all BEM

A drawee who pays on a forged indorsement of a negotiable instrument may be liable to the payee under what theory?

Conversion.

A secured party has a perfected security interest in proceeds for how many days?

20 days.

A security interest in a deposit account has top priority when perfected by what method?

Control.

A security interest in investment property has top priority when perfected by what method?

Control.

Are secured creditors entitled to self-help repossession?

Yes, as long as it can be done without a breach of the peace.

Are supergeneric descriptions acceptable in financing statements?

Yes.

Are supergeneric descriptions of collateral sufficient in security agreements?

No, supergeneric descriptions do not reasonably identify the collateral for attachment purposes.

Between a seller-financed PMSI and a financer-financed PMSI, which has priority?

The seller-financed PMSI.

Do acceleration clauses violate the requirement that negotiable instruments be payable on demand or at a definite time?

No, they do not.

Does a public records filing necessarily put a person on notice of defects for purposes of determining holder in due course status?

No, not necessarily.

Does having holder in due course rights through the shelter rule make the holder a holder in due course?

No, they are not a holder in due course.

Even if a person does not qualify as a holder in due course, he or she may receive holder in due course treatment under what rule?

The shelter rule.

For which types of collateral may a security agreement be evidenced by control?

Nonconsumer deposit accounts, electronic chattel paper, and investment property.

How can the life of a filing statement be extended?

By filing a continuation statement.

How do you determine whether a mistaken name is seriously misleading?

By performing a search using the debtor’s proper name and determining whether the erroneous filing appears.

How does a secured creditor perfect its interest in fixtures?

By filing a fixture filing.

How long after filing is a financing statement effective?

5 years.

How many parties are there to a draft?

Three.

How many parties are there to a note?

Two.

If a drawee bank has notice of the drawer's death, for how long may it continue with making payment?

10 days.

If a financing statement is mistakenly filed under the secured party’s name instead of the debtor's name, is it effective?

Yes if it was an error in the filing office.

If a holder becomes aware of defects after acquiring a note, does he or she lose holder in due course status?

No, the requirement is assessed at the time of receipt.

If a holder is made aware of a claim by a third-party to the instrument at the time of receipt, may he or she be a holder in due course?

No, notice of such claims at the time of receipt defeats holder in due course status.

If a payee deposits a check without indorsing it, what is the effect?

The depositary bank becomes a holder anyway.

If an instrument is not negotiable, does that make it unenforceable?

No, it is just subject to ordinary contract law.

If collateral includes real estate, a financing statement must also be filed where?

In the real property records where the property is located.

If collateral includes timber, where should a financing statement be filed?

The office of the clerk of court where the timber is located.

If the debtor changes his or her use of collateral such that it falls into a different category of goods, must the financing statement be amended?

No, the financing statement remains effective.

In what order are indorsers liable to each other?

In the order of their signatures.

In which jurisdiction should a financing statement be filed?

In the state where the debtor is located.

Into what categories are goods classified?

Consumer goods, equipment, farm products, and inventory.

Is a certificate of deposit a type of note or draft?

Note.

Is a check a note or draft?

Draft.

Is a written security agreement generally required for attachment?

Yes, except for pledges.

Is duress a defense to negotiation of order paper?

Yes, duress is a defense to indorsement under UCC Article 3-305.

Is incompetence a defense to negotiation of order paper?

No, legally incompetent payees may effectively indorse.

Is intoxication a defense to negotiation of order paper?

No, intoxicated payees may effectively indorse.

Is minority a defense to negotiation of order paper?

No, minor payees may effectively indorse.

Is notice purely a subjective requirement for purposes of determining holder in due course status?

No, there is both a subjective and objective component.

Is the requirement that the parties give value for a security interest to attach the same as consideration?

No, because even past consideration is enough.

May a financing statement be effective despite a mistaken name?

Yes, as long as the mistake is not seriously misleading.

May a negotiable instrument be payable in goods or services?

No, this would fail the "fixed amount of money" element of negotiability.

May a person become a holder in due course even if upon receipt, a check is marked insufficient funds?

No, notice of instrument dishonor at the time of receipt defeats holder in due course status.

May a person become a holder in due course if the instrument shows evidence of forgery?

No, notice of defects that call the instrument's authenticity into question defeats holder in due course status.

May indorsers disclaim liability on negotiable instruments?

Yes, disclaimers are allowed.

May the drawer of a check disclaim liability on it?

No, the drawer of a check may not disclaim liability.

May the drawer of a draft other than a check disclaim liability on it?

Yes, so long as it is not a check.

Must a holder pay full face value to become a holder in due course?

No, any value is sufficient subject to the good faith requirement.

Must the debtor sign a financing statement?

No, he or she must only authorize the financing statement which can be accomplished through a separate writing.

Opting out defeats negotiability unless what?

The instrument is a check.

The drawer of a draft is liable only if what two conditions are met?

Presentment and dishonor.

Through what process is a security interest created?

Attachment.

To bring a conversion action, what is required?

The plaintiff must have received the instrument.

Under what conditions are indorsers liable on negotiable instruments?

After presentment, dishonor, and notice of dishonor.

Unless there is an after acquired property clause, what does collateral described as "equipment" include?

Only that which the debtor had rights in at the time of attachment.

What are accessions?

Goods physically united with other goods in such a way that the original goods' identity remains the same.

What are authorized undertakings and instructions?

The power to give, maintain, or protect collateral; power to the holder to confess judgment; and waiver of a benefit of law that protects the obligor.

What are crops, livestock, and farming supplies classified as?

Farm products.

What are goods for collateral purposes?

Goods include movable things and fixtures.

What are goods held for sale or lease or used for business in a short period of time classified as?

Inventory.

What are goods purchased primarily for business use classified as?

Equipment.

What are goods purchased primarily for personal, family, or household use classified as?

Consumer goods.

What are proceeds?

Money, goods, or anything else received from the sale, exchange, collection, or other disposition of collateral or proceeds.

What are the elements of a negotiable instrument?

A written, unconditional promise or order to pay a fixed amount of money, payable to order or bearer, on demand or at a definite time, without unauthorized undertakings or instructions.

What are the elements of a valid written security agreement?

It must be authenticated or signed, reasonably identify the collateral, and express an intent to create a security interest.

What are the elements of fraud in factum?

The signer did not know of the essential character or terms of the instrument and was not given a reasonable opportunity to learn of them.

What are the elements of holder in due course status?

A holder must pay value for a negotiable instrument, the holder must not be on notice of defenses at the time of receipt, and he or she must take it in good faith.

What are words of negotiability?

Payable to order or bearer.

What do the necessary steps for negotiation depend on?

Whether the instrument is payable to order or bearer.

What does a blank indorsement contain?

Only the payee's signature.

What does a good faith purchaser of chattel paper for value in the ordinary course of business receive priority over?

Conflicting security interests from proceeds of inventory and any other security interest the purchaser lacked knowledge of at the time.

What does an after-acquired property clause do?

Allows the secured party to obtain a security interest in future acquired property.

What does fraud in factum mean?

Fraud in the execution.

What does indorsement generally require?

A signature.

What does negotiation require?

Possession of a negotiable instrument and good title to it.

What does the good faith requirement for holders in due course entail?

A subjective and objective component: (1) honesty in fact and (2) following reasonable commercial standards.

What happens when a debtor moves across state lines?

The security interest will become unperfected after 4 months unless a new financing statement is filed.

What happens when a negotiable instrument is transferred by negotiation to a holder in due course?

It is subject only to certain real defenses, not personal defenses.

What happens when collateral moves across state lines?

The security interest will become unperfected after 12 months unless a new financing statement is properly filed.

What happens when there are conflicting words and numbers as to the amount on an instrument?

The words prevail.

What is a cashier's check?

A check where the drawer and drawee are the same bank.

What is a certified check?

A check the bank has accepted.

What is a deposit account for purposes of classifying collateral?

A bank account. Article 9 applies to security interests in nonconsumer deposit accounts.

What is a draft?

An order to pay.

What is a note?

A promise to pay.

What is a purchase money security interest (PMSI)?

There are two kinds: (1) When the debtor purchases collateral from the secured party on credit and the secured party retains a security interest in such goods, or (2) when the debtor takes a loan from the creditor for the purpose of buying specific collateral, then the creditor takes a security interest in it after the loan is used to procure it.

What is a restrictive indorsement?

An indorsement which limits what can be done with an instrument.

What is a secured transaction?

An exchange intended to create a security interest in fixtures or personal property.

What is a security agreement?

The instrument which creates a security interest; it is an agreement between a debtor and secured party.

What is a special indorsement?

The payee signs the instrument and designates a new payee.

What is a sufficient signature for a negotiable instrument?

Any symbol or mark made by the drawer with the present intent to authenticate the instrument.

What is a supergeneric description?

A general descriptions such as "all of the debtor's property" or "everything the debtor owns."

What is an acceleration clause?

A clause giving the holder the right to demand payment before the due date if a named event occurs.

What is an account for purposes of classifying collateral?

A right to payment other than those supported by an instrument or chattel paper for services or property.

What is an anomalous indorsement?

An indorsement outside the chain of title.

What is chattel paper?

A record showing both a monetary obligation and a security interest in specific goods.

What is considered a breach of the peace?

Actions which may potentially lead to violence of any degree. This includes using any force or threat of force.

What is dishonor?

When the drawee refuses to pay the instrument upon appropriate presentment.

What is it called when an instrument says "not negotiable"?

Opting out.

What is it called when collateral is in the secured party's possession under an oral security agreement?

A pledge.