Question

Your client, Winston, sold a large number of freezers to Rita on credit. This occurred on May 1, 2017. Winston had purchased these freezers from Manny on March 1, 2017. Manny had purchased the components from Supplier on November 1, 2016. Assume that each transaction is a credit sale and that every creditor timely filed a UCC-1 such that they are secured parties.

A. Draw the picture of each and every transaction and explain each of these transactions under Article 9 of the UCC.

Answer 1

UCC-1 (Uniform Commercial Code-1) is a legal form that a creditor files to give notice that it has or may have an interest in the personal property of a debtor.

Further, Article 9 deals with secured transactions like the creation and enforcement of debts. It spells out the procedure for settling debts, including various types of collateralized loans and bonds.

If a debtor defaults on his or her debt, the creditor may repossess the secured property by two Modes, Attachment & Perfection.

CHART OF TRANSACTIONS:

All the transactions were made on credit, & all the parties have filed Form UCC-1.

But, in the case when there are many parties that have claim over the same asset, then PERFECTION comes into the picture. It happens when a creditor is able to establish priority over other creditors who may have a claim on the same collateral.

The creditor who has priority may seize the collateral in order to satisfy the debt if the debtor defaults by filling all the requisite documents to the concerned authority.

Supplier, Many & Winston have right over the collateral but Winston has the priority over the asset. So, he can repossess the asset from Rita, then he should transfer the asset with the subordinate parties in settlement of dues.