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Secured Transactions
University of Mississippi School of Law
Czarnetzky, John M.

Secure Transactions


Fall 2016


Chapter 2. The Scope of Article 9 (15)

Chapter 3. The Creation of a Security Interest (43)

Chapter 4. Perfection of the Security Interest (85)

Chapter 5. Multistate Transactions (117)

Chapter 6. Priority (129)

Chapter 7. Bankruptcy and Article 9 (231)

Chapter 8. Proceeds (255)

Chapter 9. Default (275)

Chapter 2. The Scope of Article 9 (pg. 15 – 42)

I) Pg. 15-16: Security Interest Defined | Pg. 34-39: Other Transactions

Article 9 of UCC sets out rules governing secured transactions in personal property.

It states what a debtor and creditor must do to make the transaction effective (attachment);
What creditor must do to give notice making transaction effective (perfection);
Who wins if rights in collateral are contested (priority);
What creditor may and may not do to repossess and sell collateral (default)


§ 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… (look to code)

§ 9-109 (a) [General scope of article.] Except as otherwise provided in subsections (c) and (d), this article applies to:

a transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract;

Notes: even if the contract says “this does not create a security interest” – it may still do so by actions

(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.

[Inapplicability of article.] This article does not apply to:

(1) a landlord’s lien, other than an agricultural lien;

(2) a lien, other than an agricultural lien, given by statute or other rule of law for services or materials, but Section 9-333 applies with respect to priority of the lien;

(3) an assignment of a claim for wages, salary, or other compensation of an employee;

(4) a sale of accounts, chattel paper, payment intangibles, or promissory notes as part of a sale of the business out of which they arose;

(5) an assignment of accounts, chattel paper, payment intangibles, or promissory notes which is for the purpose of collection only;

(6) an assignment of a right to payment

11) the creation or transfer of an interest in or lien on real property, including a lease or rents thereunder, except to the extent that provision is made for:

(A) liens on real property in Sections 9-203 and 9-308;
(B) fixtures in Section 9-334;
(C) fixture filings in Sections 9-501, 9-502, 9-512, 9-516, and 9-519; and
(D) security agreements covering personal and real property in Section 9-604;

(12) an assignment of a claim arising in tort

(13) an assignment of a deposit account in a consumer transaction, but Sections 9-315 and 9-322 apply with respect to proceeds and priorities in proceeds.

Exclusions from Article 9 (d)

Federal Statutes
Landlord’s Lien (statutory Lien
Wage assignments
Non financing assignments
Real estate

Other Transactions

Consignments = Not a sale or security interest
Lease? Evaluated individually

Lessee owns property at end of lease = Sec. Int.
Lessee has right of termination = Lease
Lease for entire economic life of leased good = Sale

– Property interest that secures repayment of a debt

Several types of liens

Mortgage (real property)
Security Interest = consensual lien on personal property (anything that isn’t real property)
Judgment liens = Court transacted lien in which you owe someone money and the court enforces you to pay

Ex) two unsecured creditors have a dispute – lawsuit – court orders judgment – Sherriff seizes property
A lien is charged to a debtors property when

ing account
General intangible …. INTANGIBLE (catchall) – Any personal property (collateral) that is not a good nor any other intangible property.

Ex) A personal loan – an obligation to repay
Payment Intangibles

In re Troupe

Classifying of Collateral is determined at time of creation of security interest and classification does not change if the manner in which collateral is used by the debtor.
If not, then the lender would have to MONITOR the type of use

NO Monitoring needed b/c that would just create more costs all each party’s behalf


Technical Validity of the Forms

The Security Agreement – Attachment (§9-203) – No security agreement needed when collateral is in the possession of the secured party; however, if non-possessory (where the creditor does NOT have/possess the collateral), THE SECURITY AGREEMENT MUST:

Be authenticated by debtor (signed)
Describe collateral
Define agreement

§9 – 203: Attachment and Enforceability of Security Interest

Attachment – a security interest attaches to collateral when it becomes enforceable against debtor
Enforceability – A security interest is enforceable against debtor ONLY if:

Value has been given
Debtor has rights or power to transfer rights in collateral
One of following conditions is met:

Debtor authenticated (signed) security agreement describing collateral, OR
Collateral in secured party’s possession, OR
Collateral is a certificated security in registered form and certificate has been delivered to secured party, OR
Collateral is deposit account, electronic chattel paper, investment property, etc. and secured party has possession