UCC & Secured Transactions Flashcards

Under UCC Article 9, which of the following best describes a 'purchase money security interest' (PMSI)?

Answer: A security interest taken by the seller or lender to finance the debtor's acquisition of the collateral

A PMSI is created when a seller retains a security interest in goods sold on credit or when a lender finances the debtor's acquisition of specific collateral.

A secured party with a perfected security interest in inventory has a PMSI. What must the secured party do to have super-priority over conflicting security interests in that inventory?

Answer: Both file before delivery and notify prior secured parties before delivery

For inventory PMSI super-priority, the secured party must both file a financing statement before the debtor receives the inventory and send authenticated notification to holders of conflicting security interests.

Under UCC Article 9, what is the effect of a 'continuation statement' filed by a secured party?

Answer: It extends the effectiveness of a financing statement for an additional 5 years

A continuation statement, filed within 6 months before expiration, extends the financing statement's effectiveness for 5 more years from the original lapse date.

Which of the following collateral types is perfected by filing a financing statement in most U.S. states under UCC Article 9?

Answer: Equipment used in a business

Equipment is typically perfected by filing a financing statement, whereas consumer goods may be automatically perfected (PMSI), titled vehicles are covered by title statutes, and deposit accounts are perfected by control.

Under UCC Article 9, what is the concept of 'proceeds' in the context of secured transactions?

Answer: Whatever is received upon sale, exchange, collection, or disposition of collateral

Proceeds include whatever is received when collateral is sold, exchanged, collected, or otherwise disposed of, and a perfected security interest in collateral automatically extends to identifiable proceeds.

A debtor grants a security interest in 'all accounts now owned or hereafter acquired.' This language is commonly referred to as what type of clause?

Answer: After-acquired property clause

An after-acquired property clause extends the security interest to collateral the debtor acquires after the security agreement is signed, which is expressly permitted under UCC Article 9.

Under UCC Article 9, which party has the right to redeem collateral before a secured party completes a disposition following default?

Answer: The debtor and any secondary obligor or other secured party

UCC § 9-623 grants the right of redemption to the debtor, any secondary obligor, and any other secured party or lienholder, allowing them to satisfy the obligation and reclaim the collateral.