1. Defintion is defined as where one transfers title to the buyer for a pirce
    1. Goods
      1. Specially manufactured goods;
      2. Unborn young of animals;
      3. Growing crops;
      4. Crops and fixtures which can be removed without material harm to the land and timber (removable by seller or buyer); and Minerals, and structures to be removed from land by the seller, not the buyer.
      5. Not
        1. "money in which the price is to be paid,"
        2. "investment securities" (covered by Article 8); and
        3. "things in action." UCC § 2-105(1), Comment 1.
    2. Merchants need to adhere to reasonable business standards and honesty in fact (e. g. consumer could be on notice)
  2. Choice of Law
    1. Unlikely that a court will permit bifurcation of goods and services contracts – especially as one may be enforceable, and the other one may not me
    2. Unified goods and services contracts will probably be governed by the Uniform Commercial Code
      1. Specially manufactured consumer goods are goods
        1. The definition of consumer goods also appears in a different section as "household items"
    3. CISG doesn't include consumers
  3. Formalization
    1. Parole Evidence under Convention on the International Sale of Goods: -- will look to customs, and then to statutes
  4. Gap Fillers
    1. For security interests parole evidence can be introduced, and security agreements are usually not integrated
      1. Mutual mistake can be reformed
      2. after-acquired property clause can be implied in some circumstances
    2. Uniform Commercial Code – Sales
      1. Hierarchy of which will determine what "reasonable" is
        1. Deal
        2. Course of dealings
          1. Trade practice: Evidence of a relevant usage of trade offered by one party is not admissible unless and until he has given the other party such notice as the court finds sufficient to prevent unfair surprise to the latter.
    3. Uniform Commercial Code - Leases
    4. Convention on the International Sale of Goods
    5. Common law real estate
    6. Magnuson-Moss
  5. Warranties
    1. Express: doesn’t need to be in writing, but puffing isn’t a warranty
      1. Need to show
        1. Warranty was made
        2. Warranty was breached
        3. Warranty caused ahrm
        4. Extent of damages
        5. Abiltiy to fed off other affirmative damages
      2. Three alternatives to warranty privity --
    2. Implied title warranty
    3. implied Warranty of Merchantability
      1. Uniform Commercial Code – Sales
        1. Buyers in the ordinary courses of business
        2. Sellers in the ordinary course of business
          1. Pawnbrokers are never in the ordinary course of business
      2. Uniform Commercial Code – Leases
        1. Finance lease have the arranties run to the seler not the lessor – can’t be a disgusied sale
        2. –special rules on page 84 in 3a-103-1-g
      3. Convention on the International Sale of Goods
        1. Fit for the purpose, and purpose to transport
      4. Common law real estate
      5. Magnuson-Moss
        1. Atty’s fees -- eliminate vertical privity problem
    4. Reducing warranties
      1. Uniform Commercial Code – Sales
        1. Buyers in the ordinary courses of business
        2. Sellers in the ordinary course of business
          1. Pawnbrokers are never in the ordinary course of business
        3. UCC takes two views (freedom of contract and protection)
          1. Unconscionability is for the prevention of oppression and unfair surprise
          2. Good fair is a factor, in determining if it was really their own bargain, and consideration should be given to the fact that the probabiolity is small that a real price is intended to be exchanged for a psuedo-obvligation
          3. Allocation of risk is okay Terms are merely an allocation of unknwon or undertrminable risks
          4. Courts resolution
            1. Sophistic and baragaining
            2. Implied warranty by price
            3. Usage of trade
            4. What the words said, and how clear it was
      2. Local states lemon laws
      3. Convention on the International Sale of Goods can viciate them all
      4. FTC mandates conspicuous disclosure of a use car's warranty protection in plain view
      5. Uniform Commercial Code – Leases
        1. Can imply a warranty of merchantability if merchant
      6. Convention on the International Sale of Goods
      7. Common law real estate
      8. Magnuson-Moss
        1. Relief is granted to a consumer who is damaged bvy the failyure of a warrantor to comply with any obligation under a written warranty
        2. Terms and conditions must be disclosd
  6. Nonperformance
    1. Convention on the International Sale of Goods says taht excuse when unavoidable
  7. Title -- leases have quiet enjoyment
    1. Warranty of Title -- note: no state has made article 9 effective before 2001
      1. Uniform Commercial Code – Sales (seems to treat both merchants and non-merchants alike)
        1. Strict liability
        2. Need specific language to disclaim warranty
        3. Purchasers of a good get the title that the seller had
        4. A seller can't transfer that which it has not
          1. A seller can't transfer that which it has not
        5. Voidable title: does not have good title but has the power to transfer title to a good faith purchaser for value (checks that bounce)
      2. Uniform Commercial Code - Leases: covenant of enjoyment
        1. warranty is that no third party hold a claim or interest that arose from an act or omission of the lessor that will interfere with the enjoyment
        2. disclaiming must be specific unless the circumstances warrant otherwise
        3. if someone tricks someone into thinking that he could convey (lease) good title the lessee gets to regain possession, but rent is now paid to the true other rather than the trickster
        4. sublease
          1. buyer or subleases from an existing lessee can only have right to the goods that are no better than those of the existing lessee
      3. Convention on the International Sale of Goods
        1. Implied warranty of title of the seller
        2. Excluded from CIG is any issue regard rights of third parties, because it doesn't want to regulate the property of individuals
      4. Pre-Uniform Commercial Code: A party to a transfer could convey no better title to goods than he had
      5. Common law real estate
        1. Implied warranty is created by statute and is impled with a transfer of deed
        2. Warranty of quiet enjoyment
        3. Warranty of further assurance
        4. Often handled by title insurance
      6. Magnuson-Moss
    2. Entrustment differnts from voidable title in that the buyer must be in the ordinary course of business (not just a good faith purhcaser for value) and the seller must be a merchant in that type of good
      1. Uniform Commercial Code – Sales (seems to treat both merchants and non-merchants alike)
        1. Any estrustment of goods to a merchant of those goods, transfers all rights regardless of conditions -- if they sell it out from under you, you can't get it back from the new owner
        2. Knowledge by the buyer of the other title ends this
      2. Uniform Commercial Code - Leases
      3. Convention on the International Sale of Goods
      4. UK law
        1. Does not allow an innocent buyer to prevail against the entruster
      5. Common law real estate
      6. Magnuson-Moss
  8. Non-performance
    1. Uniform Commercial Code – Sales
      1. UCC speaks in terms of seller's excuse
        1. Identified goods -- when the contract requires for its peerformance goods identified when the contract is made. It isnb't enough the seller happened to identify particular goods for the buyerm they have to be unique. Fungible goods can only be covered under 2-615
          1. In the case of total loss of identified goods, the entire contract is voided
          2. In the case of partial loss, the buyer can inspect and have the choice of voiding. -- and can make due allowance for the injury
          3. Risk of loss is still on the seller, even if he qualifies for exuse
        2. commodities
          1. Default: seller who wants to claim has to notify the buyer of any claim by a justifiable excuse
            1. An excused non-delivery is not a breach
          2. Definition of force majeure is something that could not be avoided by good-faith compliance and was beyuond control
          3. Seller's requirements
            1. Performance has become impractical
            2. Inapplicablity was due to soemthing that the parties exprelly or impledly agreed would charge the promisor's duty to perform
            3. The promisor did not assume the risk that the continbgency would occur
            4. The promisor seasiably notified the promisee of the delay in delivery or that the delivery would not occur at all
          4. Multiple buyers
            1. In cases where a seller that is claim excuse under §2-615, has more than one buyer, and has a limited capacity to perform, the seller must allocaiton production and delivery amopjng its customers in a fair and reasonable manner
              1. American courts don't like to find themselves rewriting the contract to make for a more equitable distribution of goods given a shortage -- German, Hungarian do
              2. Theorhetical problem with allowing for excuse given significant priace increae
                1. Would establish a line by which oen is responsible for below, and one from above
                2. Anything else would be the court rewriting the contract.
        3. Some courts have interpreted the defence in terms of commercial impracticbility rules
    2. Party made law
      1. Parities can contract out of this -- for the purposes of a new force Majure cause
    3. Uniform Commercial Code - Leases
      1. Hell or highwater for fiance lease
        1. Nonconcumer finance lease myust either be terminated or go forward with no reduction in rent
      2. Identified goods
      3. excuse
    4. Convention on the International Sale of Goods
      1. Excuses a party from performance when the inability was due to an impediment beyond his control
      2. CISG applies to both buyers and sellers
      3. CISG applies to all obligations, not just delivery
      4. Excuse only happens when a third party supplies also has a valid basis of exuse
    5. Common law real estate
    6. Magnuson-Moss
  9. Equitable remedies
    1. Buyer’s when seller breaches
      1. Goods
        1. Common law: only available when inadequate
        2. Uniform Commercial Code: unique, same policy as before but more liberal, or other proper circumstance’s
          1. Hard to describe goods as unique
            1. If price is the only unique thing, than a decree for specific performance would be price-based
            2. Disruption that cover would mean would be a reason for specific performance
            3. Test for unique: total situation which characterizes the contract.
              1. Output requirements
              2. In the old days things were contracts for sale
          2. Right to replevin: If there goods are reasonably unavailable and the goods have been identified to the contracts
            1. identifiable goods may be used for a security interst
          3. Specific performance decrees are like contracts and the parties have to show that they can and will perform them
            1. Can get specific performance in bankruptcy
              1. If unsecured
              2. Insolvency is discovered before delivery: can stop delivery before arrival. Seller’s right ends when the buyer gets the goods or is govern acknowledge my a third party carrier or bailer that the buyer now has the possession of the goods
              3. Insolvency: Reclamation demand: 10 days of the buyer’s receipt of the goods if insolvent. No limit if misrepresentation -- seller’s rights are subordinated to a good faith purchaser for value
              4. If filing for bankruptcy: reclamation demand must be in writing, bankruptcy court may choose to satisfy the sellers’ valid reclamation right with a lien or administrative expense claim, rather than goods, time limit for sellers’ demand is not removed in bankrucy even when there is a misrepresentation solvency (even in writing) – Uniform Commercial Code 10 day limt is 20, sellers’ reclamation right in subject ato all of the limits that exist on the right outside of bakrucy
              5. Buyers who pre-pay and the seller has become insolvent, canrevoer if the seller becomes insolvent within ten day after receipt of the first installment on their price – goods must be identified
  1. Validity of LDC
    1. Uniform Commercial Code: if things are reasonable enforceable in the light of anticipated or actual harm
      1. party that wrote the LDC has the burden of showing the reasonableness of it
        1. LDC can be subject to foffset based on actual damages or enrichment.
          1. Minority: could show damages in repudiation of a contract
  2. Lost profit buyer (need acceptance of the goods or valid rejection, and there is no cover) – e. g. benefit of the bargain (on in the position that would have been
    1. Usually most of the warranties in the Uniform Commercial Code are not disclaimed, except for consequential damages
      1. Types of allowed consequential damages
        1. (from a seller’s breach) Of any kind incuding preuly economic loss
        2. of which the seller had reason to know of
        3. damges caused in fact
        4. would could not be prevented by cover or otherwise
      2. "super consequential damages" – must show
        1. personal injury or proper damges (no econmoic lsses)
        2. priximate cause
    2. incidental damages can be somewhat larger (e. g. reasonableness test)
    3. Lost proft only applies to what one is contractually bound to do
    4. Has acceptance occurred -- dispies arised over whether the bueyr waited to long to cover? The goods that th buyer purchased as a cover were substantially the same as the contrac goods, and the buyer didn’t pay too much for the contract goods
      1. Acceptance – if it is too late to revoke acceptance, the buyer’s damages are limited to breach of warranty
        1. Can deduct, for less value, but must give proper notice
        2. If the buyer has paid the piurcahse price, the buyer may hold the goods as security for repayment of tis purchase price as well as for any expenses – and thebuyer cna resell the goods in a manner as an aggrieved seller -- damages are [return of price paid by buyer + cost + expense savedof cover]-[conract price – incidental damages]-consequential damges, _
          1. Good faith from covering is without delay or reasonable price --
      2. Not yet acceptance – or justifiable refused
        1. Must be given in a reasonable time after the the buyer discovers orshould have disvered the breach
        2. Incidental damages
        3. (Value of conforing – value of nonconfirming )(+ incidental + consequential)
      3. no goods (or goods rightfully dumped back)
        1. right to cover -- it is optional -- buyer ends up getting the goods, and the seller pays the buyer for any additiona cost that the buyer incudrred in getting them.
        2. right to contract market damages
      4. timing issue
        1. damges mesaure are set at the market priac at the time tha tth ebuyer leanred of the breach -- may not be the price of the goods at the originally primiced perforamces.
          1. Place of perforamce – place of arrival of goods, unless the buyer rejects or rvokes accpetance after arrival
          2. Breaches occur as of recent modificaitons
    5. nominal damages may be awarded if the court finds that there was an overall benefit
    6. Need to fix damages on the date of breach
      1. Some court finds that where a market price is too wild, whenver the seller can prove that the actual loss was less
      2. What the buyer does is irrelevant, the damages are fixed on the date of breach based on spot transfer
    7. Additional problems for leases
      1. Rights to cover
        1. "lessor may otherwise default" -- lessor can recover the cost of putting things back in working order
        2. new leases must be substantially similar to be considered a cover
      2. for a new lease to cover it has to be substantially sinmilar
      3. things would be discounted to present value – not in older Uniform Commercial Code number 2
      4. leaes: a buy can accept a lease of a defective good and give it a haircut discounte back
    8. Convention on the International Sale of Goods
      1. Sets up dichotomy beween avoided contracts and non-avoided contracts
        1. Can onyl declare a goods to be avoided if breach is funamental, or if delivery is not on time or place, or within a contraually agreed grace period
        2. Under Convention on the International Sale of Goods, if a conract is avoided, both parties are relieved, but damges will be assessed
      2. Specific performace: will be granted if the buyer doesn’t have the good year
        1. Specific performance must be in line with the state courts law (which would be Uniform Commercial Code)
        2. Specific performance to remedy a funadmental breach is available, but must be in line with local law (so would get the Uniform Commercial Code anyway)
      3. Buyers have choice between contract-market and contract market
      4. Consequential damages must be reasonable to know, even if they are preesonal injury
    9. Real estate
      1. Refusing to close can be granted specific performance
        1. Have to show that money is inadaquate (not a problem with real estate)
        2. buyer must be able to perform
      2. can be paid for higher out of pocket costs
      3. usually houses are sold as is
      4. the courts have refused to grant specific performance in bate and switches
  3. lost volume seller’s remedies
    1. definition of lvs: those who can show that the the contract-market measure is inadauate to put the seller in as good a postion as peromrace would have done (e. g. lose a profit)
      1. must show that the sale would have occurred
        1. e. g. the only reason that the sales were made was that the buyer breached
        2. seller was no operating at full capacity and could have made additional sales if the bueyr had not breached (e. g. retail toy stores wouldn’t be eligible)
      2. definition of profit (including reasonable overhead) together with any incidental damages, due allowance for costs incurrend, and credit for proceeds of sale
        1. profit is defined as contract price minus seller’s direct costs (variable costs) minus allocatable share of the sellers’ fixed costs or overhead
          1. direct costs are also variable costs
        2. we need to allocate the fixed costs
        3. these clauses were probably put in for a component parts manufacture who has stopped production in midstead and haas sold things for scrap
          1. can resell for scrap
      3. must show that the seller’s aabilityt to seell these goods was greater than the current buyer’s demand for them
    2. completing of manufature when stopped mistead
      1. how much more would it cost
      2. how much would it get for the scrap
      3. how much the seller could get from the third party
    3. bop is on the defendant to show that decision to stop is reasonable
  4. Seller’s remedies: put the aggrived back where they were. Consensual shoudln’t eb allowed unless proviosn in the code
    1. codal
      1. Types of breaches by buyers
        1. Wrongfully reject goods
        2. Wrongfully revoke acceptance
        3. Fail to make a payment when due
        4. Anticpatoruoly repduiate the conract
      2. Types of remedies
        1. Sellers ability to limit damges
          1. Withhold delivery
          2. Stop delivery by aby bailee
          3. Indentify goods to the contract in case of anticpatory repudiation
        2. Resel and recover damges
        3. Recover contrac-tmarket damges (or lost profits)
        4. Sue for price
          1. Can be said to be a right of specific performance for the seller
          2. When available – buyer can not have paid the price
            1. Where the buyer can not have accpeted the goods
            2. Wherer conforming goods, whether or no accpeted have been lost or damaged wihing a commerically reasonable time after the risk of loss has passed
            3. Where the seller has identified goods to the contrac and there is no reasonable preopect of reslelling them to a third party for a reasonable price
          3. Seller must hold for the buyer the goods, and if the price is paid, the buyer is entitled.
            1. If while the seller is holding the goods for the buyer, resle beomcse psoible, than the seller may resell and must deduct from its action for price the proceeds of any resale
          4. Sellers for price can sue for incidental damges
          5. Resale samges, if the buyer breachs, the seller identifies, notices give, and seller resells the goods at either a public or priact sale
        5. Delay issue is still ripe
          1. In some case, an immeadite suit, ratther than one immedaitely afterwards might still be ripe, if the seller is uable after reaosnbale effort to resell the goods at a reasonle price or the circumstances reasonable indicate that such an effort would be unavailing
        7. Cancel the contract – cancelling apry aleways retain right to sue for breach
      3. Lessor
        1. Right to repossess gooods is a standard remedy
        2. Specifically says that the lessor can sue on contractually agreed for remedies
        3. Lessors’s price is unpaid rent plus the the present value of future rent
          1. Once the lessor sue for the rent, i must hold the lease goods for the lessee for the reamining term of th lease
          2. In the even of a release thhan the original lessee gets credit for the revenue
          3. If the leasee pas judgment forther rent, it is entitled to possesion and use of the leased goods for the reaminder of the term
          4. Kessir who sues for rent is eligible for incidental damages
        4. Resale damage formula: (accrused but unpaid rent on the original lease as of the date of the new lease term) +( present value of the total remaining payment for the original lease date – present value of the total in the new lease for the term that is comparable t the reminder of the priginal lease) + incidental damages – expesnes saved
          1. The second lease can be "substantially similar"
        5. aggreived lessors can sue for los profits
        6. lessors can sue for damages to the salvage value
    2. damages under Convention on the International Sale of Goods (distinction between avoided breached contract and non avoided)
      1. can only avoid withy a fundamental breach -- avoidenace relieves of dutues but retains right to sue
      2. Convention on the International Sale of Goods treats the buyers "cover" and the "seller" resale about the same
      3. Seller can get specific performance, bu subject to Uniform Commercial Code
    3. Real estate
      1. Somes states, depding on the terms of the contracts agallow the selelr to recover contracts-market damges but only when the seller can prove those damages( an dwhere the seller returns the deposit
      2. Sellers are usualyl not entited to contracts-resael danages as such
      3. Consequential: Might not be able to get damages for unforseeable damages
        1. Usually for costs associated with resale
      4. Can reverse rules about atty’s fees
  5. Risk of loss (by 3rd parties)
    1. Standard terms
      1. FOB: Seller’s Place aka Shipment Contract (default)
        1. Risk shifts when the goods are delivered to the carrier and the buyer is responsibelf ro paying the cost of fright
        2. Must put the goods in possession of carrier
        3. Make a reaosnbale KI for their transportion
        4. Delivery any documetn necessary to enable buyer to take delivery
        5. Promply notify buyer of shipment
      2. FOB: Buyer’s Place aka destinartion contract
        1. Risk shifts when the goods arrive at the buyer, and the seller is responsibel for paying the cost of the frigt
        2. Put goods in possesion of carrier
          1. Risk passes when buyer erevies a negotaibel docuemtn of title
          2. When bailee acknowelddg to the buyer th ebuyer’s right to possess of the ogoods
          3. When the buyer recives a non-negotaible document of title
        3. Make a reaoble conract for transportion
        4. Delivery any docuemnt necessary to enable the buyer to take delivery
        5. Promprly notfiy the buyer of shipments
      3. Ther ehas to be an actually injury for damages due to unreable conduct
      4. If a buyer rightfully revokes acceptance, than the buyer can reate the risk of loss as if it rested on the seller from the beginning, but only to the extent of a deficity in the buyer’s insurance coverage
    2. Default risk of loss rule for leases
      1. Risk of loss never passes except for finance leases (otherwise the same)
    3. Convention on the International Sale of Goods on risk of loss
      1. Parities can opt out
      2. 13 incoterms
        1. E (lowest level of respobibility for seller)
        2. F (seller has at least the responsiblility of delivery the goods to the carrier, at which point the buyer will have the risk of loss)
        3. INCO terms on page 194
      3. Parities must specific Uniform Commercial Code or INCOTERMS
      4. Default rules
        1. Goods are to be delivered to the buyer but the goods are not in transit defaults to a Uniform Commercial Code shipment contracts
        2. Goods already in transit – risk passes to buyer when contracts is conclued, but the risk may pass retroactively if the circumstances so indicate and if the sleler did not know or have reason to know that the goods were lsot or damged at the time the contract was conlcided
        3. Under Convention on the International Sale of Goods if the buyer has committed a fundamental breach, thebuyer retains all remeides, including the right to avoid
    4. Real estate risk of loss
      1. Common law: risk of loss during the closing is on the buyer (could be based on seperation of title, and a change in the rol)
        1. Insurance proceeds would need to be held in trust for the buyer
        2. Early possession doesn’t change thigns
  6. Closing
    1. goods
      1. Acceptance – rejection has to be rasonable time -- "perfect tender rule"
        1. Affiramtive signifcation
        2. Failure to reject
        3. Act by buyer that is inconsitant with sellers’ onwership -- must state reason for rejection
        4. Rights to cure creaee commerical leeway
      2. Installment contracts
        1. Buyer may only reject an installment if the nonconfimity impairs an insllment and can’t be cured
      3. Revocation of acceptance
        1. Non-conformity must subtantilly impari value of goods to buyer
        2. Must do revoke reasonable after discover
      4. Assurances might cause non-confirmity
      5. Uniform Commercial Code isn’t clear on whehter the revoking buyer and the rejecting buyer have to give the same chance to cure -- most courts allow the seller to cure
      6. Shaken faith doctine – that the nature of the product may be legitimately doctrine – e. g. seller can’t unilatelly define what constites an accetpabel cure
    2. Keases
      1. Finance lease can revoke accepntace of leased goods where the fiure to discover the nonconnformity was reasobaly induced by the leesor’s assurances - still have direct right agins t supplier
    3. Convention on the International Sale of Goods
      1. Can revoke based on fundamental breach or something being too late
  7. Unconscionability
    1. Uniform Commercial Code – Sales
      1. Vagueness
      2. Determined as a matter of law
      3. Measured at time of contracting
    2. Uniform Commercial Code - Leases
      1. Accent is on procedural unconscionability in the forming of the contract
      2. Attorneys fees can be included
    3. Convention on the International Sale of Goods
      1. CISG doesn't include consumers -- so there is no unconscionability
    4. Common law real estate
    5. Magnuson-Moss
  1. Checks -- federal rules will pre-empt UCC
    1. Person who writes the check is defined as the drawrer
      1. "Drawee" or "payor bank" means a person ordered in a draft to make payment.
      2. "drawn" – act of writing a check on an account
      3. "Acceptor" means a drawee who has accepted a draft.
      4. "Drawer" or "issuer" means a person who signs or is identified in a draft as a person ordering payment.
      5. "depository bank" means the first bank to take an item even though it is also the payor bank, unless the item is presentefor immediate payment over the counter;
    2. pre-accepted payment is a certified check
    3. when a bank should pay
      1. cashing: banks must pay immeadiate , over the counter chekcs
      2. on-us (third party): midnight of the next business day (e. g. intratransfer)
        1. .bank can charge-back , and can reallocate the funds. If the money was withdrawn the bank can sue to revoer
        2. provisional settlement is the time at which the moneu is in the account but it can be cahrged back
      3. a bank should pay when the customer has payment (by writing a check) -- all that has to happen is the bank has to property transfer the debt to the paying institution -- doesn't have to pay if it is stolen
      4. if the customer ahs authorized if they wrote a check
        1. as soon as the check is cashed or brought to the imtermediary, the intermediary is entiteled to encofrce
      5. problems
        1. overdrafts
          1. at the payor banks option it can charge the account
          2. at the payor bank’s option it can refuse to pay
            1. banks can waive out of this by contractually ageeeing to pay overdrafts
          3. fees
            1. code doesn’t regulate
            2. courts have looked at unconscionability at bad faith and at how mucgh the penalites exceeded the cost
        2. stop-payment
          1. with timely notices, the bank no longer has the right to pay
        3. revering the charges for improper transaaction
          1. bank is subrogated to the right of the payee of the check
            1. bank can asser tht payee’s rights agins the drawer as a dfence to the bank’s obligation to recredit the account (e. g. bank steps into the shoes of the payee) – this might be practically quite limited
          2. usaully banks shoiuld reverse
          3. banks have to returnany fees in connection with transactions, if penalties result
            1. wrongful dishonor: penalties include proximate damages
        4. indorsements bring with them liability
          1. people can indorse without recourse -- just to pass on
            1. loss can be passed up the chanhain
            2. transfer warranties (presentment warranties only run to the payor bank) – transfer warranties only run to ealier transferees in the chainof collection (these include forged drawer’s signature)
          2. forgery: of not authorized, paur bears the loss – and payor bank can seek recover from the person to whom or for whose benefit the payment was mdade, unless it was taken in good faith and value
            1. loss can be passed back to the earlierst possible person after the forgery -- payor bank shouldn’t have paid, but it can revoever, but it can’t recover from someone who took for goof faith and vlue
            2. absent a valid indorsement by the payee, no one can become a person entitled to enforce a check
          3. presenting bank that took a chekc from a forger would have breached its presentedment waranty to the payor bank
          4. warranties of presentmetn and transfer
            1. check this!
            2. Negligence can pout a burden ofn people
            3. Bank statement may play a part
            4. Forger goes to the victim
          5. warranties to sue on
            1. can also sue for a breach of presentment warranty
            2. requires actual knowledge, rather than notice
        5. when the bank must pay
          1. local
            1. cash withdrawls from local chcks: first $100 on the first day, next $400 on the second day, and everything else on the third day
            2. noncash withdraws fro local checks: bank must make $100 available on direst business day after the banky day on which the funds were deposited . Rest of the funds on second business day
          2. nolocal
            1. cash withdrawls from nonlocal checks: first $100 on first day, $400 on fith day, and the rest on the sixth
            2. nocash withdraws from non-local checks: : bank has to make $100 on the firs tbusiness day, but it has until 5th business day to make the reatining funds vailable 12 cfr 229.12c
          3. exceptions for new accounts, large deposits, faud
      6. clearing
        1. reg cc deadline for returning checks:
          1. second business day for local
          2. fourth for nonlocal
          3. bank has to depsoit the check in the mail by midnight of day it receives the chekc
            1. exceptions
              1. midnight deadling waived as long as the payor delviers the check to the transfer by the first banking day after the deadline
              2. can have an extra day if using a fast delviery service
          4. notice of non-payment
            1. must get notice of non-paument by 4pm on the second business day after the banking day on which the payor bank received the check
          5. truncation – not in NY
        2. federal reserve
          1. msot expensive
          2. slower
          3. when deadline for dishonor pass, things are final
        3. clearing houses: local checks
          1. assumtion that things will be honored
          2. commputaiton of ent position
          3. clearing houses have a time by which things have to be declined
          4. no Uniform Commercial Code requirement of decision to dishonor (e. g. the deadline is satisifed if the bank just puts the chek in the mail
        4. direct-send (also correspondant bank relationships_)
  2. wire transfers
    1. CHIPS and generic
      1. beneficiary bank can reject order, as the sending bank might e insolvent -- acceptance is final, and must pay the beneficiary
        1. beneficiary’s bank acepts a payment order at the earlier of the folowing 1_ when the bank pays the beneficiary or when the bank notifies the beneficiary of recippt of the order that the account has been debeited
      2. if something goes to the wrong arrount, due to error of the sender, it requries action in the local courts
        1. most bodies of law rely on common law restitution
        2. if the other (wrongfully debted) party has an independant right of payment
          1. can be applied -- might be more complicated if there are restricted accoutns
        3. if someone gains access to a password, the bank is responsible
      3. doomsday provision
        1. banks contribute share of the swhorfall
        2. if two large participants fail,than the transactions gets unwound
    2. Fedwire
      1. Usually to the credit of a third party -- debt cards exluded under efta
      2. Sender bank and a receiving bank
      3. Originaating bank can collect from a depositer who didn’t have enough funds
      4. Federal Reserve, when it receives the payment order, has no choice but to avoid pay, and the fed becomes obligated
        1. Payment can be excused if the fed screes up
      5. Banks have to cover any overdrafts by the end of the day -- check this
        1. .15 fee for the amount of the overdraft, large overdrafts require regulatory supervision
      6. debit provision -- takes a little while longer of the other bank is in a different fed district
      7. no signficance to refusal provision of chips – the beficiary’s bank become sobligated to pay the amount of the fedwire transfer
      8. fed seems to take the risk
      9. probably very little reason to go to equity in the case of finality of payment
        1. if the banks have an agreed uponsecurity provision and the provision would have revealed the error, there can be a coa for neg, which shifts the loss to the responsible usuall receivng bank)
  3. floorplan transaction (usually an agreement between the supplier and the financier) (Floorplan has agreements for repo)
    1. docuemnts
      1. security agreement is defined as conditions
      2. statement of transaction
      3. financing statements is defined as what is filed
      4. persoanl guarentee
        1. aligns the lenders with the corporation in the event of default
    2. money is tendered from the financing company to the supplier
    3. at purchase the cost of the boat goes from the dealer to the financing company
      1. financing company later bills for interst
    4. verified by floor checks who trust no-one
  4. Liens (include security interests) "charges against or an interst in property to secure payment o9f a debt or performance of an obligtion" -- which is an intersts in a piece of colleteral.
    1. Security Interest
      1. Real estate mortgages
      2. Deeds of trust
      3. Security intersts
        1. Finite amount that can be granted given property
        2. To prevent certain types of security interests it would require an knowledge of what was involved
        3. Intended as security doctrine: there does not need to be a recissation of the words "security" for there to be a security
    2. Statutory liens
      1. Mechanics liends
    3. Juducial liens based on unsecured creditors
  5. Priority is defined as whose interests will be fullfilled first, over those in bankrupcy that will be fulfilled at lesiure, or proportionately -- bankrupcy stops all attempts to collect, but not criminal actions
    1. Definitions
      1. Claim is defined as the amount owned under non-bankrupcy law
        1. Non-bankrupcy law includes "default" and acceleration on contracts
      2. Debt is defined as sum of money owning (fluctuates with fees)
      3. Discharge: legally discharge, debt exists but creditor can’t attempt to collect
        1. Can be securue on unsecure – and everything becomes non-recourse debt
        2. Non-recoruse secured debt, if not removed in bakrupcy will contine to encumber collateral afterwise
          1. If underlying debt isn’t apid, the creditor can forclose after bankrupcy – and the balance will go to the junior lienholders,
          2. There can be deficiency judgment
      4. Non post-petition intersts
        1. Bankrupt isn’t supposed to pay any debts once it beomces a part of the bankrupt estate
      5. Chapter 7 – amounts determined by selling the actions
        1. Creditor needs to submit a form that is a proof of claim
        2. Complete debts are reorganized (e. g. accelerated)
          1. Courts can estimate claim to make things go fast
        3. All defenses the debtor had, the trustee, and bankrupcy estate now has
      6. Chapter 11—valu e of the property that will be distributed under the plan is detmined through beotiations
        1. No need to explain all of the debts – if there is no dispute no need for itemiation
        2. Complete debts are reorganized (e. g. accelerated)
        3. All defenses the debtor had, the trustee, and bankrupcy estate now has
        4. There can be a good way to handle bankrucies by selling negotiable paper
        5. Confirmation in champter 11 dischages the old seucred edebts and paumetn sheduels and substitues new ones
          1. Cramdown – what the creditors don’t agree with (can discharge debts) – check thsi
          2. Valuation of payhments
      7. 12-reorganization for family farms
    2. Self-help
      1. Right to self help is impled -- security agreement usually have clause saying that the debtor should surrender goods on default
        1. Breach of peace is defined as no one specifically tells someone that they are tresspassing
      2. People who helped themselves still have to bring actions in bankrupcy
        1. Unsecured debtors can’t use self-help
        2. However, debtors can set off outstanding accounts from a creditor
      3. Self-help gainst accounts -- written notice to the debtors that they should ante up to the lender usually the people who owe money are held to have to by the sedured party -- there may be a right of the creditor to the debtor to recover
    3. Unsecured creditor’s right (security intersts are liens)
      1. Pro-ratta share of unsecured creditor s in 507a
        1. Pro-ratta share of unsecured creditors
          1. Divide claim between its unsecured and its secured part
          2. Add in post-petition feeds
            1. Unesecured creditors don’t get post-petition fees, but secured ones do
            2. Attornye’s fees must be reasonable
            3. Payment of attornye’s fees must be covered in the underlying agreement
            4. Interst, attoruney’s ffees,and costs can only be accrued to the ext that the value of collateral exceeds the amoun of the claim secured by it
          3. Secrured claim can’t exceeds the value of the collateral
          4. Can only sell what is subject to the security interst, could sell the property subject to a security interst
      2. Secured Property Special collection rights of a persoanl property secured creditor are referrred to as security interst
      3. Unsecured Property Liens: chronological order of perfection (exception are small, such as property taxes)
        1. Unsecured creditor types
          1. General creditors: get pro-ratta sahre or non-exempt money
            1. Scheduling: pro-ratta share of what is left
          2. Ordinary creditors
          3. Judgmenet creditors (still unsecured) -- can get through a writ (does it matter if Sheriff is there or not) with judgment (?) check this
            1. No fishing expenditions by judgment creditor
            2. Exemptions to judgments vary by state
              1. Federal laws prodtect up to 75% of wagezs
        2. Unsecured creditors can make a "pererence paymetn to certain creditors" -- a prefence
      4. Consensual real estate interests: mortgage (under Uniform Commercial Code they have the same priority as personal property security intersts)
    4. Aaa
    5. Insert ways to perfect here
    6. Bbb
  6. Security interests are enforcible if they are not perfected, perfection gives them priority
    1. Intitial perfection
      1. Ordinary goods: last event test: where the collateral is located (everything except for minerals, and things covered by certificates of title) at the moment of filing
        1. If they move, the security interst remains perfected for four months despite the move from the time that the collateral enterd the state -- this might create inequities but no one cares (misleading might be a reason)
        2. Security interest becomes unperfect otherwise execpet with regard to trustees in bankrupcy
      2. Movement of PURCHASE MONEY SECURITY INTEREST goods between states: -- can file in the destination state in the next 30 day
      3. Mobile goods: is defined as of the type normally used in more than one jurisidiction ( doens’t matter if they are never moved) -- can be filed where the debtor is located (or cheif executive office)
        1. If the the debtor moves, the security interst remains perfect for four months
        2. Motor vehicales are excluded
      4. Accounts and general intangibles: same as mobile
    2. Requirements for atttachment of security interest
      1. Material either in possession of secured creditor or signed secrity agreement with description
        1. Possession
          1. (e. g. Pawn)
          2. eg warehousing
        2. Signed agrement with description collateral
          1. Agreement can be composit (parole), but notes have to be comined product of both parites
            1. Some cases allow other papers to be included if a general reference is made
      2. Value must be given
        1. Definition of value is broad -- either consideration of past consideration (or to secured a past debt)
      3. Debtor must have rights in the collateral
        1. If Debtor owns a limited intersts in the property and grants a security interst in the property, Security interst will generally attach only to a limited interest in the property (a leasehold)
          1. Lessee can grant a security interest in the lease
          2. Can grant a security intersts in a contract
        2. Some owners who acquired their intersts by fraud may be able to grant a security interst
        3. The security interst seems to be able to be made for after-acquired property
    Please visit
  7. ways to perfect (taking of whatever steps are required
    1. possession (assumption is that people might look at property before securing a loan to it) gives constructive notice.
      1. Definition: Right to control is not determinative
        1. Ownership – not necessarily possession
          1. Judgements not yet executed are in the possession of the judgment holder -- might need to be a minimal amount of change in possession (e. g. agreement with an employee)
        2. Naked possession:
          1. Possession is the sole means of perfecting in only two types of collatearl, money and instruments
        3. Possession through agent might be invisible to sercher
          1. Bailments
            1. Secured party has possession from the time that the bailee receives notifivation of the secured party’s interests --debtor cannot be an agent for the secured party -- is this true under common law
              1. Escrow can be a bailee/agent
          2. In some states the bailee is neither an agent nor an escrow (e. g. notice of assignment is notice that it was not wholly controlled by the debtor)
          3. Issue may turn on who has ultimate control
          4. Possesion by attorney may be sufficient to put other s on notice that a note was encumbered -- but, there are cases where if the collection agency ws owned by a debtor, contructive notice is not given
      2. Categories
        1. Intruments: warehouse receipts, negotaible bills of lading, and similar docuemnts
          1. Security interests in instruments can only be perfected by possession (e. g. can be perfected by financing statement filing or possession)
          2. Negotaible promisorry notes are not included in a document of title
        2. real estate
        3. personal property (Uniform Commercial Code 9)
          1. consumer goods
    2. automatic perfection by law
      1. general intangibles and accounts are pefected by law
        1. (another way to look at this, is as the embodiment of a tangible right)
          1. accounts under article 9 is defined as something different than bank accounts
          2. accounts used as collateral
            1. Could be a grant of freedom to do whatever necessary with accounts
            2. Requirement to apply a part of accounts directly to loan
            3. Payment directly to creditor
            4. Lock box
      2. purchase money security interest in consumer goods is defined as secured debt for the purchase price of collateral --only in consumer goods (it is the purpose for which the goods were bought that matters) -- usually this refers to goods that are small in value, but this has not been littigated as of yet. It is time of purchase that matters
        1. security interest is defined as the right to apply the valuye fo the collateral to the holder’s debt
        2. variants
          1. if a consumer good is paid for by a promissory note (to the vendor) the vendor is the secured party
          2. if there is a third party involved the third party is the is the secured party (e. g. if a check is made out jointly to vendor and debtor)
            1. if the money isn’t used for the purchase, the status as a secured party can be lessened -- we may need to trace the money if the money went by way of an account that already had money in it
            2. secured party can lose it status by consolidating loans entitled to the pm status with loans that are not – (e. g. credit line) most courts hold that no party of the interwt is purchase money (there is little consistancy)
    3. dragnet clauses
      1. can have a security interest which includes a future advance aka "dragnet clauses" – a valid clause where if the creditor later lends additional money, a secrity agreemen twith such a future advance clause will ensure that the subseqent loan is sured from its inception
      2. limited dragnet clauses in real estate (usually need proof that the future advance was contemplated by the parites), some states require a maximum amount of indebtedness be statedw
      4. can include dragnet for atty’s fees, expenses
    4. notice (includes filing) – move everything here. Filing statemnt is known as Uniform Commercial Code-1 -- this makes security intersts binding against third parties
      1. sufficient material for finacing statement -- substantial compliance is acceptable so long as it is not seriously misleading
        1. name of debtor -- this is what things are indexed by (also a book, page, and file number is stamped on it)
          1. variations in name prodcue problems -- rule is that if a normal serach (without being clued in by an employee of the secretary of state would turn it up, than it is worthwhile) (the individual secretary of state)
          2. usually by what people are usually known in the community
            1. people can change their names legally
          3. personal names -- names are individuals or organizations (any kinds of legal or commerical entity)
            1. courts usually favor the longer or more formal versions
              1. some want alternative names to be filled in as well
            2. corporate names
              1. corporations are formed with the secetary of state
              2. corporation have words of incorporation (except California)
              3. no duplication in corporate names
            3. partnership names (formed by contracts) (see later in 49)
              1. Practical ways of avoiding the problem
                1. Ways of avoiding problems if the secondary creditor is deciding whether or not to lend
                  1. Insist that debtor prove its incorporation an dhistory
                  2. Search records for possibility of change
                  3. Search under prior names
              2. Greater than four months: If the name change renders the financing statement misleading, the filing will not perfect a security interest in collateral acquired by the debtor more than four months after the change
                1. Secured parties who finance based on a continuing basis (e. g. floor plan) – it will be ineffective against inventory acquired more than four months afterwards
                2. If a creditor waits more than four months to file (under the old name) things could be held to be ineffective,
              3. Less than four months: Effective with regard to collateral owned by the debtor at the name of the name change, or acquired in the first four months
            4. Trade names
              1. Usually no effect given to them
              2. If the secured party so desires they can be indexed
              3. Debtors trade name may be enough to perfect
        2. name of secured party
        3. signature of debtor -- required and can be fatal to security
          1. no requirement of witnessing (real estate usually requres) – but it can be flexible
          2. article 9 signatures are consensual
          3. any manifestation if asset is okay --
          4. reasons
            1. preventing fraud -- could be by a debtor, or by both against a third party
            2. minimizing litigation
            3. formality (caution)
            4. channeling transactions (good business practices)
            5. some see public policy as being against secured credit
          5. other systems
            1. revised article 9 would eliminate
            2. more stingent in real estate system
            3. Canada is differnt
          6. "Political non-signature creates implied signature"
          7. if there is already a financing statement, it might be possible for the secured party to sign (e. g. renewal)
        4. address of secured party from which information concerning the security inters can be obtained as the finacing statement is merely notice that the interst may exist
          1. secured parties are required to cooperate about giving out statements
        5. mailing address of debtor
          1. generally no mailing address is fatal to perfectoin
          2. two functions of address
            1. would the mail arrive (this might not really prevent fraud, as people wouldn’t admit to a debt, if they were trying to cover it up
            2. identity – probably principal purpose
        6. contains a statement of what the collateral is (usually what is in securiety agreement) attachment is a pre-equisite to perfection
          1. types –or
            1. inadaquate classication as to whether inventory or equipment can be fatal
          2. description: -- code definitions are different than common usage -- there are splits of authority (check this) about whether or not the description is what matters, or the understand to the third parties
            1. some courts have upheld failed descriptions (split)
              1. check for fill in the blanks – check this! (9-203-1-a)
            2. proposed article 9 has a comment that "all assets: or "all personal" property isn’t sufficient
            3. minority: must be sufficeint to enable a reasonable service to identify the colaltearl without additional info
            4. majority: more relaxed
              1. supergeneric requirements cause no problem for the secured credit system that parties could not cause without them
              2. if the sercher knows where something is located it might be enough
              3. proposal that it should be optional (if no description, the attachment would reach all property, rather than none of it)
          3. alternative filing systems
            1. real estate: indexes by tract
              1. can include references to separate documents
            2. Motor Vehicles: by VIN
      2. Place to file (three alternatives) -- no communication between the filing offices
        1. Alt 1:
          1. Natural Resources, Minerals, Fixture finacing statements go to Real estate mortgae office for
          2. Everything else goes to secretary of state
        2. Alt 2:
          1. Farm equipment, general intangibles that came from sale of farm equipment, consumer goods go to country where debtor lives (if debtor is not a resident of the state it goes to where the goods are kept) -- growing crops, or later crops have to be filed where the land is located
          2. Natural Resources, Minerals, Fixture finacing statements go to Real estate mortgae office for exemptions to Uniform Commercial Code filing requirement
        3. Alt 3
          1. Farm equipment, general intangibles that came from sale of farm equipment, consumer goods go to country where debtor lives (if debtor is not a resident of the state it goes to where the goods are kept) -- growing crops, or later crops have to be filed where the land is located
          2. Natural Resources, Minerals, foxtire fomacomg statements or what will become a fixture go to real estate mortgage office
          3. Everything else secretary of state AND
            1. Where the debtor does business if he only does business in one country
            2. Country where debtor resideds (if the debtor resides in state but has no place of business)
        4. exemptions-- still subject to Uniform Commercial Code except when it comes to filing perfection, or duration
          1. International registration by treaty
          2. National filing systems
          3. Copyright – with office in DC
          4. Trdemark – state filing will do (confusion)
      3. wage claims
      4. insurance policies and claims
        1. perfection occurs by notifiaction to the insurance company and inclusion of secured party as a loss payee
      5. real estate intersts
        1. (move stuff here)
      6. tort claims -- usually aren't securable as they usually arn’t commercial collateral
        1. there can be valid contractual liens -- but they are not necessarily perfected
      7. most kinds of bank accounts -- already comvverd by existing law
  8. when perfection ends
    1. definition of removal
      1. removal is only constructive notice
      2. when something is "removed" it only has another thing added to the record
    2. removal by satisfaction
      1. real estate: document is executed and filed called satisfaction of mortgage for recording
        1. liability for non recording
          1. some statutes provided for actual dmaages occasioned by the neglect or refusal, some provide for a minium amount of damages
            1. some give attorney’s fees
          2. is possible to make "side-deals" that may satisfy concurrant closings
      2. goods – this is called a "termination and release
        1. filing of a termination statement
    3. removal of recored security by partial release
      1. real property
        1. somtimes embeedded provissions in original loan, which include a "paydown" – but there is no statutory or implied obligations
      2. goods
        1. somtimes embeedded provissions in original loan, which include a "paydown" – but there is no statutory or implied obligations
        2. statement of release can be filed
        3. amendment to a financing is possible
        4. no obligation to amend or additionally file upon payment of secured debt
        5. evidence of intent of parties
          1. there needs to be no consideration paid
            1. can be just a checkbox with no recissation of terms
            2. courts are unlikey to apply equity principals or intent to this
    4. removal by time (self-clearing) -- not in all jurisdiction
      1. 0-4.5 years good
      2. 4.5-5 years good, and opportunity to renew
        1. if renewed, process starts anew
        2. must renew, rather than filing a new statement because if a new statement was finaced, it would have priority as of a later date -- must identify specifically the earlier statement
          1. earlier versions might not be discoverd
      3. 5-6 years bad, but opportunity to renew
      4. 6+ years, bad
      5. bankrupcy (additional window)
        1. usually can’t create and perfect new liens -- exception for liens created, and perfected with in a grace period before the bankrupcy is filed
        2. a filed, and perefect security interst exists at the time of filing of bankrupcy, the interst will remain in effect either until termination (and 60 days after), or until expiration of the five year period (whichever later) -- this additional window is open to interpreation
  9. Attachment
    1. Definitions -- some court infer the definitions of collateral, even if it does violence Security interest must always be identifable. Comingling: collateral that is put together in a mass, so that none could tell which is which. Identifability – a legal concept which explains what is assumed to be a certain party of the collateral
      1. Product
        1. Usuall used for agricultural products (wool, sheep)
      2. Profit: real estate concept of the right to remove. If the Uniform Commercial Code were appled it would not be proceeds
      3. Rents
      4. Offspring
      5. Proceeds is defined as (see table) – what is exchange by means of a tradee
        1. What is acquired by exchange of goods owned and secured
        2. If the debtor sells, the security intrest will attach to the price paid, whether it is an account, promissory note or cash -- this doesn’t include rents
        3. Proceeds of proceeds are proceeds
        4. Security interst will automatically cover proceeds
          1. Security interest must always be identifable -- burden of tracing is on the party claiming the security interst
            1. Comingling: collateral that is put together in a mass, so that none could tell which is which.
            2. Identifability – a legal concept which explains what is assumed to be a certain party of the collateral
              1. Some courts hold that cash is never identifable
              2. Lowest intermediate balance test: amount of collateral remainin in the account is equal to the lost balnace of all funds in all funds in teh account between the time the collateral was deposit to the time the test is applied
        5. When sale of the collateral is authorized, the presumption is that the preoceeds of the sale will secure the outstanding debt
          1. Power always exists to transfer the criminal (might be breach of crime)
            1. The security interst will continue in the collateral -- doesn’t affect a biocob
            2. Assuming no biocob, the security interest will contine in both the sold property and the proceeds
            3. if there is a forclosure and and the buyer of the collateral sells the goods, than some court says that the security interest ends, and some say that it continues
            4. might need release -- can be waived
          2. Unauthorized disposition of collateral
            1. Can pay off the lien and sell item
            2. Can simulataneously agree for everyone to exchange (e. g. via an escrow account)
            3. Some states make unauthorized disposition criminal, others make it only criminal if the secured party isn’t paid off
            4. New York makes it criminal to sell collateral in violation of a security agreement that prohbits sale
      6. Floating Liens: After acquired property is defined as (not a value tracing concept) . After acquire property usually includes replaces, additions, substitutions -- note: after-acquired property clause can be implied in some circumstances
        1. Once in bankrupcy, a secured party won’t secured any additional after acquired property must be proceeds, product, offspring, rent or profits
          1. Milk is a close one -- if they are processed they become products alternative argument is based on whether a part of the cow is consumed in the process.
          2. E. g. Lender is entitled the the same percetnage of the proceeds of the postpetition milk as its contribbution of the production of mil bears to the total capital and direction operating expesnes incurred
            1. Cash collateral (e. g. milk that is encumbered by lien) = (D/(D+E+L))*P where d=average depretiaion of capital, E=direct expnese L=cost of labor, P=cost of proceeds sold
          3. After-acquired title in real eatette include fitures, and permits an earlier mortageor to convey a security intersts in land acquired after by the mortgager
        2. Bankrupcy creditors can’t get their hands on things that would have been available to all creditors
        3. Highly liquird collateral aka cash colateral is defined as liquid things that may be necessary to keep the business going (secured creditors can seek adaquate protection)
          1. Once liquid collateral is coverted into other form (e. g. wages produce product) it is not a tight enough relationship to be called proceeds -- at this point the secured creditor is not entitled to it -- there can be anorder permitting the use of cash collateral to fill the gap
            1. Notice is required to secured creditor before using it
      7. Failure: there is a doctrine of equitable mortgages whic the code abolishes
      8. The word "proceeds doesn’t include anything filed in the future – the word proceeds means very little. Changes in material (see table). Can make wording large enough to include multiple nomenclature

Type

Description of Type of Change

Example

Disposition

Signature

0 (Barter)

Proceeds received by the debtor fall within the description of collateral in the altready filed financing statement.

Trade of one piece of equipment for another

Security agreement attaches to the newly acquired property, and is perfect so long as the new property falls into the same property as the older property.

No

0 (via Cash)

Same as 0(Barter) but debtor exchanges collateral into cash first, provided value is trace

Selling of one piece of equipment and using the proceeds to buy another

Security agreement attaches to the newly acquired property, and is perfect so long as the new property falls into the same property as the older property.

  

1

Change in use that Doesn’t control place of filing.

Equipment becomes inventory

Filing remains effective despite

No
  1. (Barter)

Elephant Rule

Barter where new object wouldn’t change the place of filing

Equipment exchanged for inventory

Secured party remains perfected -- constructive notice to later parties. This means that the "description" means less and less.

No

1 (via cash)

Selling collateral, and using proceeds to buy a different class of object that would not change the place of filing

Equipment sold, and proceeds used for inventory

Secured party loses perfection, unless secured party files within 10 days

  

2

Change in appearance, location or use of collateral

Equipment becomes different class

Filing remains effective (searcher’s must find previous locations). If the filing is greater than 10 days, it is not continuous

No

2 (Barter)

Exchange of collateral for non-cash proceeds

Equipment traded for farm equipment (e. g. different filing office)

Filing is not effective, but a ten day grace period is given

No

2 (via cash)

Exchange of property via cash where the cash is filed in a different filing office

Equipment traded for farm equipment (e. g. different filing office)

Filing is not effective, but a ten day grace period is given

 

3 (sale without commingling))

Exchange by debtor for property or cash

  

Security interest continues without perfection and is discontinuous unless. The word "proceeds" isn’t effective. Continuity will be preserved if there is a 10 day break (grace period)

  

3 (sale with commingling)

Exchange by debtor for property or cash where proceeds are comingled

  

If funds are comingled before a bankrupcy, secured party is subordinated to possessor. Original secured party is limited to a perfection not exceeding the debtor’s cashflow during the day days before bankrupcy less the amount already paid

  

4

Ordinary Goods is defined as all goods except minerals, or goods covered by a certificate of title

General rule: secured part should file where the goods are located at the moment of filing, even if the princiapl place of business is elsewhere.

Non-Movement of most consumer or farm products

 

 

Multistate debtor: Must file everywhere

Possession: Can assume will happen in correct state

Last event test: the last thing that happens governs where to file. One perfect by doing som eact in the state and according to the alw where the goods are located.

Goods are in Arizona during when security agreement is signed, but are in Ariza at the time when the creditor files the finacning statement

To perfect, filing myst be in state where the goods are. If the goods are in transit, they should be filed in state where they are in stansit

Movemnet of goods

Collateral, which is filed against in state A moves to state B

Purchasers: Interest will become unperfected after four months, otherwise continuous perection (there are some states that allow for automatic perfection)

3rd: Parties who become claimants:

Purchasers: Security interest is unperfected as of the end four months

Lien Creditors and Trustees: Tolls time limt for perfection until 60 days after the end of the trusteeship

4

Mobile Goods

Minerals

  

Multistate debtor: Must file everywhere

Possession: Can assume will happen in correct state

  

Real estatea

Exchange of collateral for real estate

  

No allowance under common law to allow secured party to perfect

  
  1. Lien Creditors (note priority doens’t assure first payment, just firs tpriority)
    1. Lien holders canextend the debtor’s time for repayment
      1. A judicial sale will discharge the lien under which the colalteral is held, but not prior liens
      2. Sale will transfer subject to prior liens
      3. Proceeds are applied first to expense of sale, then to the lien under whicht he sale was held, then to subordinate lies, then to debtors
      4. The debt underlying each lien is reduced y teh amount paid to the lien holder form sale, but the balance reamins owing.
    2. Purchasers would usually volunteer to pay the lien or arrange to
  2. Negotiable instruments
    1. Creation
      1. Criteria for negotiability
        1. In writing for a promice or order
          1. Writing is defined as "intnentional reduction to tangible form" -- electronic might not be good yet
          2. Promice is defined as a direct commitment to pay (party that makes is the maker")
            1. Instrument that has a promci is a note
          3. Order is defined as something directing someone else to pay
          4. Types of drafts
            1. Checks (on banks)
            2. Cashier’s checks (drawer and drawee are the same bank)
            3. teller’s checks (draft drawn by one bank on another)
        2. Unconditional
          1. No conditions (or mechendice) or reference to other docuemtns
          2. Exceptions
            1. Can make reference to collateral or security agreement
            2. Can have a instrument that states that something is recourse or non-recourse
            3. Deisgnation of a specific funds doens’t undermind negotiability
        3. Must require payment of money (no servics) -- commodities ok, and foreign currency
        4. Amount of the obligation be fixed:: can be fixed or variable amounts of rates
        5. Must be made payable to order or to bearer
          1. To order
            1. revised article (in NY) doesn’t care if the words "to order" are scratched out on check (militias)
            2. if it says "to order" it is bearer paper
          2. bearer
        6. Payable on demand or at a definite time
          1. Demand is the same as at sight
          2. Can be systemic limitations
          3. Possibiliities of imbedded options
            1. Holder can be given the option to extend
        7. No extraneous undertakings
          1. Cannot be a combination of commodiites and money
          2. Exceptions
            1. Maintance of collatteral
            2. Canhave a authorization of the holer to confess judgment or realize on or idpose of collateral
            3. Can have waiver of rights
      2. Example: draft bought by buy, addressed to an intermediary bank. (notification by telex) Draft is mailed, and alter presented to intermediary bank
        1. Party that directs payment is drawer (e. g. buyer’s bank)
        2. Intermediary is drawee
        3. Payee (usually seller)
        4. Remitter -- buyer
    2. Transferring
      1. Holder must possess, and and have a right to enforce (no personcan be a holder)
        1. Bearer paper: With bearer paper, possession is the first last and only question -- theives can be holders
          1. Bearer paper can be indorsed to order paper
        2. Order paper: must be payable to an identified person--that person is the only one who can be a holder
          1. Transfer of possession is done enough – indorsement (must unambiguously indicate that the insturment is an indorsement)
            1. Signatures in lower right are always of issuer
          2. Types of endorsements
            1. Special endorsements: person to whom it is to be piad
              1. Still order paper, but possession change will change the person who can be the holder
            2. Blank: doesn’t indicate person – order paper to beaer paper
            3. Restrictive: -- if not complied with than covversion, unless proceeds applied according to intention of endorser
              1. Invalid for most kinds of condition precedant
              2. Valid "for deposit" or "for collection"
            4. Accomodation (also anompousl endorsement) –
              1. They become the guarantor of the endorsement, like a standard guarantor
      2. Holder in due course
        1. Invalid for consumer credit transactions -- consumer notes are technically insturments, but are not negotiable
          1. Bearer bonds are no longer deductable
          2. Today estoppel certificates can be issued
        2. Must obtain by valid transfer
          1. Other people are not holders, and hence not HOLDER IN DUE COURSE
        3. Must take for value: consideration but future performace is not value
        4. Must take in good faith (different): honesty in fact in fact, and observance of reasonable business standards
          1. Some courts look to close connection between the parties and their standards of dealings
        5. Must be no constructive notice: people can’t protect themselves from problems by hidng behinvd the HOLDER IN DUE COURSE statute
          1. Specific problems that knowledge would have to be shown
            1. Insturment is overdue
              1. Checks have a 90 day limit
              2. Multiple legs make an instrument payable at any time something becomes overdue
            2. Dishonored
            3. deafault
            4. forgery or alternation
            5. third party has claims on it
            6. one of the obligors has a claim that would limt o r bar enforcement of the instument by the original payee
        6. remedies for holder in due course - holder can sue any party on the dishonor
          1. sue make to enforce even if the underlying contract was breached
            1. only defenses
              1. infancy
              2. durress
              3. lack of legal competancy
              4. illegality
              5. inducement by bribery
                1. laws viciate holder in due course status only if they render obligations "entirely null and void"
              6. fraud in the making (e. g. switched papers) – people must take precautions
            2. discharge in solvency proceedings is a defecence to holder in due course
            3. payment:
              1. discharge of one party doesn’t let the others off the hook
              2. accomodation party might be discharged if a holder grants extenion od due date
            4. discharge
              1. holder in due course status is not precluded by just notice of discharge (other than extension of due date), but if one takes a not with notice of partial discharge or valid dfence that this is vald against them
              2. discharge is effective against a person that takes with notice of the discharge
              3. discharge would not be binding on a holder in due course that took without knowledge o fthe dischage
              4. discharge parties might want to destroy note
              5. real estate: paument by a borrower to a party that it things is a holder is valid even if that party has transferred
              6. property: payment is valud only if it is made ot a person entitled to enforce the instrument at the time of payument
          2. drawer
          3. indorser
        7. remedies for a holder not in due course (e. g. no payment of value)
          1. obligor can impose defenses, any original claim
          2. no rememdies unless indorsement
            1. checks don’t need to be indorsed for a bank to get the check
            2. banks usually use chargebakcs
            3. today there is a secondary market for debt –e. g. CMOs
          3. shelter: purchasers that fails to obtain HOLDER IN DUE COURSE status can assert any holder in due course rights that the seller had before the sale -- e. g. people who take for not value can assert righhts of prior holder
      3. remedies on underlying obligation
        1. near-cash certified checks, cashier’s checks, teller’s checks –
          1. bank has liability
          2. underlying obligation is discharged upon receipt
        2. ordinary instruments
          1. suspension of obligaiton until dishonor or payment
          2. can sue on check or underlying obligations
  3. Foreclosure is defined as the process by which the creditor applies the value of the creditor to payment (it differs from taking collateral)
    1. Creditor remains in possesiosn until sale
      1. Needs a writ of possession, or possession (directs the sheriff to remove the debtor) – delaying tracts
    2. Types of foreclosures
      1. Strict foreclosure (equity)
        1. Rare: Irresptive of the equity in property it is forelsoed
      2. Usual sale – retains equity and security interst -- can’t waive the selling procedure for vale capute
        1. Judicial sale
          1. Common law right to redeam – ends at foreclosure (so many advertised sales never take place)
            1. ½ the state have statutory redemeption
          2. can be low sale prices for some reason
            1. poor advertisiing -- usually statutes
            2. no warranties and no inspection time (hostile environment)
            3. caveat emptor rule applies
            4. can’t use the property until the statutory redemption period ends
          3. anti-deficiency statutes – only address the possibility of a deficiency judement
          4. the creditor will bid on it, and rather than the necessity for confirmation, the money will go to the creditory, not the anti-deficiency statutes
        2. Uniform Commercial Code sale -- for both self-help and replevin (can’t bring Sheriff to a self-help)
          1. Possessionis taking for the purpose of preseving the collateral or its value
          2. protections
            1. Opportunity for debtor to propose a satisfaction of the debt for retaining the prop (check this) -- some courts have said that there this doens’t apply when the procedural prerequisites are not given
            2. If more than 60% equity If they debtor doesn’t object with in 21 days, the debtor has waived the sale requirement -- this exists if the debtor has paid 60% of the cash price on credit, or 60% of a loan against consumer goods -- else no power to object
              1. there is no requirement that they must sell
              2. no time limit for sale
          3. Method of sale or retention
            1. Choice of ways to sell (auction, fixed price) (commercially reasonable)
              1. Open issue of whether things can be sold at wholesale or retail
              2. Distress sales might be unreasonabke
            2. Prior notice needed
              1. It might be somewhat lose, in that the burden might be on the debtor to find out aout the sale if the debot really has some intersti
            3. Can chose to retain, though usually in satisfaction of the debt
              1. Debtor can give up his right to be protected from deficiency
            4. SECURED CREDIT CAN BUY IT HIMSELF AT A "PUBlic sale"
            5. Secured creditor cannot buy at a private sale unless commodity
          4. Uniform Commercial Code right of redemption
            1. Includes fees, and expenses of sale
          5. Integrity of sale
            1. Good faith Buyers at sale take with good title
            2. If the sale is defective, debtor can sue
              1. Statutory penalties for bad sale of sconsumer goods
          6. Possibilities of injury
            1. Forfeiture of equity
            2. Large Deficiency judgment
        3. Court ordered foreclosures are judicial – served on the debtor with 20 days to respond. Needs confirmation by court.
      3. Contractually assented to judgment are "power of sale foreslosures" (in some states) – that the collateral is in the hands of a third party or a creditor
      4. Uniform Commercial Code disposition: secured party may sell, lease or dispose of any or all collateal -- creditors can still forclose other ways
        1. All creditors rights in collateral disposed of
    3. Deficiency judgements
      1. Anti-deficiency legislation
    4. Possession during foreclosure
      1. Can be contractually determined
      2. Even contractually determined things have a series of protocals
      3. Real property
        1. Generally: lenders never have possession, even after a foreclosure
          1. Procedure varies
          2. exceptions
            1. neutral receiver to preserve the value of the collateral
              1. receivers have fiduciary oblgations to all who have interst in the property
            2. usually more likely to appoint receivers after a judgment
        2. rents from real property
          1. can be a contractual provision that the rents would go to
      4. person property
        1. generally: immeadiately on default: procedure for taking it varies by state
          1. constitutionally: there is only a right to an opportunity to be heard
        2. forceclosure must be completed by selling in a commerically reasonable manner
  5. consignment and bailment via negotiable documents of title which are defined merely as something that in the regular course of business would work, (bills of lading always work), and the documents must be addressed toa bailee and purport to sell goods in the bailee’s possesio nwhich are identified or fungible
    1. warehouse receit is defined as document issed by a warehousman (person engaged in buinsee of storing goods for hire).
      1. Needs to be either bearer or to be delivered to the order of a specific person
        1. Instead of "bearer" can say "order of shipper"
      2. There can be non-negotiable documents of title -- carrier must deliver to th named person (consignee) – can’t deliver illegal goods, receipient must be able to make notations of partial deliver
    2. Generally warehouse receipts reflect a right to deliver goods to a person "entitled under the document"
    3. Conflicting instructions -- seller and buyer have to settle it for themselves: Negotibable bills: carrier is absolved of liability if they comply with seller’s instructions, carrier can always deliver to buyer (if goods reached their destination)
      1. Only a holder can get the goods
        1. Claimant must be in possession of bill
        2. The bill must state that the goods are deliverable to anyone
    4. Stolen goods that are innocently in the hands of a carrier
      1. Can be delivered to true owner if true owner properly establishes claim
      2. Carrier has a lien on the goods to cover shipment and storage prices -- what about bankrupcy?
    5. If there is a local law governing stopping shipment or returning, goods can be returned to the seller
    6. Possible to stop shipment under sales law -- limited by the fact that bills can be indorsed (like a holder in due course rule)
      1. Only a prior owner could stop a duely negotiated and indorsed bill
    7. Transferring documents of title
      1. Bearer bills can be transferred by delivery and for named bills to that person
      2. Bills can be indorsed to give them to another party
      3. Documentary draft transaction, seller obtains a negotiable document of title cover goods, and uses a draft to which those document are attached to collect payment from buyer
        1. Steps
          1. Sale contract
            1. Normal sale contracts
          2. Shipment: delivery of goods to shipper, and obtaining a bill of lading
          3. Issuace of draft:
            1. Usually payable to the order of seller
            2. Addressed to, and drawn on the buyer
            3. Types of drafts
              1. Sight draft
                1. No extension of credit: payment problely after the draft is presented to it
              2. Time draft
            4. Some indiciation of buyer’s bank (e. g. payable trhough)
              1. "Payable through" is defined as somethgint ath can be presented for payment only by or through the identified bank
          4. processing (through remitting bank): seller present documents to the bank, with a letter detailing terms of transaction, and indorses it to the abnk, and tbe bank becomes a holder.
            1. Often a reference to ICC number 22
            2. Letter has to include terms that the underlying documents will
              1. "delivered against payment" (e. g. the presting bank is not authorized to realse documents until it obtains payment from buyer
              2. delivered aginst acceptance (drafts)
                1. buyer’s acceptance obligates it to pay the draft
          5. sending – remitting bank indorse and sends whole packing to presenting bank
          6. processing by presenting bank
            1. demand is made against the buyer to pay for the source
      4. banker’s accepatces: immeadiate payment to the buyer without allowing people to defer payment as ni fraft
        1. structed as a time draft
        2. letter of credit in which a financial institution guarantees
        3. credit is obtained to let the buyer defer payment
        4. when the goods are shipped and the bank accepts, the bank has to pay at the scheudled time
        5. frunds to pay the seller ceom from the daft, and the funds can come from the sale of the draft at a discount
        6. low risk in banker’s acceptance (check banker’s acceptance)
  6. Creation of suretyship
    1. Types
      1. Cosignor
      2. Accomodiation parties (without directly benefitting from the transaction)
    2. Usually can proceeds against the seocndary obligator
    3. Guarantee of collection – where the primary obligigor has to be persued first
      1. Must be unable to locate and serve principal
      2. Or princiapl is solven,
      3. Lender is unsuccessful ager a judgement
  7. Defenses to suretyship (e. g. when a guarantor can get out of it, default is not) -- can be waived (often dealt with by allowing guaratnor to purchase the debto frm the creditor)
    1. In bankrupcy, a lender rarel can be sure that iw will be able to enforce the guaranty against a guarantor if the guarantor is closely related to the obligaor
    2. Release
      1. For negotiable instruments, a releae by the princiapl never relaes the guarantor, whehtero or ot the realse include a reservation of rights against the guarantor
      2. Traditional rule: The rule predicates that the principal’s continuing liability to the guarantor on the view that a princiapl would understand from the credit’s resevation of right agains the guarantor, tha the creditor implicityly intends to resver gains t the principal.
    3. Impairment of collateral Can claim that the debtor failed to maintain perfection (changes the economics of the loan)
    4. Creditor granting extention
    5. Changing of exposure (increasing time to pay)
      1. Reinstatement of the loan after default
    6. Complete release from liabilty
      1. Focuses on the intent, and whether it flows to the creditor (e. g. was there reservatio of rights)
    7. If the principal is released, the guaratnero can retain his right to purseu the principal via remibursement or subrgation
    8. Bankrupcy: can extend ther eunderlying debt
  8. Deferrment of payment: have to look at when things appear (check this)
  9. Interest rates
    1. Fixed rate: risk on borrower
    2. Float rate: risk on lender
    3. Swaps still have credit aspect
    4. Bankrupcy code can limit rate to a bnakrupcy court to the market rate at bankrucpy
    5. Usery
      1. Some state statutues that differentiate between tenors
      2. Notes may cap the spread on floaint intert rates
      3. Prepayment can rendering things usery – mathemtical clause to deal with that
      4. Home mortgae rates pre-empted by DIDMCA
      5. Can get around usery laws by calling things stock
    6. Late payments:
      1. Minority: they are really LDC
      2. Could brin gonusorious interst
      3. Late pyaments can be disallowed
    7. Prepayment
      1. Usaully ok in home mortgages
      2. Prepayment penaltiies are often invaladitate di bankrucpy -- ymcs can discount bank any benefit to refinancing
        1. Bankrupcy will always limit things to makret rate
  10. Letters of credit
    1. Types
      1. Regular: usually coverdd under the UCP (never version of article 5 brings Uniform Commercial Code into parity with Uniform Commercial Code)
        1. Third party: local buyer’s bank sends to a local seller’s bank, and sends an advice -- entirely independant obligation than the contracts -- this independance continues past bankrupcy
          1. Advising banks:
            1. If the buy’ers local bank only advice that a letter of credit has been issued, than there is no independant liability on the letter of credit
            2. Assuming that the seller is satisfied with the credit of the sending bank
          2. Confirming banks: local confirming bank accepts the credit risk as well
            1. Confirming bank will seek a reimbursed from the issuing bank -- but this money is usually obtained in advance
          3. Payment is condition on presentation of docuemtns and a draft e. g. the banks don’t have to do a lot of checking
            1. Strict compliance with the docuemntary questions is necessary
              1. Slavish confomity isn’t appropriate (conformance to international standard
              2. Probaly could accept minor typos
              3. Defects have to be noticed and reported quickly or the bank gets on the hook again
                1. Issuer can seek a waiver of defects
            2. Underlying payment is a question of contracts laws, however
          4. Gap fillers
            1. Vague terms are to be ignored
            2. Things that can’t be determined form the document should be ignroed
            3. 20a – issuer must honor a request for pament if docuemtn in questoin sppears on it faced to be in compliance with the letter
            4. cira or about means a 10% variance
            5. without qualifificaiton implies a 5% vairance
          5. problems
            1. failure to pay: nonperforamcen by th ebeneficiayr is match with non payment by the applicant
            2. wrongful honor: no right to reimbursement issuer is subrogated to the rights o the benficiary against eh applicant and can seek reimbursemnt from the applicant for whatever sums were actually owed under the sales contracts at isse
            3. wrongful dishonor: can sue in specific performacen
              1. laible for dealy
              2. no consequential dmanages
            4. fraud: benefit of the doubt given to bank, if they act on good faith
              1. based on an honesty in fact standard, bank must be convinced tha tthe claim was true
              2. can dishonro if ithe materailly is materially farudle,nt, or honor would become a fraud
                1. applicant could sue for fraudulent presentation
      2. Standby: guarantor would step into the shoes of the debtor (this gets around familiarity problems)
        1. Guarator’s rights against the princiapl
          1. Perforamce: can sue the princiapl to enforce the underlying obligation
            1. E. g. shouldn’t have to gothrough the trouble when they could have done it anyway
            2. Guarantor may be able to recover from princiapl even though the creditor has realeased own right to recover
          2. Reimbursement
            1. Guarentor can reover from the princiaple
          3. Subrogation is defined as stepping into the shoes of the principal, and seerting against the principal all of the right that the creditod could have asserted agins tthe princiapl -- it can be an equitable remedy
            1. There is no right of subrogration until the entirer guaranteed dbet has been paid because it could force borrowers to force guarators to pay when they have paritailly paid
            2. Can usually be seen as an assignement of rights by oepration of law
            3. Can take on more if the lender has a right against the borrower, such as a lien or security interst
              1. Guarentor
              2. Bankrupccy: no longer any virutal preference problem as debtors cannot rely on the guarantor’s status to jusitify recovery of payments from third-party creditors, even if the guaratnro has waived his rights against the debtor (making him not as much of a suerty)
        2. Issuing bank is guaratnor
          1. To trigger obligations all that is needed is a draft to be issued
            1. Need to establish that this has defaulted
          2. Clean letter of credit is defined as needing nothing more than payment demanding obligations
            1. Could be a question of what "willfully" means
          3. False drafts could result in felony
          4. Can subrogate: Issuer is subrogated to the rights of the beneficiary to the same extent as if the issuer were a secondary obligor of the underlying obligaiton owed to the beneficiary -- in and out of bankrucpy under the revised article 5, banks may be able to assert subrogation in and outside of bankrupcy, and are liable with the debtors – check this
        3. Applicant is princnipal obligor
          1. Applicant: bankrupcy can deferring a creditor’s right to persue a gaurantor, on ther other hand with a clean letter of credit, such a guaranty virtually makes this into a secured transaction
        4. Beneficiary is creditor
      3. guaranty
        1. Documentation
          1. Required Documents
            1. Document of title
  11. New payment systems
    1. Stored value cards – with microprocessord
      1. Alternative system where shadow account exists
      2. May be exempted from regulation E (access devices0
      3. Can have a hand-carried record of tranactions
      4. Risk of loss is now distributed based on contracts
    2. Virtual coins
      1. Thiry party storing
      2. Can be privacy concerns
      3. Less forgery risk
  12. Debit cards -- they refer to EFTA
    1. Banks can only send unvalidated cards and banks needs to explain use of the cards
      1. Need written documentation
    2. Collection
      1. Pin-based
        1. Usually when the transaciont is accepted the payor bank’s deicison becomes final
        2. Usually payments are made by a sinle deposit
      2. Non-pin based
        1. Settled trhough credit card collection network -- but they are not under the TILA!
      3. Rules for risk of loss
        1. Payor bank is responsible under the rules for losses
          1. Merchants might be entitled to draw from the bank even though they are not drawing fmor the account
        2. Rules determing which bank takes losses
          1. Customer has no liability unless the card has been used unless the card that cause the loss has some minimual security feature (PIN, photo signature)
          2. Banks can enforce a contracutal provision that makes customers liable for up to $50 of unauthorized things
          3. If the customer doesn’t notify, the bank can pass on an even larger loss – up to $500
            1. Customer must report losses – extenuating circusmtances are ok
            2. Customer myu review statements
          4. State law limits more narrowly
        3. Disputes
          1. Customers have to give oral or written notice in 60 days
        4. Trebble damages for a anlk that fails to recredit an account within 10 days, of notice that isnt’ met by a responce, or unreasonable denial of claim
      4. Failure of the stakeholder may end things (e. g. FDIC takeover)
  13. Credit cards - mostly federal law (TILA) and Reg Z, also applies to Amex, Discover, Gas Cards -- does not include to credit cards for busines spurpoes or things over 25k
    1. Can only issue in responce to an application
    2. Must have clear and conspicuis disclosure
    3. Network: consumer (SIC) code, to merchange bank to card network to issuing bank
      1. Merchant bank sorts into on-us and for the rest of the network
    4. Contractual relationship between the merchant and the bank is reguatlionof the merchant’s reugaltion with the customer, the cardholder – to prohibit inordinate risk
    5. TILA now prohinits contracts which force equalization of credit card and cash prices
    6. Canceling charges
      1. No final at point of sale (for defect) one can refuse to pay -- arrangements end up with the merchant bearing most of the risk
        1. Customer lose the right as the customer pays the bill (only a right to withold payment)
        2. Disputes limited to within the sate and more than 100 miles
          1. If a bank starts to cure, it has to finsih exception
      2. Disputes have to be announced to the card issuer with in 60 days of the statement, as well as additional clarification about the charge, after explaination, an written explanation
        1. While dipsute are pending no action can be taken
        2. Penalty for not complying is $50
      3. Cardholder limited to $50 in unauthorized charges -- applies to business
        1. Business can contract out of this, if they have more than 10 employees, and if the business doens’t pass it on the the employees
      4. Issuers will bear the loss
      5. Apparant authority
        1. Unauthorized limits liability
        2. With apparant liability doens’t limit liabilty for third partychanges
  14. Fixtures is defined as item of person property that has become relatede to real property so that it will arise in a real estate tranasction
    1. A deed or a lien would convey an interst in the fixture
    2. Uniform Commercial Code: personal property finaceriers can take an interest in fixtures – article 90 requires that fiancing statemetn covering fixtures be filed in the real estate records rather than in the usual place
    3. State law determines when a fixture is intimately related
      1. Rule of thumb is whether the person who gets the real estate would expect to get it without having to specificailly pay for it in the deed
      2. Security intersts are subordnate to the owner or encumberancers
    4. If a debtor has the right to remove goods as against the owner, than the secured party can as well
    5. In order to prevail over the owner of the land, the statue requriest that the secured party have priority over any preedessor in title priorit o, he can transfer this priority to his mortgae.
      1. There can be a PURCHASE MONEY SECURITY INTEREST in tixtures
      2. Replacesments should be covered in the contracts
      3. Even if something is a fixture, the sp can get priotiy by filing /w the sectary of state. – e. g. something can be perfected (under alt1) in whichever way appropraite if they wern’t fixtures
      4. Things that are fixtures can be perfected by other means other than the filing means
      5. If something is not a fixture, than it is equipment, and then the holder of the si on the land would be subordinated to evyerone
      6. Construction mortgages will have priority over a purchase money security interest in fixtures installduring during the consturionc of the building—cosntruciotn mortages ahve to indicate that they are for the cosntruction and improve of land
      7. Bricks are real estate –and ordinary building material can’t really be fixtures
      8. Applications to remove fixtures in buuildings that are being defaulted on can be gratned if security against dagmes is given (damages caused by removal) not property value damages
  15. Future advances
    1. Common law: anti future advance
    2. Advances must be specificed in the agreement: if the uuincdle future advances or other value whether or not the advance or value were given persuant to origina committment
  16. Lien Credit (and trustee) vs. Secured Creditors -- first to perfect toot first to attach (time of perfection, not of filing)
    1. First come, first served
      1. Levy (sheriff removing), or write, grnishment or recordiing
      2. Majority: first to levy on particular property
    2. If a PURCHASE MONEY SECURITY INTEREST attaches first, the holder of the PURCHASE MONEY SECURITY INTEREST has 10 days to prectect, and defect a lien that has come into existance in the day days (some states more)
    3. Future advances: priority of ve the lien, provided the secured party doesn’t have knolwedg -- every secured advance made in 45 days is seccured (even if lien) – and an advance "persuant to committment"
      1. Knowledge at the time of the advance doesn’t prevent the ledner making the advance form having priority provided the advace is made pursuant to a commitment mad when the creditor didn’t have knwoeldge of the lien -- e. g. if the commitment is made before the 45 days it will work
        1. Peronal property: Future advances as agreed to – the greater the fees the more less the poential for recovery
        2. Real: future would have priority, some jurisdictions don’t
  17. Secured v. Secured
    1. First to file or perfect has priority
  18. PURCHASE MONEY SECURITY INTEREST exception deosnt’ apply for inventory except if they perfect no later the time the debtor receives collateral, notced msut be given to the debtor
    1. Proceeds and PURCHASE MONEY SECURITY INTEREST (will extend) -- desont’ flow into accounts or chateell paper
    2. If comingled there will be apportionment.
  19. Authorized dispositons will stop priroties
  20. Exceptions to BIOCOB
    1. Even if a BIOCOB knows of the security interest’s existance
    2. If the sale is outside the course of business, than future buyers do not tkae free of the security interst (even futures BIOCOBS)
    3. Farm products: security intersts continue not withstanding sale – but there are other ways
    4. Buy occurs when things are identified in contract
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