Uniform Commercial Code in a Nutshell
Authors:
Stone, Bradford / Adams, Kristen David
Edition:
8th
Copyright Date:
2012
13 chapters
have results for secured
Part Five. Financing the Sale of Goods: The Secured Transaction Part 2 155 results (showing 5 best matches)
- Section 9–615(f) deals with calculation of a deficiency or surplus when a disposition is made to a secured party, a “person related to” the secured party, or a secondary obligor (e.g., guarantor). In such a case, the secured party may lack the incentive to maximize the proceeds of disposition. Thus, if the proceeds of disposition are “ ‘significantly below the range of proceeds that a complying disposition to a person other than the secured party, a person related to the secured party or a secondary obligor would have brought,’ then instead of calculating a deficiency (or surplus) based on the actual net proceeds, the calculation is based upon the amount that would have been received in a commercially reasonable disposition to a person other than the secured party, a person related to the secured party, or a secondary obligor.” § 9–615(f) and Comment 6 (source of quote) and 7; see §§ 9–102(a)(63) (“person related to” defined), 9–602(8) (nonwaivable rights and duties).
- (2) the bailee’s receipt of notification of the secured party’s interest (e.g., nonnegotiable warehouse receipt engaging to deliver the goods “to Debtor” and Secured Party notifies warehouse of secured party’s interest); or
- The big moment for our secured party (SP–1) has arrived. Assume SP–1 has priority over competing claimants and now wishes to apply the collateral toward the debt. Remember: “The rights of a secured party to enforce its security interest in collateral after the debtor’s default are an important feature of a secured transaction.” § 9–601 Comment 2. These are the rights that distinguish the secured creditor from the unsecured creditor.
- When Debtor defaults, Secured Party will follow this sequence: Secured Party takes possession of or control over collateral; Secured Party may either accept the collateral in satisfaction of the debt or dispose of (sell) the collateral and apply the proceeds toward the debt. Any
- A secured party (if so agreed and in any event after default) may notify an account debtor (the person obligated on an account, chattel paper, or general intangible) or other person obligated on collateral (e.g., maker of promissory note) to make payment to the secured party. § 9–607(a)(1); § 9–102(a)(2), (3), (11), (42), (47), (65) (“account,” “account debtor,” “chattel paper,” “general intangible,” “instrument,” and “promissory note” defined). Example: Seller–assignor sells goods to various buyer–account debtors, then assigns the several accounts to assignee–secured party. These assignments are on a “non-notification” basis, that is, buyer–account debtor agrees to make the payment(s) to seller–assignor, who in turn agrees to remit the payment(s) to assignee–secured party. See § 9–205. (In fact, buyer–account debtor may not know the account has been assigned.) Assume Seller–assignor defaults in its obligations to assignee–secured party, who notifies buyer–account debtor to make...
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Part Five. Financing the Sale of Goods: The Secured Transaction 138 results (showing 5 best matches)
- To secure the full and timely payment of the sums owing to the Secured Party hereunder, and to secure the performance of the Debtor’s obligations set forth herein, the Debtor hereby grants to the Secured Party a security interest in the following described property. * * *
- The secured creditor’s right to have the collateral applied toward the debt in the event of default is often referred to as foreclosure—the right to cut off the debtor’s interest in the collateral and also junior third party interests. Thus, the secured creditor may take or keep the collateral in satisfaction of the debt (strict foreclosure); alternatively, a foreclosure sale is conducted wherein the purchaser from such sale cuts off the interests of the debtor, the secured creditor, and junior third-party interests (foreclosure by sale). The proceeds of such sale are used to pay off the debt to the secured creditor. Any excess is paid to junior interests, and any remaining monies returned to the debtor. If the sale is insufficient to satisfy the debt, the secured creditor may be entitled to a deficiency judgment.
- Of course, the secured creditor’s interest in the collateral is only for the purpose of securing repayment of the debt. Consequently, any time before foreclosure, the debtor may pay the debt and thereby cut off the secured party’s interest in the collateral.
- For a secured creditor to have rights that prevail over third-party claims, security law often requires some form of public notice so that third parties may be apprised of the secured creditor’s interest. This notice may be given by the secured creditor taking possession of the collateral (pledge) or by a certain paper being filed or recorded in an appropriate public office (e.g., register of deeds). Without such notice, the secured creditor may not have priority over certain third parties.
- to Secured Party (i.e., Secured Party acquires possession of the certificate per § 8–301(a)(1)) pursuant to Debtor’s security agreement. Here, delivery to Secured Party is sufficient to
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Introduction 4 results
- In 1994, 1995, and 2000, revised texts were promulgated covering investment securities, letters of credit, and secured transactions. Most importantly, 2000 revised Article 9 substantially revised Secured Transactions along with conforming amendments to other articles and errata and amendments to revised Article 9. These matters were reflected in the 2001 Official Text.
- 4. Further, when a transaction involves the giving of a check or draft for a part of the purchase price, it may also involve the acceptance of some form of security for the balance. This is the subject of Article 9, Secured Transactions. This superseded the Uniform Conditional Sales Act, Uniform Trust Receipts Act, and acts regulating chattel mortgages, conditional sales, factor’s liens, assignments of accounts receivable, and similar transactions.
- of goods under Article 2A. This Article borrows from both Article 2, Sales, and Article 9, Secured Transactions.
- ...was Professor Karl N. Llewellyn; the Associate Chief Reporter was Professor Soia Mentschikoff. This project resulted in the 1952 Official Text of the UCC. The New York State Law Revision Commission studied the 1952 Code and concluded that it needed extensive revision. The Code was revised and the 1957 Official Text resulted. Subsequently, a 1958 and a 1962 Official Text were promulgated with relatively minor revisions of the 1957 text. The Permanent Editorial Board for the UCC—a body formed to promote uniformity of enactment and construction of the UCC to evaluate and prepare proposals for amendment of the 1962 UCC—promulgated the 1966 Official Recommendations for the Amendment of the Code. Mostly as a consequence of substantial revisions of Article 9 of the UCC, Secured Transactions, a 1972 Official Text was promulgated which incorporated all prior officially approved amendments. A 1978 Official Text was promulgated to permit issuance of corporate stock in uncertificated...
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Part One. The Process of Selling Goods 3 results
- A security interest is an interest in personal property or fixtures that secures payment or performance of an obligation. Example: S sells goods to B. B makes a down payment and has 24 monthly installments to pay the balance. S reserves a security interest (this was called a “conditional sale,” pre-UCC) to secure the unpaid balance. Upon B’s default, S has certain rights against the sold goods (pre-UCC chattel-mortgage language called it “foreclosure”) in priority to others claiming an interest in the same goods. This is the subject of UCC Article 9, Secured Transactions, and is discussed in Part Five infra. Of course, security interests can also arise under Article 2, Sales, or Article 2A, Leases. § 9–109(a)(5). These will be discussed later. A buyer’s special property in goods, discussed above, is not a security interest. § 1–201(b)(35).
- that contracts are intended to cover. But a severe shortage of raw materials or of supplies due to a contingency such as war, embargo, local crop failure, unforeseen shutdown of major sources of supply, or the like, which either causes a marked increase in cost or altogether prevents the seller from securing supplies
- B gives a chattel mortgage in goods to A, who records the mortgage. (This is now called a “security agreement” with A filing a “financing statement” and is governed by UCC Article 9, Secured Transactions.) B sells the goods to innocent C, who does not know of A’s interest. A recovers
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Part Six. The Entire Transaction Made Pursuant to a Letter of Credit 6 results (showing 5 best matches)
- 5. S secures insurance policy covering the goods while in transit.
- 6. S has goods inspected (by Inspection Agency designated in letter of credit) and secures inspection certificate.
- “Trust receipt” secured financing of buyer
- What if Buyer City Bank has agreed to finance Buyer’s purchase of the goods on a secured basis? In this situation, Buyer will sign “trust receipts” (now deemed a security transaction under Article 9). An example of this transaction is given in § 9–308 Comment 4:
- This nutshell confirms the statement in the General Comment to the Code that “[t]his Act purports to deal with all the phases which may ordinarily arise in the handling of a commercial transaction, from start to finish.” These phases involved (1) selling or leasing goods; (2) paying for goods with negotiable instruments or wire transfers; (3) shipping and storing goods covered by documents of title; (4) financing the sale of goods: the secured transaction; and (5) constructing the entire commercial transaction pursuant to a letter of credit.
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Index 10 results (showing 5 best matches)
- Secured transactions—Article 9.
- Perfected by bailee’s receipt of notification of secured party’s interest § 9–312(d), but see § 9–313(c)
- the buyer’s receipt of a nonnegotiable document of title (or other direction in a record to deliver, see § 7–102(a)(5)) as provided in § 2–503(4)(b), to wit: risk of loss remains on the seller until the buyer has had a reasonable time to present the document (or direction). Simply: Risk of loss remains on the seller during a period that is reasonable to secure acknowledgment of the transfer from the bailee. §§ 2–509(2)(a) and (c), 2–503(4)(b) and Comment 6. Compare § 3–414(f), wherein risk of a drawee’s insolvency shifts from the drawer to payee if “a check is not presented for payment … within 30 days after its date….” For a general discussion of risk of loss, see Part One, C, 5 supra.
- Secure payment of purchase price: exchange of goods or document for price.
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Preface 3 results
- The fifth edition was based on the 2001 Official Text. Included was (i) revised (1994) Article 8 (Investment Securities), (ii) revised (1995) Article 5 (Letters of Credit), and (iii) revised (2000) Article 9 (Secured Transactions) with conforming amendments to other Articles and errata and amendments to revised Article 9.
- ...by the relevant UCC citation. Accordingly, the reader—whether law student or practitioner—is given entŕee to the Code itself so that an independent judgment may be made as to the rule and application under consideration. Further, the cite will afford ready entŕee to a study in depth. For instance, once a relevant UCC cite is obtained, all reported case law construing the language can be located through such publications as the Uniform Laws Annotated—Uniform Commercial Code and the Uniform Commercial Code Reporting Service. The UCC cite also will give ready entŕee to the massive legal literature that discusses the Code. On occasion this Nutshell will refer to J. White, R. Summers, Handbook of the Law Under the Uniform Commercial Code (6th ed., Student Edition, 2010) (cited as UCC Hornbook), Gregory M. Travalio, Robert J. Nordstrom & Albert L. Clovis, Nordstrom on Sales & Leases of Goods (2d ed., Aspen 2000) (cited as Sales Hornbook), and R. Henson, Handbook on Secured... ...Secured...
- The sixth edition was based on the 2004 Official Text. Included was (i) revised (2001) Article 1 (General Provisions), (ii) amended (2003) Article 2 (Sales), (iii) amended (2003) Article 2A (Leases), (iv) amended (2003) Article 3 (Negotiable Instruments), (v) amended (2002) Article 4 (Bank Deposits and Collections), (vi) revised (2003) Article 7 (Documents of Title), (vii) revised (2001) Article 9 (Secured Transactions) with conforming amendments to Articles 1, 2, 2A, 4, 5, 6, 7, and 8. (It is to be noted that Article 7 was the
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Part Three. The Process of Paying for Goods With Negotiable Instruments 10 results (showing 5 best matches)
- (i) an undertaking or power to give, maintain, or protect collateral to secure payment. § 3–104(a)(3)(i). Example: “Maker agrees to maintain the collateral that is security for the payment of this note in good repair and free from damage, injury, and deterioration and to keep said collateral free of all conflicting claims, liens, and encumbrances.”
- Secured transactions under UCC Article 9
- In the factual setting above, suppose Buyer did not sign a negotiable installment note, but instead executed a security agreement under UCC Article 9. (Article 9 is discussed at Part Five infra.) Suppose the following waiver-of-defense clause appears in the security agreement: “Buyer/debtor waives the right to assert against any assignee of the seller/secured party, or any subsequent assignee, any defense, counterclaim, or setoff he could assert against the seller/secured party in an action brought by him upon the debt of the buyer/debtor or upon the security agreement.” Such a waiver—if enforceable—would give Bank rights similar to a holder in due course. As to this clause, UCC § 9–403(b) states,
- In the above hypothetical case, suppose P’s obligation to pay the $10,000 note to C is secured by collateral (see, e.g., § 9–109), and S, another party to the note, is an accommodation party. If C impairs the value of the interest in the collateral, S’s obligation is discharged to the extent of the impairment. § 3–605(d) and Comment 7. S has the burden of persuasion. § 3–605(h), see § 1–201(b)(8) (defining “burden of establishing” a fact). Example: C, the payee of a secured note, fails to perfect the security interest (i.e., the financing statement was not filed). The collateral is owned by P, who subsequently files for bankruptcy. As a result of the failure to perfect, the security interest is not enforceable in bankruptcy. § 9–317(a)(2), B.C. § 544(a). S’s right to be subrogated to C’s security interest in the collateral is impaired, and S’s obligation is discharged to the extent of the impairment. Section § 3–605(d) (last sentence) states four common examples of impairment.
- A person having control of a “transferable record” is deemed the holder (§ 1–201(b)(21)) of it and has the same rights and defenses as a holder of a writing under the UCC, including the rights and defenses of a holder in due course. 15 U.S.C. § 7021(d) (E–SIGN). A “transferable record” is an electronic record that (a) would be a note under UCC Article 3 if it were in writing; (b) the issuer has expressly agreed is a transferable record; and (c) relates to a loan secured by real property. § 7021(a)(1); see § 7021(e)–(g). See UETA § 16.
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Part Two. The Process of Leasing Goods 4 results
- Example: Lessor leases goods to Lessee. Later, Lessee—in satisfaction of its maintenance covenant—takes the goods to Repairman for maintenance and repairs. Repairman asserts a possessory lien to secure payment of the charges. Do Lessor and Lessee’s interests have priority over this lien that arises by operation of law? Answer:
- Lessee vs. secured party creditor of lessor.
- [Prefatory Note: Article 2A, Leases, borrows from both Article 2, Sales, and Article 9, Secured Transactions. See Parts One and Five of this Nutshell; see also Comment to § 2A–101. Because of this commonality, each portion of the discussion that follows in Part Two will cite any analogous Article 2 and Article 9 provisions, together with specific page references indicating where the relevant subject matter is discussed.
- Retention or creation of a security interest does not create a lease under Article 2A. § 2A–103(1)(j) [2A–103(1)(p) (2003)]. Instead, Article 9 (Secured Transactions) applies to a transaction that creates a security interest regardless of its form or the name the parties have given it, e.g., a self-styled “lease.” §§ 9–109(a)(1) and Comment 2, 9–203 Comment 3. Whether a transaction creates a lease or a security interest is determined by the facts of each case. § 1–203. See hypotheticals at § 2A–103 Comment (j). [For discussion of “true” leases vs. security interest “leases,” see pp.
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Outline 14 results (showing 5 best matches)
- PART FIVE. FINANCING THE SALE OF GOODS: THE SECURED TRANSACTION
- A. Fundamentals of a Secured Transaction
- C. Secured Transactions Under UCC Article 9
- (4) Effect of Debtor’s Use or Disposition of Collateral Without Accounting to Secured Party
- 4. Requisites to Protection of Secured Party Against Third-Party Claims—Perfection of a Security Interest
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Part One. The Process of Selling Goods Part 2 6 results (showing 5 best matches)
- to UCC Article 9, Secured Transactions, to be discussed in Part Five infra. § 2–502 Comment 2.
- As to C’s rights as a secured creditor, see § 2–402(3)(a) and Part Five infra. As to a seller’s bailee in possession, see Part One, G, 3 above.
- control of the goods to secure B’s right to recover any sums paid.
- The entrustment principle also manifests itself elsewhere in the UCC: for example, entrusting goods to a warehouse, § 7–205; and a secured party entrusting inventory to a merchant, § 9–320(a). See § 2–403 Comment 2. See Part Four, D, 2, C, (4) and Part Five, C, 5, D, (1), (b) infra. See also §§ 2–507(3) (2003) (BFP may defeat seller’s right to reclaim), § 2–702(3) (same rule in pre-2003 code).
- goods to B on credit without taking or retaining some sort of security interest in the goods as an Article 9 Secured Transaction? Such a Seller is an unsecured creditor with no interest in the sold goods. Thus, upon liquidation of B’s estate in insolvency proceedings, S would receive only a small percentage of his claim. B.C., 11 U.S.C. § 726. However, suppose S discovers B has received goods on credit while
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- the security to A (§ 8–401). To be a “protected purchaser,” C must take delivery of the security (§§ 8–303(a)(3), 8–106(a) and (b) (“control” defined), 8–301(a)(1)) (re: delivery). A creditor of C who wants to attach or levy upon the security must cause it to be seized (§ 8–112(a)). See also, e.g., §§ 8–204 (re: restrictions on transfer), 8–209 (issuer’s lien), 8–301 (delivery). These are manifestations of the concept of merger, that is, C’s right to the shares is so merged into the paper evidencing the claim (e.g., the stock certificate) that the paper is treated as if it were the claim itself. Further, Article 9, Secured Transactions, allows for
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- Publication Date: May 3rd, 2012
- ISBN: 9780314277442
- Subject: Commercial Law
- Series: Nutshells
- Type: Overviews
- Description: This product provides a concise yet comprehensive introduction to the Uniform Commercial Code for students and practitioners alike. It covers each major topic of the Code, including the process of selling, payment, negotiation, shipping, storage, financing sales, and leasing of goods. In addition, the text makes it possible for readers to see how the various articles of the Code may interact in a single transaction. Wherever practicable, the actual language of the Code and its comments has been used. The comprehensive outline, references to relevant authority, and intuitive system of cross-referencing all contribute to its ease of use. This eighth edition contains the 2010 Amendments to Article 9, with an effective date of July 1, 2013.
