MODULE 26 SECURED TRANSACTIONS 221

SECURED TRANSACTIONS
concept of attachment as discussed in this module. You
also need to understand the important concept of perfec-
tion discussed in this module that allows a secured party
to obtain greater rights over many third parties. Be sure
to understand the three methods by which perfection can
be accomplished. The examination also covers rules of
priorities when competing interests exist in the same col-
lateral.

Overview
The concept of secured transactions is important to
modem business. A creditor often requires some security
nom the debtor beyond a mere promise to pay. In gen-
eral, the creditor may require the debtor to provide some
collateral to secure payment on the debt. If the debt is not
paid, the creditor then can resort to the collateral. Under
revised Article 9 of the UCC, the collateral is generally
personal property or fixtures. You need to understand the

A. Scope of Secured Transactions

1.Important definitions
a. Secured party can be any creditor who has security interest in collateral of debtor
(1) Creditor may be any of the following:
(a) Lender
(b) Seller )
(c) Cosigner
(d) Buyer of accounts
(e) Buyer of chattel paper
1] Chattel paper consists of one or more writings that evidence debt that is secured by
personal property

a] Often chattel paper is comprised of negotiable instrument along with security

agreement

2] Chattel paper may be tangible or electronic

(2) Debtor is entity (or person) that owes either payment or some specified performance
(3) Security interest is legal interest in collateral that secures either payment or debtor's specified
performance of some obligation

(4) Security agreement is transaction that creates security interest

b. Types of
collateral
(1) Personal property
(2) Fixtures

(a) Personal property that has been attached permanently or relatively permanently to' real
property

(3) Accounts
(4) Investment property
(a) Includes securities, securities accounts, commodities, or commodity accounts
(5) Promissory note

(6) Commercial tort claim

B. Attachment of Security Interests
1. Attachment is a term used to describe the moment when security interest is enforceable
 against a
debtor by the secured party

1. Security interest is said to attach when all of the following occur in any order (these are important)
a. Secured party gives value (value is any consideration that supports any contract)
(1) Preexisting claim (although not consideration) is value
EXAMPLE: D already owes S $5,000 on a previous debt. Subsequently, D signs a security agreement giving San
interest in some furniture owned by D. Value has been given by S based on the previous debt.

EXAMPLE: A bank grants a loan to allow B to purchase a washer and dryer. This extension of credit is a typical
type of value. .