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Secured Transactions
Temple University School of Law
Powell, Norman M.

Secured Transactions – Powell, Fall 2017
SEC. TRANS. OUTLINE
 
SECRUITY INTERESTS IN GENERAL
UCC 9-109
(a) [General scope of article.] Except as otherwise provided in subsections (c) and (d), this article applies to:
(1) a transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract;
(2) an agricultural lien;
(3) a sale of accounts, chattel paper, payment intangibles, or promissory notes;
(4) a consignment;
(5) a security interest arising under Section 2-401, 2-505, 2-711(3), or 2A-508(5), as provided in Section 9-110; and
(6) a security interest arising under Section 4-210 or 5-118.
Article 9 applies to Art. 9 SECURITY INTERESTS
It is a transaction.  A contract b/w two parties, that is intended by those parties to create a security interest in the personal property of one running in favor of the other
“Security Interest” – UCC 1-201(b)(35)
“Security interest” means an interest in personal property or fixtures which secures payment or performance of an obligation.
“Security interest” includes:
Any interest of a consignor and a buyer of accounts, chattel paper, a payment intangible, or a promissory note in a transaction that is subject to Article 9.
“Security interest” does not include:
the special property interest of a buyer of goods on identification of those goods to a contract for sale under Section 2-505,
the right of a seller or lessor of goods under Article 2 or 2A to retain or acquire possession of the goods is not a “security interest”, but a seller or lessor may also acquire a “security interest” by complying with Article 9.
The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under Section 2-401 is limited in effect to a reservation of a “security interest.”
Whether a transaction in the form of a lease creates a “security interest” is determined pursuant to Section 1-203.
A legal interest in a particular piece of property
ALWAYS be aware of WHAT obligation is being secured, and HOW that obligation arose
What assures the Creditor that the obligation will be met?
There are a number of pressures on the debtor
Moral responsibility (it is assumed that the debtor is a being w/ moral responsibility and will normally do what is expected)
Social Pressures
Fear of loss of reputation in the commercial community
The Law
Debtor’s obligation is usually a legal promise enforceable by law
Can be forced to compensate for failure to perform
Other ways Creditors can raise the probability that Debtors perform
Co-signers
The value of co-signer’s to creditors is the fact that the co-signers will be another monitor and pressure on Debtor’s performance of the obligation
Using debtor’s present wealth as collateral
Collateral
When the property is real property, the legal device used to create the relationship and the creditor’s interest is called a mortgage
Personal Property
Would simply say that debtor has granted creditor a security interest in the certain property
Structure of Security Interest
HAS AN ARTICLE 9 SECURITY INTEREST BEEN CREATED?
Things to look for in EVERY “Art. 9 Security Interest”:
The Debtor
The Secured party
The Obligation Secured
the Collateral
Creation of Security Interest
A sec. interest can only be crated by contractual language intended by the parties to create a security interest
Cnditional Sale/Reservation of Title
1-201(b)(35)
The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under Section 2-401 is limited in effect to a reservation of a “security interest.”
A “conditional sale” or a “title retention” agreement is just a sale with the seller retaining a security interest in the goods
The same as creating a formal security agreement
The substance not the form matters for security interests under 9-109(a)(1)
Difference b/w “Debtor” and “Obligor”
See 9-102(a)(59)
Contractual vs Statutory Creation
9-109(a)(1) only covers security interests created by contract, not statutes
Agricultural Context
Crops
Crops are considered goods under 9-102(a)(44)(iv)
“Agricultural Lien”
Defined in 9-102(a)(5)
See also, 9-109(a)(2)
ATTACHMENT
The very nature of a security interest is that it is created by CONTRACT
It is a 2-party affair; an agreement b/w a Debtor and Creditor
Definition of “Attachment”
U

agreement as to the creation of a particular type of interest in some specific piece or pieces of property
Basically the security agreement is the agreement that the parties came to and there has to be a record of it that has been authenticated
Often referred to as a concrete object, i.e. people talk about what the security agreement says or provides
But what this really means to say is what language was created in writing by the parties which evidences their agreement
Recrd [9-102(a)(70)] Record”, except as used in “for record”, “of record”, “record or legal title”, and “record owner”, means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form
Instead of a writing, there must be a Record of an agreement or writing
“Authenticate” – [9-102(a)(7)] (A) to sign; or
(B) with present intent to adopt or accept a record, to attach to or logically associate with the record an electronic sound, symbol, or process
See Comment 9 of 9-102
Record doesn’t have to be permanent or indestructible
Any writing is a record
 
Email Example
If A sends me an email and I store it on my hard drive, what I have on my hard drive is a “record” of whatever was said in the email, authenticated by A by A simply sending the email from his own email.
 
 
[1] Electronic chattel paper” means chattel paper evidenced by a record or records consisting of information stored in an electronic medium
[2] Letter-of-credit right” means a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance. The term does not include the right of a beneficiary to demand payment or performance under a letter of credit.