Bài giảng Business Law (13th edition) - Chapter 29: Security Interests in Personal Property

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.Security Interests in Personal PropertyPAETRHC29“One must have some sort of occupation now-a-days. If I hadn’t my debts I shouldn’t have anything to think about.”Oscar Wilde, A Woman of No Importance, Act I (1893)Learning ObjectivesSecurity interests under Article 9 of the Uniform Commercial CodeAttachment of the security interestPerfecting the security interestCreditors and priority rulesDefault and foreclosure29 - *Uniform Commercial Code Article 9 covers security interests in personal property and applies to common transactionsA security interest in personal property or fixtures obtained by a creditor secures payment of a debt or performance of a duty [1–201(37)]Strict compliance with procedure is required or creditor loses preferred claimOverview29 - *A security interest is not legally enforceable against debtor until attached to particular item(s) of debtor’s property (collateral)Attachment requires [9–203]:Agreement in which debtor grants creditor a security interest in collateral Debtor must have rights in the collateralCreditor must give value to the debtorAttaching the Security Interest29 - *Collateral -- the property securing the promise to repay – may include [9-102(a)]:Collateral Under Article 929 - *Negotiable instrumentsDocuments of titleAccountsChattel paperGeneral intangiblesGoodsInvestment property Deposit accountsA security agreement must be clear that a security interest will existIn re Shirel: information in credit application did not meet requirements for agreementFuture advances are extensions of credit specified in a security agreement [9–204(3)]Special Issues29 - *A security agreement may be drafted to grant a creditor a security interest in debtor’s after-acquired property [9–203(b)(2)]Purchase money security interest (PMSI): when seller retains security interest until goods are paid for or when money is loaned to acquire goods and lender takes interest in goodsSpecial Issues29 - *Creditor protected against other creditors or purchasers of collateral by perfecting the security interest (filing, possession)Basic rule: If more than one security interest on the same collateral was filed (perfected), the first security interest filed (perfected) has priority over any later-filed (perfected) interest [9–322(a)(1)]Basic Priority Rules 29 - *Perfected purchase money security interest (PMSI) in inventory may have priority over another security interest in same inventoryPMSI in collateral other than inventory has priority over another interest in same collateral if perfected at time debtor receives collateralBuyer in ordinary course of business takes free of security interest even if security interest perfected and buyer knowsExceptions to Basic Priority Rules 29 - *If debtor defaults, secured creditor may:Forget collateral and sue debtor on the note or promise to payRepossess collateral and foreclose to keep the collateral in satisfaction of the remaining debtRepossess and sell collateral, then either sue for deficiency or return surplus to debtor, depending on the circumstances Default & Foreclosure 29 - *Test Your KnowledgeTrue=A, False = BUCC Art. 7 applies to secured transactionsOnly a security agreement is required to create attachment to the collateralA security agreement may be drafted to grant a creditor a security interest in debtor’s after-acquired property.Automatic protection occurs in a purchase money security interest.29 - *Test Your KnowledgeTrue=A, False = BWhen several creditors claim a security interest in the same collateral, priority rules apply to determine who is paid first.Perfecting the security interest only means filing a notice about the security in a public newspaper.Future advances are extensions of credit specified in a security agreement.29 - *Test Your KnowledgeMultiple ChoiceDon, a furniture maker, needed a loan for $5000. Which of the following would be satisfactory collateral? (a) A painting valued at $7,000 (b) A bill of lading on Swiss woodworking equipment in transit to Don(c) A certificate of deposit for $8,000 (d) Both A and C, but not B(e) All of the above29- *Test Your KnowledgeMultiple ChoiceKaty bought a motorcycle from Kyle’s Bikes, Inc. Kyle finances his motorcycle inventory through GMAC. Could GMAC repossess the bike from Katy if Kyle fails to repay his loan to GMAC? (a) No(b) Yes(c) Yes, but only if Kyle consents29 - *Thought QuestionsWhat security interests in personal property affect you? Your family? 29 - *