UCC Article 9: Secured Transactions and Priority
What the exam tests
Article 9 questions test attachment, perfection, priority, and default. Identify the collateral type, the method of perfection, and whether a purchase-money security interest or buyer in ordinary course is involved.
Core rules
- Attachment: value given, debtor has rights in collateral, and a security agreement authenticated by the debtor. Attachment creates an enforceable security interest.
- Perfection: filing a financing statement, possession, control, or automatic perfection. Filing requires the debtor's name and collateral description; errors that make the debtor name seriously misleading are ineffective.
- Priority: first to file or perfect generally wins. A PMSI in goods has superpriority if perfected within 20 days after the debtor receives possession. A buyer in ordinary course takes free of a security interest created by the seller.
- After-acquired property and proceeds: a security agreement may cover after-acquired inventory and proceeds.
- Default: secured party may repossess without breach of peace, sell collateral, and seek a deficiency. Notice of sale is required except for consumer goods in some cases.
- Farm products, fixtures, and accessions have special rules.
Worked example
Bank A has a perfected security interest in all equipment. Bank B later makes a purchase-money loan for a new machine and files within 20 days after the debtor receives possession. Bank B's PMSI has priority over Bank A's earlier after-acquired property interest because B perfected within the 20-day window. If B filed late, A would win.
Traps
Do not assume filing always perfects; possession or control may be required for deposit accounts and letter-of-credit rights. A PMSI in inventory requires notice to prior filers. A buyer in ordinary course does not take free of a PMSI in inventory unless the requirements are met.