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Securedtransactions9 l' I on 0 The following text introduces concepts and terminology related to the area of the law referred to as 'secured transactions'. These offer a measure of security for anyone lending something of value [usually money]. 1 Read the text, then choose the correct word to complete each of these definitions. You may need to consult the glossary. 1 A loan / pledge / lien is an arrangement in which a lender gives money to a borrower, who agrees to repay the money, usually with interest, at some time in the future. 2 A loan / mortgage / pledge is a debt instrument by which the borrower gives the lender a lien on real property as security for a loan. 3 The depositing of personal property by a debtor with a creditor as security for a debt is referred to as a loan / mortgage / pledge. 4 A claim which a creditor has on the property of the debtor to ensure payment (often for goods for which payment is outstanding) is known as a loan / pledge / lien. 1 (US) security interest in specific assets (also chattel mortgage prior to the Uniform Commercial Code) 2 (US) usually referred to as a floating lien and not often used, though possible, under the Uniform Commercial Code All the security interes mentioned above are consensual,since they are created through a security agreem torgrants to the creditoran interest in debtor property (collateral)in nce of the debtor's obligations to the creditor. There also exist noterests, such as those created by operation of law, e.g. unpaid seller as a lien over goods in his possession for which he has not received payment. In order to invoke consensual security interests against third parties, perfectionof the security interest must take place. Perfection is the action which gives the creditor priorityover certain other creditors in the enforcement of the security interest. Perfection can take place in three ways: by registration of the security agreement, by possession of the collateral, and by attachmentof the security interest. The underlying purpose of perfection is to put third-party creditors' on notice of the security interestand so avoid any hidden interests in property. Attachme e at which the creditor's interest fastens to the property offered as $ecurity, itor a ve§ted interest. In certain cases, attachment also constitutes perfe upon attachment is sanctioned by statute, generally for purposes of comme onvenience and availability of other methods of protecting creditors. s: 119 . 1119 11 2 Complete the comparisons of key concepts below using the verbs in the box. attaches (x2) seize sell crystallises defaults has make owns Security / quasi-security:Security gives a creditor the legal right in property owned by the debtor, i.e. the right to 1) and 2)the debtor's property if the debtor 3)in repayment. However, in the case of quasi-security,the creditor typically 4)'"'''''''''''''' the property in question, while the debtor only 5)possession of it. Fixed charge / floating charge:While a fixed charge 6).. to the property in question as soon as the charge is created, a floating charge 7). only when it 8), for example as a result of a failure to 9) a payment at the proper time. 3 Underline the words and expressions in the paragraphs in Exercise 2 which are typically used to compare and contrast ideas. 4 Match the nouns in the box with the verbs (1-4) with which they can collocate. collateral credit a security interest indebtedness a loan payment performance 1 to attach 2 to perfect 3 to pledge 4 to secure 5 to provide 6 to enforce Unit 13 Secured transactions E e A security agreement is a legal instrument signed by a debtor. It grants a security interest to a lender in personal property which is pledged as collateral to secure the loan. Lawyers assist clients in drawing up and filing these instruments. as well as in handling disputes arising from matters connected with them. 5 Read the excerpts from a security agreement below and answer these questions. 1 Which kinds of property are pledged as collateral for the loan? 2 What happens upon default of the agreement? SECURITY AGREEMENT This SECURITY AGREEMENT is made on this 11th day of May, 2005, between Appleby Designs Ltd ("Debtor"), and Richard J. Cross ("Secured Party"). 1 SEGURITYJN'I'EREST. Debtor grants to Secured Party a security interest in all inventory, equipment, appliaIlces,furnishings and fixtures now or hereafterplaced llPon tlle premises located at 99 Appleby Road, Baltimore, MD (the "Premises") or used in connection therewith and in which Debtor now.has or hereafter acquires any right and the proceeds therefrom. As additiollal collateral, Debtor assigns to Secured Party a security interest in all oUts right, title alld illterest to any trademarks, trade names and contract rights which Debtor now has or hereafter acquires. The Security Interest sllall secure tllepayment and performance of Debtor's promissory note of even date herewith in. the principal amount of twenty thousand ($20,000) Dollars alld the payment and performance of all other liabilities and obligations of Debtor to Secured Party of every kind and description, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising. 3 default under this Agreement upon the (a) any misrepresentation in connection part of the Debtor; (b) any non-compliance with or non-per10rmance the Debtor's obligations under the Note or this Agreement; (c) is involved in any financial difficulty as evidenced by (i) an assignment for the benefit of creditors, or (ii) an attachment or receivership of assets not dissolved within thirty (30) days, or (iii) the institution of bankruptcy proceedings, whether voluntary or involuntary, which is not dismissed within thirty (30) days from the date on which it is filed. Upon default and at any time thereafter, Secured Party may declare all obligations secured hereby immediately due and payable and shall have the remedies of a Secured Party under the Uniform Commercial Code. 6 Read the text again and answer these questions. 1 Where is the inventory located in which the Secured Party has an interest? 2 According to the agreement, what would constitute evidence of financial difficulty on the part of the Debtor? 3 Which remedies are available to the Secured Party in the case of default? 7 Match these words and phrases from the text (1-5) with their definitions (a-e). 1 of even date 2 misrepresentation 3 contingent a failure or refusal to fulfil contractually agreed upon terms or actions b depending on something else in the future in order to happen c The situation in which, during bankruptcy proceedings of an insolvent corporation or person, the court appoints a person to take charge of all assets in order to preserve them for creditors. d a false statement, often in order to obtain an advantage e written on the same date 4 non-performance 5 receivership . ~ 1" ICI ingenc ng When legal agreements like the one on page 178 are drawn up, the drafter will strive to anticipate possible events which may arise and plan contingencies, i.e. to deal in advance with events that mayor may not occur. This is done by wording the text in such a way that these possible events are mentioned and thUs covered by the agreement. Often opposing pairs of words are used in order to cover the full range of possibilities. Look at this example from the security agreement: As additional collateral, Debtor assigns to Secured Party, a security interest in all of its right, title, and interest to any trademarks, trade names, and contract rights which Debtor now has or hereafter acquires. The word pair now or hereafter is used to refer to both currently existing assets as well as assets which may become the property of the debtor in the future. 8 Explain in your own words what is meant by each of the four word pairs in italics in this sentence from the security agreement on page 178. The Security Interest shall secure the payment and performance of Debtor's promissory note of even date herewith in the principal amount of twenty thousand ($20,000) Dollars and the payment and performance of all other liabilities and obligations of Debtor to Secured Party of every kind and description, direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising. 9 Look for other word pairs of this kind in the security agreement. Explain them to a partner. Unit 13 Secured transactions E d in n on Whenlegislationis revised,it is importantfor lawyersto find out what changeswill take placeand it is thereforecommonfor them to attend intensiveseminarsfocusingdirectly onthe revisedlegislationand its practicalimplications. Thefollowing advertisementis for an upcomingseminarconcerningthe Uniform CommercialCode[UCC),which is a codeof lawsregulating legal aspectsof businessand financial transactionsin the UnitedStates. 1.0Look at the advertisement and answer these questions. 1 Where might you expect to see the advertisement? 2 What is the subject of the seminar? Date: 2015-12-11; view: 1821
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