The University of Kansas School of Law
Commercial Law Secured Transactions Flow Chart – Professor John K. Pearson
1) Is it a transaction that is governed by Article 9?
Ø Secured Transaction defined – 1-207(37)
o “An interest in personal property or fixtures which secures payment or performance of an obligation.”
o Basic Formation: Debtor promises to repay Creditor, Debtor gives security interest in property, Creditor gives value, Creditor gives notice of security interest.
Ø W/in scope of Article 9?
o 9-109(a) – Applicable transactions
§ Personal property, fixtures, agricultural liens (chattel paper, consignments, accounts, promissory notes, payment intangibles etc.
o 9-109(d) – Inapplicable transactions
o Article 9 allows the use of CL and other statutes to be used when Article 9 does not discuss the issues directly.
§ Marshalling Assets Doctrine: When a SP has security interest in two different collateral (Sr.) and a Jr. exists and has interest in only one of the collateral which overlaps – the Sr. must exhaust the non-overlapping collateral first.
2) Is the security interest in the collateral attached?
Ø Attachment 9-203(a) – Enforces security interest between Debtor and Creditor, Debtor must perfect to have priority over 3rd Parties.
o Has Value been given by Creditor? (9-203)(b)(1)
§ Value(1-204)
· Usually money, or promise to give money, consideration that can support a K.
o Does Debtor have rights or power to transfer rights in the collateral? (9-203)(b)(2)
§ Debtor can only give what right/power he has, the security interest attaches to the right of the debtor not the collateral itself.
§ Title/Possession does not matter, can transfer one’s limited right (ex. lease).
o Is there an Authenticated Security Agreement? (9-203)(b)(3)(A)
§ Authentication can be done by anything that shows present intention to adopt the writing – 9-102(a)(7)
· Organization: must be done by a representative with apparent authority to bind the organization.
§ Security Agreement
· Must have adequate description of the collateral being attached –
o Sufficient description if it “reasonably describes what is identified” even if not specific- 9-108(a)
o Must be specific in what is being secured, can’t have a security agreement in everything, but don’t be too specific (serial num
legally required.
· Is the Name of Debtor on the Financing Statement?
o Mailing Address of Debtor required (but not legally required) – 9-516(b)
o Whether Debtor is individual or organization – 9-516(b)
o Financing Statements are filed under Debtor’s name.
§ Registered Organizations must use the name used on the public record (those on the articles of incorporation papers filed in the state of organization) – 9-503(a)(1)
§ Individual/Partnerships/Organizations must use organizational or individual’s name. Partnerships and Assoc. should provide member’s names individually 9-504(a)(4)(A), (B)
§ Estates, Trusts, and Trustees – see 9-503(a)(2),(3)
§ Trade Names – ineffective by themselves, but should be added as an additional name – 9-503(c)
o Authorization
§ Debtor must authorized initial financing statement or any amendment which adds collateral or debtor. – 9-509(a)
· Done by:
o Authentication of SA – 9-509(b)
