Commercial Law – Meyer – Room 414c – Seat 2/M4R
Closed Book Exam – you can use only the Code for the test, no outline.
Midterms on Reserve –
BK – Creditor
DR – Debtor
P – Payment
AA – After Acquired Property
EQ – Equipment
Inv – Inventory
CG – Consumer Goods
SP – Secured Party
SC – Secured Creditor
FS – Financing Statement
PSP – Protected Secured Party
PSI – Perfected Security Interest
II. Credit Transactions
a. Credit Sale – purchase but no payment
III. Types of Credit
1. Unsecured Credit
Credit Cards, Student Loans, Medical Bills. Utilities
2. Secured 1-201(37) – Interest in specific prop of Debtor
Consensual Lien (Art. 9)
Judicial Lien (Lien creditor) 9-102(52)(A)
· Creditor only has a judgment against a debtor. He must get a writ of execution from the judge and then have the sheriff seize property before he is a lien creditor.
· An unperfected LC is voidable under 9-317 and §544.
Statutory lien – Status lien – Creditor must only establish the requirements of the statute to have an interest.
Types of Secured Credit
a. Real Property (Land Transactions)
b. Personal Property (Secured Transactions)
IV. Typical Bank Card Transactions See diagram
a. Interchange agreement –
Owner sells car to Friend for $10k, F signs promissory note with $ due on later date. Friend defaults. Can Owner go get the car?
No, Owner is an unsecured creditor.
Can the Owner get a judgment?
See KSA 60-2304. This is an involuntary seizure protected by the statute.
What if there is a security agreement using the car? O can get the
o a consensual lien
VI. Value of the collateral
· SI in the car
· Debt = $10,000
· Default – car worth $5,000
· Secured debt – $5,000
· Unsecured debt – $5,000
VII. Why does someone want to be a perfected secured creditor
· Can get the collateral back quicker
· Commercial Debt
1. Article 9?
· Consumer Debt
1. Uniform Consumer Credit Code applies.
9-201(a) – a security agreement is effective according to its terms
Case #1 – p3
Jan 1 Seller sold barrels to buyer (debtor)
Feb 2 Buyer borrows $ from Bk and gives a security interest
July 1 Buyer files bk.
If the value of the collateral equals or exceeds the value of the debt, the secured creditor (Bk) gets all of his debt paid.
The seller is an unsecured creditor. How to account for this credit risk?
1. The seller can adjust his terms to account for this risk.
Case #1 Variation
Jan 1 Bk loans $ to winery (debtor)
Jan 1 Debtor grants SI to in all EQ and Inv
Jan 1 Bk files proper FS in proper place
Feb 1 Seller sells to winery (debtor) on unsecured credit the barrels
July 1 Debtor files bk petition
Bk wins to extent of unpaid debt and value of collateral.
The seller could have checked for the perfection of the security interest.
The seller, through negotiations, could have got his priority moved up above the bank.
Value of Article 9 – Predictablity
Planning aspect – Art 9 provides predictability.
Litigation aspect –