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LAW 603 (121)
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Chapter 23 Secured Transactions.docx

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Law and Business
LAW 603
Gil Lan

Chapter 23 Secured Transactions • Security Interest- allows a creditor to seize a debtors personal property if a debt is not repaid • Collateral – is a property that is subject to a security interest • Secured Party- is a creditor with a security interest • If the bank did have a security interest it would have to sue you which would take time and money • A security interest can be given to any type of property to any creditor rd • Guarantee- is a contractual promise by a 3 party (guarantor) to satisfy the principals debtor obligation if the debtor fails to do so Guarantying a security interest in a specific asset • Chattel Mortgage- is a transaction in which the debtor gives a creditor title to some specified personal property to secure the performance of an obligation it owes to the creditors • Conditional Sale- occurs when the seller retains ownership of the goods to secure payment of the purchase price by the buyer • Consignment- occurs when the owner of the goods transfers possession, but not ownership to someone else • Consignor- is the owner of the goods • Consignee- is the person who receives possession of the goods, but not ownership • In a true consignment the consignee is not bound to pay for the good until it does rd something, such as selling them to a 3 party • Lease- is a relationship where the lessor(seller) retains ownerships of an asset, but gives possession of it to the lessee(buyer) for a period of time in return for the lesee’s promise to make regular payments Assignment of Account Receivable • Account Receivable- are the amounts that a business is entitled to collect from its customers • Assignment of accounts receivable – allows a creditor to collect debts owing to a debtor if the debtor does not fufill its obligations • General Security Agreement- provides a creditor with a security interest in all of the debtor’s assets • Floating Charge- is a security interest that hovers above the debtor’s assets until some events causes the change to become fixed or crystalized on those assets • The debt becomes fixed if a payment is missed and is provided with notice of default by the creditor • Once the event occurs the debtor can only sell assets only subject to the creditors charge • Floating charges aren’t used anymore due to PPS (personal property security legislation) • Pps allows a creditor to a similar but more effective sort of security interest • Secured party’s interest can attach to all of the debtors current and after acquired property Special Security interest of Banks • Banks can only be incorporated under the federal bank act section 427 • Act allows banks to take a special kind of security in certain type of assets, Which other creditors cannot take • Cannot take this security interest in consumers assets or the assets of most business providing services • There is a special registration for these interests • Must get debtor to file a “notice of intention” to give security to the bank • Main advantage of section 427 applicable to all provinces once filed Provincial Rules for Secured Transactions • Still necessary for secured parties to search every province where the debtor has assets • Pps legislation now integrates common law and statutory rules for security interests • Pps sets a clear sets of rules for priority • Priority- is the ranking of secured creditors rights to enforce its claim against a piece of collateral compared to the claims of other secured creditors in the same collateral • Most pps applies to all agreements between a debtor and a secured party that creates a security interest • Pps legalisation states that for leases that have a term over 1 year is subject to pps • If a lease is not subject to pps it is given a claim ranking ahead of all other creditors of the lesee Exceptions • Landlord under a commercial lease of real property usually has the right of distress or distraint if the tenant has not paid rent • Rights of distress/distraint- allows a landlord to seize property that is on the rented premises and belongs to the tenant, sell it, and use the sale proceeds to pay the outstanding rent • Deemed trust- some assets of a business are deems as a matter of law to be held for the benefit of the government and cannot be used for the business • Liens- allows a person who has not been paid to retain possession of goods that the person has repaired or stored • Mechanic can keep vehicle till you pay the bill (are not subject to pps) Protecting Security interests under pps • Attachment- allows a security interest to be enforced against 3 parties • Occurs when these requirements are met • Debtor signs a written security agreement containing a description of the collateral or the secured party gets possession of collateral • The secured party gives some value, such as l
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