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THE UNIFORM
COMMERCIAL CODE
CHAPTERS
19, 20, 21, 22, 23, 24, 25, 26
1
THE
UCC
2
HOW TO
UNDERSTAND THE
WORLD OF
COMMERCIAL
TRANSACTIONS
3
“The Uniform Commercial
Code enables merchants to
form contracts more quickly
and easily. But along with
this increased facility goes
greater responsibility, since
informal discussions may
suddenly turn into… a
contract.”
4
TOPIC COVERAGE
• Sales
• Ownership
• Risk associated with ownership
• Warranties
• Performance
5
MORE TOPIC COVERAGE
• Remedies
• Negotiable instruments
• Banks
• Secured transactions
6
HISTORY
FROM
LAW MERCHANT
TO
THE UCC
(In 60 seconds or less)
7
FIRST
WHAT IS A
LAW MERCHANT
?
8
THE UCC
•
•
•
•
•
•
ARTICLE 1. GENERAL PROVISIONS
ARTICLE 2. SALE OF GOODS
ARTICLE 2.A LEASES
ARTICLE 3. NEGOTIABLE
INSTRUMENTS
ARTICLE 4. BANK DEPOSITS AND
COLLECTIONS
ARTICLE 4.A
FUNDS TRANSFERS
9
THE UCC
• ARTICLE 5. LETTERS OF CREDIT
• ARTICLE 6. BULK TRANSFERS
• ARTICLE 7. WAREHOUSE RECEIPTS,
BILLS OF LADING, AND OTHER
DOCUMENTS OF TITLE
• ARTICLE 8. INVESTMENT SECURITIES
• ARTICLE 9. SECURED TRANSACTIONS
10
PURPOSE OF THE UCC
1. To simplify, clarify and modernize the
law of commercial transactions
2. To permit expansion of commercial
transactions
3. To establish uniformity
11
12
SALES UNDER THE UCC
• Article 2
Applies to the sale of goods
• Article 2A
Governs the leasing of goods.
13
MIXED CONTRACTS
Involves both sales and services:
• The UCC will govern if the
predominant purpose is the sale of
goods
• Common law will control if the
predominant purpose is service.
14
MERCHANT
Someone who routinely deals in the
particular goods involved, or who
appears to have special knowledge
or skill in those goods, or who uses
agents with special knowledge or
skill in those goods.
15
MERCHANT STANDARDS
The UCC frequently holds a
merchant to a higher standard of
conduct than a non-merchant.
16
GOOD FAITH
The UCC imposes a duty of
good faith in the
performance of all
contracts.
17
UNCONSCIONABILITY
A contract may be
unconscionable if it is
shockingly one-sided and
fundamentally unfair.
18
CONTRACT FORMATION
The law should
reflect
business
reality!
19
FORMING A CONTRACT
QUICK AND INFORMAL
Three basic rules:
1. In any manner that shows
agreement.
2. Moment of making is not crucial.
3. One or more terms may be left open
20
STATUTE OF FRAUDS
A writing of some type is required for
any sale for goods worth $500 or
more:
– Writing Sufficient to Indicate a
Contract
– Incorrect or Omitted Terms
– Enforceable Only to Quality Stated
21
EXCEPTIONS
However there are exceptions to
the Statute of Frauds when two
or more merchants make an
oral contract
22
SPECIAL CIRCUMSTANCES
An oral contract may be enforceable
even without a written
memorandum, if:
– Specialty manufacture for buyer, or
– The defendant admits in court that
there was a contract, or
– The goods have been delivered or
they have been paid for.
23
ADDED TERMS
An acceptance that adds or alters
terms will often create a contract.
Click once to start self-building graphic.
Offeree does
NOT intend
to accept
NO
CONTRACT
OFFER
Offeree intends
to accept
Accepts
terms
Adds
terms
Changes
terms
Contract
Usually
forms a
contract
Usually
forms a
contract
Accepts IF offeror
accepts new
terms
NO contract (is
a new offer)
24
ADDITIONAL OR DIFFERENT
TERMS
• Additional: those that raise issues
not covered in the offer.
• Different: contradict terms in the
offer.
25
OPEN TERMS
• Open Prices: the parties may
conclude a contract even though
they have not settled the price.
• Output and Requirements Contracts
26
MODIFICATION
• An agreement modifying a contract
needs no consideration to be
binding.
• The parties may agree to prohibit
oral modification and insist that all
modifications be in writing and
signed.
27
PROPOSED REVISIONS TO
UCC
Numerous proposed revisions to UCC
Article 2, have been under debate
for over 5 years but are approaching
final state.
$5,000 vs. $500
Recognize web transactions
28
29
“The Code has reduced the
importance of abstract
terms, such as title, and
replaced them with practical
rules designed to enable
business people to anticipate
risk and protect against it.”
30
WHO OWNS IT??
The Code must sometimes
determine the rightful owner
when more than one person
claims to own something or not
own it.
31
EXISTENCE AND
IDENTIFICATION
– Goods must exist before title can pass.
– Goods must be identified to the
contract before title can pass.
– The parties may agree in their contract
how and when they will identify the
goods.
32
WHEN TITLE PASSES
Passing of Title:
Title may pass in any manner on
which the parties agree.
33
INSURABLE INTEREST
When you have a legal right in something
– A buyer obtains an insurable interest when
the goods are identified to the contract.
– The seller retains an insurable interest in
goods as long as she has either title to the
goods or a security interest in them.
34
BONA FIDE PURCHASER
BFP
A person who purchases in good faith
35
SELLER HAS IMPERFECT
TITLE
»Can be in the form of a void title
which is no title at all.
»Or can be a voidable title gives
limited rights in the goods,
inferior to those of the owner.
36
HOW TO BECOME A BFP
When a person with voidable title has power to
transfer valid title for value to a good faith
purchaser, a BFP and the BFP shows:
1. He gave value for the goods and
2. He acted in good faith
THE BFP OWNS THE GOODS!
37
ENTRUSTMENT
Entrusting means delivering
goods to a merchant or
permitting the merchant to
retain them.
Be careful!
38
A CREDITOR
Someone with a financial
stake in the goods the
merchant is selling
39
CREDITOR’S RIGHTS
Depends upon if it is an
– Ordinary Sales
Or a
– Bulk Sales
40
RETURNABLE GOODS
May play a role in creditors rights
depending on they being a
• Sale on Approval, or being subject
to
• Sale or Return
41
RISK OF LOSS
The parties may allocate the risk
of loss any way they wish.
Problems arise if the parties fail to
allocate the risk
42
SHIPPING TERMS
•
•
•
•
•
FOB place of shipment
FOB place of destination
FAS a named vessel
CIF
C&F
43
BAILMENT
When one person or company is
legally holding goods for the benefit
of another.
CREATES SPECIAL PROBLEMS
IF AGREEMENT BREACHED
44
45
PRODUCT LIABILITY
When goods cause injury,
there is a question of
product liability.
46
PRODUCT LIABILITY
ISSUES
There are three main issues
related to product liability
cases:
–Warranty
–Negligence
–Strict Liability
47
EXPRESS WARRANTIES
An express warranty is one
that the seller creates with
his words or actions.
48
IMPLIED WARRANTIES
Are created by the Code
itself, not by any act or
statement of the seller.
49
MERCHANTABILITY
Merchantability means that
goods are fit for their
intended ordinary purpose.
50
IMPLIED WARRANTY OF
MERCHANTABILITY
Unless excluded or modified, a
warranty that the goods shall be
merchantable is implied in a
contract for their sale, if the
seller is a merchant of goods of
that kind.
51
IMPLIED WARRANTIES
(cont’d)
Implied Warranty of Fitness
for a Particular Purpose
52
IMPLIED WARRANTIES
(cont’d)
The seller of goods
warrants that her title is
valid
53
IMPLIED WARRANTIES
(cont’d)
A merchant warrants that
the goods are free of any
rightful claim of copyright,
patent, or trademark
infringement.
54
DISCLAIMERS
Disclaimer: a statement
that a particular warranty
does not apply.
– Oral Express Warranties
– Written Express Warranties
55
DISCLAIMERS
(cont’d)
Three other rules:
–General rule
–Remedy Limitations
–Consequential
Damages
56
PROPOSED UCC REVISIONS
Sellers attempting to limit
warranties would be required
to use very explicit language,
conspicuously placed.
57
PRIVITY
When two parties
contract, they are in
privity.
58
FACTORS THAT LIMIT
THE SELLER’S
RESPONSIBILITY
• Buyer’s Misconduct
• Statute of Limitations and
Notice of Breach
59
NEGLIGENCE
• In negligence cases, plaintiffs
most often raise one or more of
these claims:
– Negligent design
– Negligent manufacture
– Failure to warn
60
HOWEVER
Where a sales contract
includes proper disclaimers or
remedy limitations, a buyer
barred from a negligence
case may have no remedy at
all.
61
STRICT LIABILITY
Need not prove that
the defendant’s
conduct was
unreasonable.
62
STRICT LIABILITY
(cont’d)
Strict liability may be imposed if:
– The defective condition is
unreasonably dangerous to the
user.
– Seller is in business to sell this
product.
– The product reaches the user
without substantial change.
63
STRICT LIABILITY
(cont’d)
Strict liability may be imposed
EVEN if:
– The seller exercised all reasonable
care.
– There is no contractual
relationship.
64
CONTEMPORARY TRENDS
Strict liability may be
imposed based on
design, manufacture or
failure to warn.
65
CONTEMPORARY TRENDS
(cont’d)
Tests to measure
design and warning
cases include:
• Consumer expectation
• Risk-utility tests
66
LEGISLATION
• Lemon Laws
• Consumer Protection Laws
• Magnuson-Moss Warranty
Act
67
68
“Performance and remedy
under the Code reflect
contemporary commercial
practices but also demand
a satisfactory level of
sensible, ethical
behavior.”
69
GOOD FAITH
The Code requires good faith
in the performance and
enforcement of every
contract.
70
CONFORMING GOODS
• Conforming goods satisfy
the contract terms.
• Non-conforming goods do
not.
71
SELLER’S OBLIGATION
The seller must tender the
goods, which means to
make conforming goods,
available to the buyer.
72
PERFECT TENDER RULE
– Under the perfect tender rule, the
buyer may reject the goods if they
fail in any respect to conform to
the contract.
– Parties may limit the effect of the
perfect tender rule by agreeing to
accept imperfection in the goods.
73
RESTRICTIONS ON THE
PERFECT TENDER RULE
• Usage of trade
• Course of dealing
• Course of performance
74
CURE
When the buyer rejects
non-conforming goods,
the seller has the right to
cure, by delivering
conforming goods before
the contract deadline.
75
DESTRUCTION OF GOODS
• If identified goods are totally
destroyed before risk passes to the
buyer, the contract is void.
• If identified goods are partially
destroyed, the buyer may choose
whether to accept the goods at a
reduced price or void the contract.
76
COMMERCIAL
IMPRACTICABILITY
A supervening event
excuses performance of a
contract, if the event was not
within the parties’
contemplation when they
made the agreement.
77
BUYER’S OBLIGATIONS
(and a Few Rights)
• The buyer must provide
adequate facilities to
receive the goods.
• Right to inspection
• Right to partially accept
78
BUYER’S OBLIGATIONS
(and a Few Rights) – (cont’d)
May revoke acceptance only
if the nonconformity
substantially impairs the
value and only if he had a
legitimate reason for the
initial acceptance.
79
BUYER’S OBLIGATIONS
(and a Few Rights) – (cont’d)
• May reject non-conforming goods by
notifying seller within a reasonable time.
80
BUYER’S OBLIGATIONS
(and a Few Rights) – (cont’d)
May reject a nonconforming installment,
only if it substantially
impairs the value of that
installment and cannot be
cured.
81
REMEDIES: ASSURANCE
When there are reasonable
grounds for insecurity, a party
may:
– demand written assurance of
performance from the other party,
and
– until he receives it, generally may
suspend his own performance.
82
REMEDIES: REPUDIATION
• A party repudiates a contract by
indicating that it will not perform.
• When either party repudiates the
contract, the other party may:
– for a reasonable time await
performance or
– resort to any remedy for breach of
contract.
83
SELLER’S REMEDIES
• Cancel the contract
• Stop or refuse delivery
• Identify goods to the
contract
• Resale
84
BUYER’S REMEDIES
• Cancel the contract
• Recover money paid
• Cover
• Accept NonConforming Goods
85
Buyer’s Remedies
(cont’d)
• Obtain Incidental and
Consequential Damages
• Obtain Specific
Performance
• Obtain Liquidated
Damages
86
DAMAGE LIMITATIONS
AND EXCLUSIONS
• A court generally will not enforce
a limitation that leaves the
injured party with no remedy.
• A court will not enforce an
unconscionable exclusion of
consequential damages.
87
PROPOSED UCC
REVISIONS
• Good Faith
• Seller’s damages
• Buyer’s damages
88
89
COMMERCIAL PAPER
• Commercial paper is a
contract to pay money.
• It can be:
– A Substitute for Money
– A Loan of Money
90
PROMISSORY NOTE
The possessor of a piece of commercial
paper has an unconditional right to be
paid, as long as:
– the paper is negotiable;
– it has been negotiated to the possessor;
– the possessor is a holder in due course; and
– the issuer cannot claim any of the limited
number of “real” defenses.
91
TYPES OF NEGOTIABLE
INSTRUMENTS
• Note (also called a
promissory note) is a promise
to pay money.
• Draft is an order directing
someone else to pay money
for you
92
RIGHTS
• The possessor of non-negotiable
commercial paper has the same rights-no more, no less--as the person who
made the original contract.
• The possessor of negotiable commercial
paper has more rights than the person
who made the original contract.
93
REQUIREMENTS FOR
NEGOTIABILITY
The Instrument Must:
– Be in Writing.
– Be Signed by the Maker or
Drawer.
– Contain an Unconditional
Promise or Order to Pay.
94
REQUIREMENTS FOR
NEGOTIABILITY (cont’d)
– State a Definite Amount of
Money.
– Be Payable on Demand or at a
Definite Time.
– Be Payable to Order or to
Bearer.
95
DEFINITIONS
• Trade acceptance
• Sight draft
• Time draft
• Order paper
• Bearer paper
96
INTERPRETATION OF
AMBIGUITIES
When terms contradict, three rules
apply:
– Words take precedence over
numbers.
– Handwritten terms prevail over
typewritten terms.
– Typed terms prevail over printed
terms.
97
NEGOTIATION
Negotiation means that
an instrument has been
transferred to the holder
by someone other than
the issuer.
98
INDORSEMENT
An indorsement is the signature
of the payee.
– Blank Indorsement
– Special Indorsement
– Restrictive Indorsement
99
HOLDER IN DUE COURSE
A holder in due course has
an automatic right to
receive payment for a
negotiable instrument
(unless issuer can claim
one of a few “real”
defenses).
100
NOTICE OF
OUTSTANDING CLAIMS
OR OTHER DEFECTS
• The instrument is overdue
• The instrument is dishonored
• The instrument is altered,
forged, or incomplete
• The holder has notice of
certain claims or disputes
101
SHELTER RULE
• Under the shelter rule, the
transferor of an instrument
passes on all of his rights.
• When a holder in due course
transfers an instrument, the
recipient acquires all the same
rights even if he is made a
holder in due course himself.
102
DEFENSES
Real and personal
defenses are valid against
an ordinary holder; only
real defenses can be used
against a holder in due
course.
103
DEFENSES
(cont’d)
Real Defenses
– Forgery, Bankruptcy, Minority,
Alteration Duress, Mental
Incapacity, Illegality, and Fraud
in the Execution
104
DEFENSES
(cont’d)
Personal Defenses
– Breach of Contract, Lack of
Consideration, Prior Payment,
Unauthorized Completion,
Fraud in the Inducement and
Non-Delivery
105
CLAIMS IN
RECOUPMENT
A claim in recoupment is a
refusal to pay the full amount of
the instrument because the
payee owes the issuer another
debt. Issuer subtracts the prior
debt from the payoff of the
current instrument.
106
CONSUMER EXCEPTION
• A consumer credit contract is
one in which the seller is also
the lender.
• In such cases, the Federal
Trade Commission requires a
specifically-worded notice to
be included on the contract,
making it non-negotiable.
107
108
“It is never wise to play an
important game without
understanding the rules.
The rules of negotiable
instruments are complex,
but important because this
game is played by virtually
everyone.”
109
LIABILITY
• Signature liability – liability of
someone who has signed a
document.
• Warranty liability -- liability of
someone who has received
payment.
110
PRIMARY VS. SECONDARY
LIABILITY
• Someone with primary liability
must pay unless he has a valid
defense.
• Someone with secondary liability
must pay only if the person with
primary liability does not pay.
111
THE LAW OF LIABILITY
The holder of an instrument
must first try to get payment
from the party with primary
liability before making
demands against a party with
secondary liability.
112
THE PAYMENT PROCESS
•
•
•
•
Presentment
Payment, or
Dishonor
Notice of Dishonor
113
SIGNATURE LIABILITY
• The maker is primarily liable.
• The drawer of a check has
secondary liability.
• The bank (drawee) is not liable
to the holder and owes no
damages to the holder for
refusing to pay the check.
• Indorsers are secondarily liable.
114
SIGNATURE LIABILITY -INDORSERS
• Indorsers are not liable if:
– they write the words “without recourse”
next to their signature on the
instrument,
– a bank certifies the check,
– the check is presented for payment
more than 30 days after the
indorsement, or
– the check is dishonored and the
indorser is not notified within 30 days.
115
ACCOMMODATION PARTY
An accommodation party
(sometimes called a co-signer
or guarantor) is someone who
adds their signature to an
instrument in a capacity other
than issuer, acceptor or
indorser, in order to be liable
for the instrument.
116
ACCOMMODATION PARTY
(NOT ME!)
An accommodation party
has the same liability to the
holder as the person for
whom she signed.
117
AGENT
To avoid personal liability when
signing an instrument, an
agent must:
– indicate that they are signing as
an agent and
– give the name of the principal.
118
PRINCIPAL LIABILITY
The principal is liable if the
agent signs correctly, the
agent signs just her own
name, or the agent signs
only the name of the
principal.
119
RULES OF WARRANTY
LIABILITY
• The culprit is always liable.
• The drawee bank is liable if it pays a
check on which the drawer’s name is
forged.
• In any other case of wrongdoing, a
person who first acquires an
instrument from a culprit is ultimately
liable to anyone else who pays value
for it.
120
TRANSFER WARRANTIES
• When someone transfers an instrument,
they warrant that:
– They are the holder of the instrument,
– All signatures are authentic and
authorized,
– The instrument has not been altered,
– No defense can be asserted against
them, and
– As far as they know the issuer is
solvent.
121
PRESENTMENT
WARRANTIES
Apply to someone who
demands payment for an
instrument from the
maker, drawee, or anyone
else liable.
122
PRESENTER WARRANTIES
• Anyone who presents a promissory note
for payment warrants only that he is a
holder of the instrument.
• Presenter warrants that:
– He is a holder
– The check has not been altered, and
– He has no reason to believe the drawer’s
signature is forged.
123
OTHER LIABILITY RULES
•
•
•
•
Conversion Liability
Imposter Rule
Fictitious Payee Rule
Employee Indorsement Rule
124
NEGLIGENCE I
Anyone negligent in
creating or paying an
unauthorized instrument
is liable to an innocent
third party.
125
NEGLIGENCE II
Anyone careless in
paying an unauthorized
instrument is liable.
126
NEGLIGENCE III
Anyone careless in
allowing a forged or
altered instrument to be
created is also liable.
127
CRIMES
• Bouncing a check
• Check Kiting
• Forgery
128
DISCHARGE
Discharge means that liability
on an instrument terminates.





By Payment
By Agreement
By Cancellation
By Certification
By Alteration
129
DISCHARGE OF AN INDORSER
OR ACCOMMODATION PARTY
The UCC provides that
virtually any change in an
instrument that harms an
indorser or accommodation
party also discharges them
unless they consent to the
change.
130
131
“This area of law is
important because
virtually everyone has
written a check or used
an ATM and because
the law regarding these
transactions is
changing rapidly.”
132
WHO’S WHO
•
•
•
•
•
Depositary Bank
Payor Bank
Intermediary Bank
Collecting Bank.
Presenting Bank
133
BANK’S DUTY TO PROVIDE
INFORMATION
• A bank is not required to
provide a monthly statement,
but most do.
• A statement (if provided) must
disclose:
–
–
–
–
Interest rate paid
Amount of interest earned
Fees imposed by the bank
The number of days covered by the
statement
134
MORE DUTIES
When an account is opened
(and in ads), the bank must
disclose:
– Interest rate paid
– How long this rate will be in effect
– Requirements to earn the
advertised rate
– Fees or penalties imposed by the
bank
135
THE BANK’S DUTY TO PAY
A bank must pay a check
if the check is authorized
by the customer and
complies with the terms
of the checking account
agreement.
136
NO PAYMENT REQUIRED
A bank is not required to
pay a check on an
overdrawn account, but
may choose to do so.
137
WRONGFUL DISHONOR
If a bank violates its duty
and wrongfully dishonors
an authorized check, it is
liable to the customer for
all actual and
consequential damages.
138
DIFFICULT SITUATIONS
FOR A BANK
• The Death of a Customer
• Incompetent Customers
139
INVALID INSTRUMENTS
• Forgery
• Alteration
• Completion
140
DATING ON CHECKS
• Stale Checks
• Post-dated Checks
141
STOP PAYMENT ORDERS
As a general rule, if a
bank pays a check over a
stop payment order, it is
liable to the customer for
the loss he suffers.
142
ELECTRONIC BANKING
Today’s consumers have options for
banking that were barely imagined
a generation ago:
–
–
–
–
Automatic Teller Machines (ATMs)
Point of Sale terminals
Automatic deposit systems
Bill payment over the telephone lines or
by internet
143
ELECTRONIC FUND
TRANSFER ACT OF 1978
Employers may require all
employees to accept payment
by electronic transfer (direct
deposit), but may not require
that it go to a particular bank.
144
MORE
Electronic fund transfer cards
(ATM, debit, etc.) sent
without a customer’s request
must be invalid until the
consumer activates it.
145
AND MORE
• Preauthorized transfers must
be authorized in writing.
• Errors
– If reported within 60 days, a bank
must investigate an error within
the next 10 days or provisionally
credit the account until the
investigation can take place.
146
AND STILL MORE!
• Limited Consumer
Liability for
Unauthorized
Transactions (stolen
ATM card)
• Bank’s Liability
147
GOOD GRIEF!
• System Malfunctions
• Disclosure
148
WIRE TRANSFERS
• A wire transfer is a type of
payment order that “pushes”
money out of the issuer’s
account into the payee’s.
• The originator is the person
who sends the payment
order; the beneficiary
receives the payment order.
149
BANK ERRORS
• Bank Sends the Wrong
Amount
• Bank Sends Money to
the Wrong Person
150
PRIVACY
Banks and other financial
institutions must disclose
to consumers any nonpublic information they
wish to reveal to third
parties.
151
152
“Secured transactions
are essential to modern
commerce but create
pitfalls for the
unknowing. A person
doing business in
ignorance of Article 9
risks losing goods and
money.”
153
REVISED ARTICLE 9
• Governs secured transactions in
personal property.
• Applies to any transaction intended
to create a security interest in
personal property or fixtures.
• About ½ of all UCC lawsuits
involve Article 9.
154
DEFINITIONS
• Fixtures
• Security interest
• Secured party
• Collateral
155
MORE DEFINITIONS
• Debtor
• Obligor
• Security agreement
• Default
• Repossession.
156
And More Definitions
• Perfection
• Financing statement
• Record
• Authenticate
157
ATTACHMENT OF A
SECURITY INTEREST
In order to obtain a security
interest, an attachment must
take place by the two parties
making a security agreement
and either:
(1) it is in writing, describes the
collateral, and is signed by the
debtor, or
.
158
STILL ATTACHING
(2) the secured party has
possession of the collateral
• The secured party gave value in
order to get the security
agreement.
• The debtor has rights in the
collateral.
159
FUTURE PROPERTY
The parties may agree that
the security interest
attaches to after-acquired
(future) property which are
items the debtor obtains
after the parties made their
security agreement.
160
PERFECTION
• Perfection guarantees the
collateral’s availability in case
of default.
• Methods of Perfecting
Filing a financing statement
Possession of the collateral
Purchase money security interest
in consumer goods (PMSI)
161
PROTECTION OF BUYERS
Generally, once a security
interest is perfected, it
remains effective
regardless of whether the
collateral is sold,
exchanged, or transferred.
162
BUYERS IN ORDINARY
COURSE OF BUSINESS
– One who buys goods in good faith
from a seller who routinely deals in
such goods.
– A BIOC takes the goods free of a
security interest created by his
seller even though the security
interest is perfected.
163
PROTECTION OF
BUYERS (cont'd)
• Buyers of Consumer
Goods
• Buyers of Chattel Paper,
Instruments, and
Documents
164
LIENS
A lien is a security
interest created by law
(rather than by agreement).
UCC does not cover.
165
DEFAULT AND TERMINATION
• Default: when debtor fails
to make payments due or
enters bankruptcy.
• Taking Possession of the
Collateral
166
DISPOSITION OF
COLLATERAL
• A secured party may sell,
lease, or otherwise dispose
of the collateral in any
commercially reasonable
manner.
• Right of Redemption
167
PROCEEDING TO
JUDGMENT
Upon default, a secured
party may sue the debtor
for the full debt instead of
seizing the collateral.
168
THE END
AND WHEN THE DEBT
IS PAID THE
SECURITY
AGREEMENT IS
TERMINATED JUST
LIKE THIS LECTURE!
169