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Secured Transactions Assignment 8

Secured Transactions Assignment 8. Formalities for Attachment. The Big Picture. Chapter 1. Creditors’ Remedies Under State Law Chapter 2. Creditors’ Remedies in Bankruptcy Chapter 3. Creation of Security Interests Assignment 8: Formalities for Attachment

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Secured Transactions Assignment 8

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  1. Secured TransactionsAssignment 8 Formalities for Attachment

  2. The Big Picture Chapter 1. Creditors’ Remedies Under State Law Chapter 2. Creditors’ Remedies in Bankruptcy Chapter 3. Creation of Security Interests Assignment 8: Formalities for Attachment Assignment 9: What Collateral and Obligations are Covered? Assignment 10: Proceeds (State Law) Assignment 11: Proceeds (Bankruptcy) Assignment 12: Skip

  3. The Big Picture Chapter 1. Creditors’ Remedies Under State Law Chapter 2. Creditors’ Remedies in Bankruptcy Chapter 3. Creation of Security Interests Assignment 8: Formalities for Attachment Assignment 9: What Collateral and Obligations are Covered? Assignment 10: Proceeds (State Law) Assignment 11: Proceeds (Bankruptcy) Assignment 12: Skip

  4. The Big Picture Chapter 1. Creditors’ Remedies Under State Law Chapter 2. Creditors’ Remedies in Bankruptcy Chapter 3. Creation of Security Interests Assignment 8: Formalities for Attachment Assignment 9: What Collateral and Obligations are Covered? Assignment 10: Proceeds (State Law) Assignment 11: Proceeds (Bankruptcy)

  5. UCC Article 1 • Definitions and provisions applicable in all other Articles • “Current” Article 1, “Revised” Article 1 • A majority of states have adopted Revised Article 1. • Revised Article 1 is the “law of the course.”

  6. Basic Concepts Attachment: creation of a security interest §9-203(a) A security interest attaches to collateral when it becomes enforceable . . . (b) [A] security interest is enforceable . . . only if: (1) value has been given (§1-201(44)) (2) the debtor has rights in the collateral (§2-501(1)(a)); and (3)(A) the debtor has authenticated a security agreement that provides a description of the collateral . . . Lien Security interest Asset “Collateral” Debt “Obligation”

  7. Basic Concepts Attachment: creation of a security interest §9-203(a) A security interest attaches to collateral when it becomes enforceable . . . (b) [A] security interest is enforceable . . . only if: (1) value has been given (§1-201(44)) (2) the debtor has rights in the collateral (§2-501(1)(a)); and (3)(A) the debtor has authenticated a security agreement that provides a description of the collateral . . . Lien Security interest Asset “Collateral” Debt “Obligation”

  8. Basic Concepts Attachment: creation of a security interest §9-203(a) A security interest attaches to collateral when it becomes enforceable . . . (b) [A] security interest is enforceable . . . only if: (1) value has been given (§1-204) (2) the debtor has rights in the collateral (§2-501(1)(a)); and (3)(A) the debtor has authenticated a security agreement that provides a description of the collateral . . . Lien Security interest Asset “Collateral” Debt “Obligation”

  9. Basic Concepts Attachment: creation of a security interest §9-203(a) A security interest attaches to collateral when it becomes enforceable . . . (b) [A] security interest is enforceable . . . only if: (1) value has been given (§1-204) (2) the debtor has rights in the collateral (§2-501(1)(a)); and (3)(A) the debtor has authenticated a security agreement that provides a description of the collateral . . . Lien Security interest Asset “Collateral” Debt “Obligation”

  10. Basic Concepts Value has been given [by the secured party]

  11. Basic Concepts Value has been given [by the secured party] ? Secured party Debtor Security interest

  12. Basic Concepts Value has been given [by the secured party] Loan or loan commitment Secured party Debtor Security interest

  13. Basic Concepts Value has been given [by the secured party] Previously unsecured loan Secured party Debtor Security interest A loan made unsecured (“past consideration”) is value with respect to a later-granted security interest

  14. Basic Concepts Value has been given [by the secured party] §1-204. [A] person gives “value” for rights if the person acquires them . . . (2) as security for . . . a pre-existing claim . . . or (4) in return for any consideration sufficient to support a simple contract. Previously unsecured loan Secured party Debtor Security interest A loan made unsecured (“past consideration”) is value with respect to a later-granted security interest

  15. Basic Concepts Debtor has rights in the collateral [ownership, lease, etc.]

  16. Basic Concepts Debtor has rights in the collateral [ownership, lease, etc.] Secured party Security interest In “trademark” License Trademark owner Debtor- licensee

  17. Basic Concepts Debtor has rights in the collateral [ownership, lease, etc.] Secured party Security interest Title to goods Seller Debtor Bad check

  18. Basic Concepts Debtor has rights in the collateral [ownership, lease, etc.] Secured party Security interest Rights in goods not yet delivered Seller Debtor No consideration yet paid

  19. Basic Concepts Debtor has rights in the collateral [ownership, lease, etc.] §2-501(1)(a) The buyer obtains a special property . . . interest in goods by identification of existing goods as goods to which the contract refers . . . . In the absence of explicit agreement identification occurs when the contract is made if it is for the sale of goods already existing and identified. Secured party Security interest “Identification” Seller Debtor No consideration paid

  20. Basic Concepts • Debtor has authenticated a security agreement . . . • §9-102(a)(7). Authenticate means: • to sign; or • to execute or otherwise adopt a symbol, or encrypt or similarly process a record in whole or in part, with the present intent of the authenticating person to identify the person and adopt or accept a record. • Record . . . 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. §9-102(a)(69) • Is something in my memory a record?

  21. Basic Concepts • Debtor has authenticated a security agreement . . . • §9-102(a)(7). Authenticate means: • to sign; or • to execute or otherwise adopt a symbol, or encrypt or similarly process a record in whole or in part, with the present intent of the authenticating person to identify the person and adopt or accept a record. • Record . . . 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. §9-102(a)(69) • Is something in my memory a record?

  22. Basic Concepts • Debtor has authenticated a security agreement . . . • §9-102(a)(7). Authenticate means: • to sign; or • to execute or otherwise adopt a symbol, or encrypt or similarly process a record in whole or in part, with the present intent of the authenticating person to identify the person and adopt or accept a record. • Record . . . 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. §9-102(a)(69) • Is something in my memory a record?

  23. Basic Concepts • Debtor has authenticated a security agreement . . . • §9-102(a)(7). Authenticate means: • to sign; or • to execute or otherwise adopt a symbol, or encrypt or similarly process a record in whole or in part, with the present intent of the authenticating person to identify the personand adopt or accept a record. • Record . . . 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. §9-102(a)(69) • Is something in my memory a record?

  24. Basic Concepts • Debtor has authenticated a security agreement . . . • §9-102(a)(7). Authenticate means: • to sign; or • to execute or otherwise adopt a symbol, or encrypt or similarly process a record in whole or in part, with the present intent of the authenticating person to identify the personandadopt or accept a record. • Example: I sent you an email stating “I grant you a security interest in my car. B.M.Mc.” tronic or other medium and is retrievable in perceivable form. §9-102(a)(69) • Is something in my memory a record?

  25. Basic Concepts • Debtor has authenticated a security agreement . . . • §9-102(a)(7). Authenticate means: • to sign; or • to execute or otherwise adopt a symbol, or encrypt or similarly process a record in whole or in part, with the present intent of the authenticating person to identify the person and adopt or accept a record. • Record . . . 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. §9-102(a)(69) • Is something in my memory a record?

  26. Basic Concepts • Debtor has authenticated a security agreement . . . • §9-102(a)(7). Authenticate means: • to sign; or • to execute or otherwise adopt a symbol, or encrypt or similarly process a record in whole or in part, with the present intent of the authenticating person to identify the person and adopt or accept a record. • Record . . . 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. §9-102(a)(69) • Is an oral security agreement a record?

  27. Basic Concepts • Debtor has authenticated a security agreement . . . • §9-102(a)(7). Authenticate means: • to sign; or • to execute or otherwise adopt a symbol, or encrypt or similarly process a record in whole or in part, with the present intent of the authenticating person to identify the person and adopt or accept a record. • Record . . . 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. §9-102(a)(69) • Is an oral security agreement a record? Is my recollection of it a record?

  28. Basic Concepts Security agreement . . . §9-102(a)(73). Security agreement means an agreement that creates or provides for a security interest. That provides a description of the collateral §9-108(a) [A] description of personal or real property is sufficient, whether or not it is specific, if it reasonably identifies what is described. (b) [A] description of collateral reasonably identifies the collateral if . . . the identity of the collateral is “objectively determinable.

  29. Basic Concepts Security agreement . . . §9-102(a)(73). Security agreement means an agreement that creates or provides for a security interest. That provides a description of the collateral §9-108(a) [A] description of personal or real property is sufficient, whether or not it is specific, if it reasonably identifies what is described. (b) [A] description of collateral reasonably identifies the collateral if . . . the identity of the collateral is “objectively determinable.

  30. Basic Concepts Security agreement . . . §9-102(a)(73). Security agreement means an agreement that creates or provides for a security interest. . . . that provides a description of the collateral §9-108(a) [A] description of personal or real property is sufficient, whether or not it is specific, if it reasonably identifies what is described. (b) [A] description of collateral reasonably identifies the collateral if . . . the identity of the collateral is “objectively determinable.

  31. Basic Concepts Security agreement . . . §9-102(a)(73). Security agreement means an agreement that creates or provides for a security interest. . . . that provides a description of the collateral §9-108(a) [A] description of personal or real property is sufficient, whether or not it is specific, if it reasonably identifies what is described. (b) [A] description of collateral reasonably identifies the collateral if . . . the identity of the collateral is “objectively determinable.

  32. Basic Concepts Security agreement . . . §9-102(a)(73). Security agreement means an agreement that creates or provides for a security interest. . . . that provides a description of the collateral §9-108(a) [A] description of personal or real property is sufficient, whether or not it is specific, if it reasonably identifies what is described. (b) [A] description of collateral reasonably identifies the collateral if . . . the identity of the collateral is “objectively determinable.”

  33. Problem 8.1, page 145 Promissory Note “secured by col-lateral described in a security agreement this date.” Signed by debtor Are any of these an authenticated security agreement? Do they meet the requirements of the composite document rule? “Objectively indicate parties may have intended a SA?” “Parties actually intended a SA” page 144 Can we answer from the documents alone?

  34. Problem 8.1, page 145 Promissory Note “secured by col-lateral described in a security agreement this date.” Signed by debtor Financing State-ment “all inventory and equipment of the debtor’s business” Not signed, but debtor signed authorization to file it Are any of these an authenticated security agreement? Do they meet the requirements of the composite document rule? “Objectively indicate parties may have intended a SA?” “Parties actually intended a SA” page 144 Can we answer from the documents alone?

  35. Problem 8.1, page 145 Promissory Note “secured by col-lateral described in a security agreement this date.” Signed by debtor Financing State-ment “all inventory and equipment of the debtor’s business” Not signed, but debtor signed authorization to file it Cover Letter. “Enclosed are documents that give you a security interest in inventory and equipment,” signed by debtor’s lawyer Are any of these an authenticated security agreement? Do they meet the requirements of the composite document rule? “Objectively indicate parties may have intended a SA?” “Parties actually intended a SA” page 144 Can we answer from the documents alone?

  36. Problem 8.1, page 145 Promissory Note “secured by col-lateral described in a security agreement this date.” Signed by debtor Financing State-ment “all inventory and equipment of the debtor’s business” Not signed, but debtor signed authorization to file it Cover Letter. “Enclosed are documents that give you a security interest in inventory and equipment,” signed by debtor’s lawyer Are any of these an authenticated security agreement? Do they meet the requirements of the composite document rule? “Objectively indicate parties may have intended a SA?” “Parties actually intended a SA” page 144 Can we answer from the documents alone?

  37. Problem 8.1, page 145 Promissory Note “secured by col-lateral described in a security agreement this date.” Signed by debtor Financing State-ment “all inventory and equipment of the debtor’s business” Not signed, but debtor signed authorization to file it Cover Letter. “Enclosed are documents that give you a security interest in inventory and equipment,” signed by debtor’s lawyer Are any of these an authenticated security agreement? Do they meet the requirements of the composite document rule? “Objectively indicate parties may have intended a SA” “Parties actually intended a SA” page 141 Can we answer from the documents alone?

  38. Problem 8.1, page 145 Promissory Note “secured by col-lateral described in a security agreement this date.” Signed by debtor Financing State-ment “all inventory and equipment of the debtor’s business” Not signed, but debtor signed authorization to file it Cover Letter. “Enclosed are documents that give you a security interest in inventory and equipment,” signed by debtor’s lawyer Are any of these an authenticated security agreement? Do they meet the requirements of the composite document rule? “Objectively indicate parties may have intended a SA” “Parties actually intended a SA” page 141 Can we answer from the documents alone?

  39. Problem 8.1, page 145 Promissory Note “secured by col-lateral described in a security agreement this date.” Signed by debtor Financing State-ment “all inventory and equipment of the debtor’s business” Not signed, but debtor signed authorization to file it Cover Letter. “Enclosed are documents that give you a security interest in inventory and equipment,” signed by debtor’s lawyer Are any of these an authenticated security agreement? Do they meet the requirements of the composite document rule? “Objectively indicate parties may have intended a SA” “Parties actually intended a SA” page 141 Can we answer from the documents alone? Not second question

  40. Problem 8.2, page 146 Fisherman’s Pier hypothetical. At what point in time did First National’s security interest attach? §9-203(a) A security interest attaches to collateral when it becomes enforceable . . . (b) [A] security interest is enforceable . . . only if: (1) value has been given (§1-201(44)) (2) the debtor has rights in the collateral (§2-501(1)(a)); and (3)(A) the debtor has authenticated a security agreement that provides a description of the collateral . . .

  41. Problem 8.2, page 146 Fisherman’s Pier hypothetical. At what point in time did First National’s security interest attach? §9-203(a) A security interest attaches to collateral when it becomes enforceable . . . (b) [A] security interest is enforceable . . . only if: (1) value has been given (§1-201(44)) (2) the debtor has rights in the collateral (§2-501(1)(a)); and (3)(A) the debtor has authenticated a security agreement that provides a description of the collateral . . .

  42. Problem 8.2, page 146 Fisherman’s Pier hypothetical. At what point in time did First National’s security interest attach? §9-203(a) A security interest attaches to collateral when it becomes enforceable . . . (b) [A] security interest is enforceable . . . only if: (1) value has been given (§1-204) (2) the debtor has rights in the collateral (§2-501(1)(a)); and (3)(A) the debtor has authenticated a security agreement that provides a description of the collateral . . .

  43. Problem 8.2, page 146 Fisherman’s Pier hypothetical. At what point in time did First National’s security interest attach? §9-203(a) A security interest attaches to collateral when it becomes enforceable . . . (b) [A] security interest is enforceable . . . only if: (1) value has been given (§1-204) (2) the debtor has rights in the collateral (§2-501(1)(a)); and (3)(A) the debtor has authenticated a security agreement that provides a description of the collateral . . . First National’s security interest became enforceable when the last of these three requirements was satisfied.

  44. Problem 8.3, page 146 • The parties signed a security agreement that described the collateral as “The restaurant equipment described on the attached list.” No list is attached. • Does the bank have an enforceable security interest? • Two weeks later, the debtor’s lawyer mails the list to the secured party’s lawyer, and the secured party’s lawyer staples it to the security agreement. Is the agreement enforceable? • What if those events happened two years later? • What if those events happened after the debtor filed bankruptcy, 362(a)(4) and (5)

  45. Problem 8.3, page 146 • The parties signed a security agreement that described the collateral as “The restaurant equipment described on the attached list.” No list is attached. • Does the bank have an enforceable security interest? • Two weeks later, the debtor’s lawyer mails the list to the secured party’s lawyer, and the secured party’s lawyer staples it to the security agreement. Is the agreement enforceable? • What if those events happened two years later? • What if those events happened after the debtor filed bankruptcy, 362(a)(4) and (5)

  46. Problem 8.3, page 146 • The parties signed a security agreement that described the collateral as “The restaurant equipment described on the attached list.” No list is attached. • Does the bank have an enforceable security interest? No unless composite document available. • Two weeks later, the debtor’s lawyer mails the list to the secured party’s lawyer, and the secured party’s lawyer staples it to the security agreement. Is the agreement enforceable? • What if those events happened two years later? • What if those events happened after the debtor filed bankruptcy, 362(a)(4) and (5)

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