1. Chapter 34 Secured Transactions in Personal Property Twomey, Business Law and the Regulatory Environment (14th Ed.)

2. (c) 2000 West Legal Studies Chapter 342 Creation of Security Interests [34-1] Writing Signed by Debtor Intent to Create Security Interest Description of Collateral (Oral OK if Creditor in Possession) Value Contemporaneous Exchange Creditor Previously Gave Loan Debtor’s Interest in Collateral

3. (c) 2000 West Legal Studies Chapter 343 Four Classes of Tangible Collateral [34-2] Used or bought primarily for personal, family, or household use Used or bought primarily for business use Inventory Consumer GoodsEquipment Farm Products Held by debtor primarily for sale or lease to others; or raw materials, work in progress, or materials consumed in a business Crops or livestock, or supplies used or produced in farming

4. (c) 2000 West Legal Studies Chapter 344 Perfection of Security Interests [34-3] Possession—Creditor Retains Possession of Collateral PMSI in Consumer Goods—Automatic Perfection Motor Vehicles—Notation in Title Registration Writing Signed by Debtor Description of Collateral Address of Debtor Address of Creditor File Financing Statement Where Depends on Type of Collateral Local vs. Central Fixtures Consumers Farm Equipment Inventory

5. (c) 2000 West Legal Studies Chapter 345 Priorities of Conflicting Interests [34-4]

6. (c) 2000 West Legal Studies Chapter 346 Buyer in the Ordinary Course of Business Perfected Secured Party Unperfected Secured Party Buyer Buyer Not in the Ordinary Course PMSI Consumer Unperfected Buyer (Unless Creditor Filed) Buyer Perfected Creditor Priority Between Buyers and Secured Parties [34-5]

7. (c) 2000 West Legal Studies Chapter 347 Proceeds from Sale of Collateral [34-6] Public Sale Private Sale Lease to Third Party First, to pay the expenses of the secured party in connection with the default Second, to pay the debt owed the secured party Third, to pay debts owed other secured parties Fourth, to pay any balance to debtor Upon debtor’s default, creditor may sell collateral.

8. (c) 2000 West Legal Studies Chapter 348 Priority of Secured Interest under Article 9 ConflictPriority Secured Party vs. Secured Party Unsecured Party vs. Secured Party Perfected Secured Party vs. Secured Party Perfected Secured Party vs. Perfected Secured Party Perfected Secured Party vs. Lienor Exceptions PMSI in Fixtures vs. Perfected Secured Party PMSI in Equipment vs. Perfected Secured Party PMSI in Inventory vs. Perfected Secured Party PMSI in Consumer Goods vs. Buyer Perfected Security Party vs. Buyer First to attach Secured party Perfected secured party Party who is first to perfect Party who filed (financing statement or lien first) [9-307(2)] PMSI creditor if perfected before annexation or within ten days after annexation (PMSI will have priority even over prior perfected secured party PMSI is perfected within ten days after delivery [9-301(1)(d)] PMSSI is perfected before delivery and if perfected secured party given notice before delivery [9-302(1)(d)] Buyer unless perfection is by filing before purchase [9-302(1)(d)] Buyer in ordinary course wins even with knowledge [9-306(1)(d)]

9. (c) 2000 West Legal Studies Chapter 349 Priorities in Transfer of Collateral by State Buyer vs. Secured Creditor Buyer in Ordinary Course Buyer Not in Ordinary Course Perfected Secured Creditor Unperfecte d Secured Creditor Perfected Secured Creditor Buyer (Assuming no knowledge of security interest) Buyer Has Priority Creditor Has Priority (except consumer PMSI creditor,buyer has priority) Unperfecte d Secured Creditor

10. (c) 2000 West Legal Studies Chapter 3410 Chapter 34 Summary A security interest is an interest in personal property or fixtures that secures payment or performance of an obligation. The property that is subject to the interest is called the collateral, and the party holding the interest is called the secured party. Attachment is the creation of a security interest. To secure protection against third parties’ claims to the collateral, the secured party must perfect the security interest.

11. (c) 2000 West Legal Studies Chapter 3411 Tangible collateral is divided into classes: consumer goods, equipment, inventory, general intangibles, farm products, and fixtures. These classifications are based on the debtor’s intended use, not on the physical characteristics of the goods. Chapter 34 Summary [2]

12. (c) 2000 West Legal Studies Chapter 3412 Perfection of a security interest is not required for its validity, but it does provide the creditor with certain superior rights and priorities over other types of creditors and creditors with an interest in the same collateral. Perfection can be obtained through possession; filing; automatically, as in the case of a PMSI in consumer goods; or temporarily, when statutory protections are provided for creditors for limited periods of time. Chapter 34 Summary [3]

13. (c) 2000 West Legal Studies Chapter 3413 Priority among creditors is determined according to their status. Unperfected, unsecured creditors simply wait to see if there will be sufficient assets remaining after priority creditors are paid. Secured creditors have the right to take the collateral on a priority basis. As between secured creditors, the first creditor’s interest to attach takes priority in the event the creditors hold security interests in the same collateral. Chapter 34 Summary [4]

14. (c) 2000 West Legal Studies Chapter 3414 A perfected secured creditor takes priority over an unperfected secured creditor. Perfected secured creditors with interests in the same collateral take priority generally on a first-to- perfect basis. Exceptions include PMSI inventory creditors who file a financing statement before delivery and notify all existing creditors, and equipment creditors who perfect within ten days of attachment of their interests. Chapter 34 Summary [5]

15. (c) 2000 West Legal Studies Chapter 3415 A buyer in the ordinary course of business always takes priority even over perfected secured creditors who have knowledge of the creditor’s interest. A buyer not in the ordinary course of business will lose out to a perfected secured creditor but will extinguish the rights of a secured creditor unless the buyer had knowledge of the security interest. Chapter 34 Summary [6]

16. (c) 2000 West Legal Studies Chapter 3416 A buyer from a consumer–debtor takes free and clear of the debtor’s creditor’s perfected security interest unless the creditor has filed a financing statement and perfected beyond just the automatic PMSI consumer goods perfection. Chapter 34 Summary [7]

17. (c) 2000 West Legal Studies Chapter 3417 Upon default, a secured party may repossess the collateral from the buyer if this can be done without a breach of the peace. If a breach of the peace might occur, the secured party must use court action to regain the collateral. Chapter 34 Summary [8]

18. (c) 2000 West Legal Studies Chapter 3418 If the buyer has paid 60 percent or more of the cash price of the consumer goods, the seller must resell them within 90 days after repossession unless the buyer, after default, has waived this right in writing. Notice to the debtor of the sale of the collateral is usually required. A debtor may redeem the collateral prior to the time the secured party disposes of it or contracts to resell it. Chapter 34 Summary [9]