FL BAR Secured transactions and commercial paper

Governed by Article 9 of the UCC, applies to (1) any transaction that creates a security interest in personal property of fixtures by contract (2) agricultural liens (3) sale of accounts receivable, chattel paper, negotiable instruments, promissory notes and payment intangibles (4) consignments and (5) certain lease-purchase agreements

are those in which something of value belonging to the debtor is used to collateralize/secure payment of a debt to a lender. For a security interest to be enforceable both attachment and perfection must occur. Perfection must take place in the state of the debtor's principal place of bizz or residency. Upon a debtor's default a secured creditor can repossess and sell collateral that secured the creditor's interest

a security interest attaches to collateral when it becomes enforceable against the debtor with respect to the collateral which requires (1) a properly executed security agreement (2) the secured party must give value (3) the debtor must have rights in the collateral. The security agreement must (1) be in writing (2) contain a granting clause granting the security interest (3) contain a description of the collateral and (4) be authenticated by the debtor

requires the filing of a UCC-1 financing statement (unless, interest in money is only perfected by possession; interest in bank account is only perfected through control), which gives notice to the public of the security interest, and which must contain (1) name of debtor (2) name of secured party or representative (3) the collateral covered. A UCC-1 filing is valid for 5 years. The lender must file a continuation statement within 6 months before the 5 year period lapses.

The first to perfect a security interest has priority over subsequent acquired security interests, unless the after-secured interest is a PMSI

when several goods are combined/commingled to make an entirely different and separately identifiable product, the end-result is commingled good. If a lender perfects a security interest in goods before they become commingled, the lender has a security interest in the commingled product

a perfected security interest has priority over unperfected security interest. If two creditors each have unperfected security interests, the first to attach has priority

Fixtures are tangible property that us so connected to real property that it becomes one with the real property. Fixtures must (1) be attached to the real property (2) be adapted for use on the real property and (3) intended to permanently attach to the real property. In order to perfect a security interest in fixtures the UCC-1 must be filed where the mortgage is recored. A fixture filing will have priority over a subsequent real estate lien on fixtures.

an accession become identifiable as part of a larger good and the security interest remains perfected in the accession and is enforceable

A psmi in inventory has priority over the first-in-time non-PMSI is (1) the psmi creditor perfects before the debtor takes possession and (2) the PSMI creditor sends authenticated notification to the other creditor stating it expects to take a PSMI

takes place at the time of filing or possession. However there is a 20 day grace period to file the UCC-1. if it is filed within 20 days of debtor taking delivery of the collateral, the perfection relates back to the date of attachment. Relation back is effective against (1) intervening buyers (2) lesses and (3) lien creditors. But relation back is not effective against good faith purchasers. There is an exception for consumer goods: a PMSI in consumer goods does not need to be filed w the secretary of state to be perfected; it is automatically perfected in goods that the debtor obtains within 10 days.

entry into someones home to repossess collateral is always breach of the peace and not permitted

a security interest remains attached when collateral is sold by the debtor. However the garage sale exception, the security interest does not extend to the buyer if the buyer is without knowledge of the interest, unless the secured part filed a UCC-1 to cover the consumer goods

governed by article 3 of UCC, they are signed writings that demand that another pay or promise to pay money, they require (1) unconditional promise or (2) order to pay (3) fixed amount with or without interest or other charges (4) payable only in money (5) be a signed writing and (6) payable to oder or bearer

if (1) it is blank (2) it is payable to one who possesses it (3) it is pay to the order of cash (4) it is not payable to an identifiable person

(1) if payable as X and Y then both must sign to negotiate the instrument (2) if it is payable to X or Y then either can sign (3) if it is payable to X and or Y then it is deemed to be payable as "or"

a holder is a (1) person in possession of the instrument or who has rights or (2) if the instrument is properly transferred, the transferee is a holder.

is a good faith purchaser. Holder in due course status is determined as of teh time the instrument is negotiated and value is given. To be a holder in due course, the party must be without knowledge that it is overdue, dishonored, or subject to a defense or claim. Good faith requires honesty in fact and the observance of reasonably commercial standards of fair dealing. For value to be given the instrument must have been given for the promise of performance; and unperformed performance in not value.

A holder in due course does not take a negotiable instrument subject to personal defenses, which are (1) lack of consideration (2) waiver (3) estoppel (4) unconscionability and (5) fraud in the inducement. the holder in due course takes the instrument free of these defenses. However they are subject to real defense which are (1) material alteration (2) duress (3) fraud in the factum (4)insolvency (5) infancy (6) incapacity (7) illegality

under the shelter rule a transferee has a the same rights as the holder in due course transferor to enforce the note, provided the transferee takes without notice of any claims or defenses.

a drawer is (1) one who signs a check; and (2) order another to pay the check. A drawer does not have primary liability to the payee unless the draft is not paid by the drawee Drawee/payor is the one who pays and is usually a bank acceptor is a the drawee who accepts the draft by promising, before it is due to pay on the instrument when it comes due. payee is the person whom the check is payable indorser is one who signs the back of a negotiable instruments

an accommodation party can be a maker, drawer, acceptor, or indorser, depending on the capacity in which the party is signing. A accomodation party guarantees payment on behalf of a third party and is obligated to if the original drawer or maker does not pay. Ordinarily a party cannot assert a third party's defenses. However an accommodation party can assert any defenses that the original drawer or maker has to payment on the instrument. Not withstanding the accomodation party is liable even if he did not receive consideration for his indorsement.

is one that (1) just contains the payee's name (2) make the instrument a bearer instrument (3) which can be negotiated by delivery. Anyone in possession of a blank indorsement instrument can negotiate and enforce the instrument.

For an instrument to be paid it must be presented for payment, presentment must occur on or after the date specified in the instrument if no date is specified, the instrument must be presented within a reasonable time after the person to be charged becomes liable on the instrument. An instrument is dishonored when proper presentment for payment is made and payment is refused. In order for the dishonor to be valid, notice of dishonor must be given in any commercially reasonable manner

a forger is not a holder in due course and it, thus not entitled to enforce the instrument

is a draft drawn upon a bank and payable on demand a holder or holder in due course is entitled to enforce an intrument

Fraud in the inducement is a personal defense and occurs when the drawer knows what he is signing but is fraudulently induced to sign it. Holder in due course is not subject to personal defenses, and thus the drawer cannot assert fraud in the inducement as a defense to payment Fraud in the factum is a real defense and occurs when the drawer does not know what he is signing and did not have a reasonable opportunity to determine what he was signing or the terms of the instrument