Secured Transactions Flashcards

A debtor signs a security agreement describing the collateral as "all of the debtor's assets." Is this description sufficient for attachment?

Answer: No, a supergeneric description is insufficient in a security agreement

Under UCC 9-108(c), "all assets" is insufficient in a security agreement, though it is permitted in a financing statement under 9-504.

A farmer buys a tractor from a dealer whose inventory is subject to a perfected security interest held by a floor-plan lender. The farmer buys in good faith in the ordinary course of the dealer's business. Does the farmer take free of the lender's interest?

Answer: Yes, a buyer in ordinary course takes free of a security interest created by the seller

Under UCC 9-320(a), a buyer in ordinary course of business takes free of a security interest created by its seller even if perfected and known to the buyer.

A secured party repossesses a debtor's delivery van after default by hiring a towing company that takes the van from a public street at night without confrontation. Was the repossession proper?

Answer: Yes, because self-help repossession is permitted if there is no breach of the peace

Under UCC 9-609, a secured party may repossess without judicial process so long as it does not breach the peace.

A security interest is perfected in a debtor's equipment in Michigan. The debtor, a registered Michigan LLC, reincorporates in Delaware. How long does the original perfection remain effective?

Answer: Four months after the change of location

Under UCC 9-316(a)(2), perfection continues for four months after the debtor's location changes to another jurisdiction.

A lender with a perfected security interest in a debtor's inventory claims the cash the debtor received from selling that inventory. For how long is the lender's interest in the identifiable cash proceeds perfected?

Answer: Continuously, because identifiable cash proceeds remain automatically perfected beyond 20 days

Under UCC 9-315(d)(2), perfection continues in identifiable cash proceeds beyond the 20-day period without further action.

A creditor perfects a security interest in a promissory note by taking possession of it. Another creditor had earlier perfected in the same note by filing. Under the UCC, who generally has priority?

Answer: The possessory purchaser, if it gave value and took possession in good faith without knowledge of the violation

Under UCC 9-330(d), a purchaser of an instrument who takes possession in good faith, for value, and without knowledge generally beats a security interest perfected by filing.

After default, a secured party sells repossessed equipment at a private sale to its own affiliate at a below-market price without notifying the debtor. Which duty has the secured party most clearly violated?

Answer: The duty to conduct a commercially reasonable disposition and give notice

UCC 9-610 and 9-611 require every aspect of a disposition to be commercially reasonable and require reasonable notification to the debtor.