Secured Transactions: Lecture Two (Part 2): Perfection and Priority

This lecture introduces key concepts in Secured Transactions under the Uniform Commercial Code, focusing on perfection and priority. It explains that perfection, achieved through methods like filing, possession, control, or automatic perfection, establishes a secured party's rights against third parties, while attachment merely validates the interest between the debtor and secured party. The lecture then discusses priority rules, primarily the first-to-file-or-perfect principle, and examines exceptions like purchase-money security interests and buyers in the ordinary course of business, emphasizing the importance of timely action for secured parties.

To establish the secured party's rights against the claims of third parties.

Filing a financing statement, possession of the collateral, control over the collateral, and automatic perfection.

The first perfected secured party to either file a financing statement or otherwise perfect its security interest has priority.

A PMSI is a security interest taken by the seller or lender to finance the purchase of specific collateral. A perfected PMSI can gain super-priority over earlier interests if specific requirements (like timely filing) are met.

The secured party takes physical custody of the collateral. It is typically used for tangible chattel paper, negotiable instruments, and certificated securities.

Debtor's name, secured party's name, and an indication of the collateral.

For a purchase-money security interest (PMSI) in consumer goods.

They take the goods free of the security interest, even if it is perfected.

It emphasized that errors in the debtor's name on a financing statement can render the filing ineffective if the errors are seriously misleading.

It lapses and becomes unperfected. Its effectiveness can be extended by filing a continuation statement within six months prior to the five-year expiration.