UCC & Secured Transactions Flashcards

Under UCC Article 9, what is the primary purpose of a 'financing statement' (Form UCC-1)?

Answer: To provide public notice of the secured party's claim to the debtor's collateral

A UCC-1 financing statement is a public notice document filed with the state to put third parties on constructive notice of the secured party's interest in the described collateral.

In a secured transaction, what does 'commercially reasonable' mean in the context of a post-default disposition of collateral?

Answer: Every aspect of the disposition, including method, time, place, and terms, must be commercially reasonable

UCC § 9-610 requires that every aspect of a post-default collateral sale be commercially reasonable; failure to meet this standard can expose the secured party to liability or reduce its deficiency claim.

Which of the following best describes a 'subordination agreement' in the context of UCC secured transactions?

Answer: An agreement where a senior creditor agrees to rank below a junior creditor with respect to specific collateral

A subordination agreement allows a creditor with higher priority to voluntarily agree to be subordinate to another creditor's claim, which can be used to facilitate additional financing.

Under UCC Article 9, if a secured party sends proper notification of a private sale but sells the collateral in a commercially unreasonable manner, what is the likely consequence?

Answer: The debtor can recover actual damages and the secured party may lose part or all of its deficiency claim

A commercially unreasonable sale can expose the secured party to actual damages and, in consumer transactions, may bar any deficiency recovery or create a presumption that the collateral was worth the full debt.

What is the meaning of 'value' as a requirement for attachment of a security interest under UCC Article 9?

Answer: Value includes a binding commitment to extend credit, past consideration, or security for a pre-existing claim

Under UCC § 1-204, value includes past consideration, binding commitments to extend credit, and security for antecedent debts — a broader definition than classical contract consideration.

A secured party perfects a security interest in the debtor's accounts receivable by filing. The debtor then collects on those accounts. How does the secured party maintain its interest in the collected funds?

Answer: The security interest continues in proceeds, including cash proceeds deposited into the debtor's account

Under UCC § 9-315, a security interest in collateral continues into identifiable proceeds, and cash proceeds remain subject to the security interest for 20 days even without a specific filing covering the deposit account.

Under UCC Article 9, which of the following statements about 'control' of electronic chattel paper is correct?

Answer: A secured party has control if a single authoritative copy exists and the secured party is identified as the assignee in that copy

UCC § 9-105 provides that a secured party has control of electronic chattel paper if a single authoritative copy exists, it is unique and identifiable, and the secured party is identified as the assignee in the authoritative copy.