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Secured Transactions: Introduction

This LibGuide is intended to assist students in the study of Secured Transactions and lists some of the major sources of law in the area and a variety of tools for the researcher to use when confronted with a question involving a secured transaction.


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The Center for Computer Assisted Legal Instruction

CALI currently offers 49 interactive exercises under the subject of "Commercial Transactions," many of which deal with Article 9 of the UCC.

Sum & Substance Audio CDs

Secured Transactions
Sum & Substance Audio-CDs
CD# 7347 a-d

Sum & Substance CDs can be a timesaving study aid useful for class review and exam preparation. The CDs include exam tips and hypotheticals to help you master the subject.

The secured transactions audio lecture covers collateral, security interests between debtor and creditor, such as creation and attachment, between creditor and others, including perfection filing, possession, control, automatic, and temporary, and priorites of secured parties v. lien creditors.
It also defines a perfected secured party, purchaser BIOCs, and holder in due course rule. Other subjects include rights upon default, including collection and enforcement by secured parties, possession and disposition by secured parties, noncompliance, acceptance of collateral in full or partial satisfaction, and application of proceeds of sale.

Secured Transactions - Definition


Secured transaction

"A business arrangement by which a buyer or borrower gives collateral to the seller or lender to guarantee payment of an obligation.  *Article 9 of the UCC deals with secured transactions."

                                           --Black's Law Dictionary (9th ed. 2009)

"A secured transaction within the scope of Article 9 of the Code might be considered as any transaction which is intended to create in favor of one person a security interest in the personal property of someone else.

A secured transaction is one which produces for the benefit of the secured creditor a "lien" in the personal property of the debtor. The lien serves two functions for the creditor: (1) if the debtor defaults, i.e., fails to pay the secured debt, the secured creditor may take possession of the personal property subject to the lien and use it to satisfy the debt; (2) if other creditors of or buyers from the debtor or a bankruptcy trustee assert a claim to the debtor's personal property, the creditor may be able to acquire a priority position through the lien. In these two regards, it may be said the personal property subject to the lien "secures" payment of the debt owed the secured creditor."

                                          --Secured Transactions in a Nutshell (5th ed. 2007)

Secured Transactions: An Overview

A security interest arises when, in exchange for a loan, a borrower agrees in a security agreement that the lender (the secured party) may take specified collateral owned by the borrower if he or she should default on the loan. A security interest also provides the secured party with the assurance that if the debtor bankrupts, he or she may be able to recover the value of the loan by taking possession of specified collateral instead of receiving only a portion of the borrower's property after it is divided among all creditors. See Bankruptcy.

Security agreements are contracts. Article 9 of the Uniform Commercial Code governs security interests in personal property. It has been adopted, with some modifications, by every state. A security agreement must comply with other state laws governing contracts.

Article 9 of the Uniform Commercial Code covers most types of security agreements for personal property that are both consensual and commercial. See § 9-102(2) and § 9-104 of the code. This includes fixtures, personal property that is "fixed" to real property such as a water heater. Statutory liens (e.g. a mechanic's lien) are generally not governed by Article 9 but by the individual statute that creates them.

See §§ 9-102(2) & 9-310 of the code. Article 9 contains a statute of frauds which requires a security agreement to be in writing unless it is pledged. A pledged security agreement arises when the borrower transfers the collateral to the lender in exchange for a loan (e.g., a pawnbroker). The "perfection" of a security agreement allows a secured party to gain priority to the collateral over any third party. To perfect a security agreement, the filing of a public notice is usually required.

Article 9 also provides for the resolution of conflicts if there are multiple security interests or liens on specific collateral. See §§ 9-301 - 9-316 of the code. Part 5 of Article 9 deals with the procedures to be followed when a borrower defaults. See §§ 9-501 - 9-507 of the code.

--LII/Legal Information Institute

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