, creditor may send notices to pay and eventually file suit for payment If a debtor defaults on a secured credit transaction, creditor has several optionsRights and liabilities depend on the security device used: surety, guaranty, lien, or mortgageIf Consumer Fails to Pay28 - *A surety is jointly liable for payment of another’s debt or performance of a dutyCreditor can demand performance from the surety at the time debt is dueA guaranty contract is similar, but guarantor does not join principal debtor in a promise, but makes a separate promise to be liable only after principle debtor defaultsGuarantor is secondarily liableSurety & Guaranty28 - *Creditor must disclose any material facts about the risk involved to the surety A surety may use defenses to a creditor’s demand for payment that principle debtor would have under the primary contractIf surety performs or pays principal’s obligation, the surety acquires all rights creditor had against principal (subrogation)Surety’s Rights28 - *A lien is a security interest in or claim on personal propertySome liens (e.g., artisan, innkeeper, common carrier) are created by improvement to goods or provision of services concerning the goodsSee Aircraft Repair Services v. Stambaugh’s Air Service, Inc.State law provides procedures to foreclose a lien (foreclosure)Security for Personal Property28 - *Contract devices for real estate as security for an obligation: (1) real estate mortgage, (2) deed of trust, and (3) land contractMaterialmen and mechanics who furnish labor or materials to improve real estate have right to a lien until they are paidSecurity for Real Property28 - *Mortgage: security interest in real property given by an owner (mortgagor) as security for a debt owed to creditor (mortgagee)Mortgagor can sell the property interest without mortgagee’s consent, but sale does not affect mortgagee’s property interestIf mortgagor defaults, mortgagee may foreclose in accordance with state lawThe Mortgage28 - *A deed of trust is another mechanism for a security interest in real propertyGenerally, treated like a mortgageA land contract secures the balance due seller for the purchase of real estateAn installment contract for a land purchaseDeed of Trust & Land Contract 28 - *Test Your KnowledgeTrue=A, False = BA guarantor is primarily liable for debtor’s obligation, and the creditor can demand performance from the guarantor at the time the debt is due. Since a surety is not the principle debtor, it has no defenses available in response to a creditor’s demand for payment.A plumber may file a security interest on a house until she is paid for her work.28 - *Test Your KnowledgeTrue=A, False = BA creditor must disclose to a surety all information about the risk involved in a particular debtor, including whether the debtor business is likely to be successfulForeclosure means that the mortgagor’s rights to the property are terminated.A mortgage is a security interest in (or deed to) personal property.28 - *Test Your KnowledgeMultiple ChoiceBob Builder contracted with Joe Homes to build a house. Bob hired Ken Carpenter, who built the kitchen cabinets, but Bob refused to pay Ken. What should Ken do? (a) Ken may file a lien on Joe’s real property(b) Ken may file a mortgage on Joe’s property(c) Ken may sue Bob and Joe for redemption(d) Ken may foreclose on Bob for payment28 - *Test Your KnowledgeMultiple ChoiceWhich two statutory systems permit one who furnishes labor or materials to improve real estate to claim a lien until they are paid? (a) The Torrens and Priority systems(b) The Pennsylvania and New York systems(c) The New York and New Jersey systems(d) None of the above28 - *Thought QuestionsWhat are the advantages and disadvantages of credit?How does credit affect your life?Do you have any secured credit?28 - *