Topic 8 – Part 1 – Secured Transactions

What is bailment?

Possession of personal property without transfer of ownership, to be returned later.

Who are the two parties in bailment?

Bailor (owner) and bailee (possessor).

What are the two essential elements of bailment?

Delivery of possession without transfer of title, and intention to return the property.

What is a bailee’s lien?

The bailee’s right to hold goods until paid.

What is a secured transaction?

loan where the creditor takes a security interest in the debtor’s personal property.

What is a security interest?

A legal right allowing the creditor to take or sell collateral if the debtor defaults.

Who are the two parties in a secured transaction?

Creditor and debtor.

When do creditors want a security interest?

When it increases repayment incentive, collateral holds value, loan is long-term, and benefits outweigh costs.

What is a general creditor?

A creditor with no security; must sue to collect.

What is a judgment creditor?

A creditor with a court judgment who can seize assets or garnish wages.

What is a secured creditor?

A creditor with a security interest who can repossess collateral without a judgment.

What is a conditional sales contract?

ebtor has possession, but creditor keeps ownership until paid.

What is a chattel mortgage?

A security interest in personal property the debtor owns and possesses.

What is a vendor take-back mortgage?

Seller finances purchase and keeps a security interest in the item sold.

What is an after-acquired property mortgage?

Security interest in goods the debtor will acquire in the future.

What is a floating charge?

A security interest over changing assets that crystallizes upon default.

What are the three steps under the PPSA?

Creation, attachment, perfection.

What is attachment?

When the security interest becomes tied to the debtor’s property.

What is perfection?

Making the security interest effective against third parties.

What are the two methods of perfection?

Possession and registration.

What determines priority between secured creditors?

Whoever perfects first.

What is a Purchase Money Security Interest (PMSI)?

A special security interest that takes priority over earlier perfected interests.

What is an assignment of book debts?

Security interest in accounts receivable, activated only on default.

How do you perfect security in investment property?

By control.

What forms of intellectual property can be collateral?

Patents, trademarks, copyrights.