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The Uniform Commercial Code deals with laws covering commercial transactions in the United States. There are many different articles and sections, including Article 9 and UCC 9-308. What appears to be covered in this particular section of the Uniform Commercial Code?
UCC 9-308 deals with When Security Interest or Agricultural Lien is Perfected; Continuity of Perfection. It mentions the perfection of security interest, agricultural liens, continuous perfection, supporting obligation, and more.
If you’re curious and want to learn more about UCC 9-308, you’re in the right place. Whether you have a general desire to learn or are involved in something that deals with UCC 9-308, it’s always a good idea to learn more and to educate yourself. Read on to learn more about the Uniform Commercial Code 9-308.
What Is UCC 9-308?
As covered by Cornell Law School, here is the legal definition of UCC 9-308:
(a) .Perfection of security interest..
Except as otherwise provided in this section and Section 9-309, a security interest is perfected if it has attached and all of the applicable requirements for perfection in Sections 9-310 through 9-316 have been satisfied. A security interest is perfected when it attaches if the applicable requirements are satisfied before the security interest attaches.
(b) .Perfection of agricultural lien..
An agricultural lien is perfected if it has become effective and all of the applicable requirements for perfection in Section 9-310 have been satisfied. An agricultural lien is perfected when it becomes effective if the applicable requirements are satisfied before the agricultural lien becomes effective.
(c) .Continuous perfection; perfection by different methods..
A security interest or agricultural lien is perfected continuously if it is originally perfected by one method under this article and is later perfected by another method under this article, without an intermediate period when it was unperfected.
(d) .Supporting obligation..
Perfection of a security interest in collateral also perfects a security interest in a supporting obligation for the collateral.
(e) .Lien securing right to payment..
Perfection of a security interest in a right to payment or performance also perfects a security interest in a security interest, mortgage, or other lien on personal or real property securing the right.
(f) .Security entitlement carried in securities account..
Perfection of a security interest in a securities account also perfects a security interest in the security entitlements carried in the securities account.
(g) .Commodity contract carried in commodity account..
Perfection of a security interest in a commodity account also perfects a security interest in the commodity contracts carried in the commodity account.
What Is UCC 9-308 Simplified?
In simple terms, UCC 9-308 dives into the various perfection of security interest or agricultural liens. It deals with these specifications in several steps, from A-G.
It’s always a little confusing to understand UCC sections until they are in context. If you are ever in a commercial transaction with UCC 9-308, these definitions and specifications will make more sense.
What Are The 3 Requirements For A Creditor To Have An Enforceable Security Interest?
One of the items discussed in UCC 9-308 is a security interest. There are three requirements a creditor must have to obtain an enforceable security interest.
The requirements for this item include the following:
- The debtor must have the legal rights to the collateral and the ability to convey the rights
- The value must be offered in exchange for any collateral
- The debtor must authenticate the collateral, or the debtor must have it
These items ensure there is an enforceable security interest involved in the equation.
These requirements ensure the debtor has access to what they are promising, and the lender can get the security interest at the end of the day. They state every portion of the deal is as fair as possible for everyone involved.
What Is An Example of a Perfected Security Interest?
There is a security interest, and then there is a perfected security interest. It can be tricky to understand the difference, so let’s go over a visual example of a perfected security interest. A security interest must be perfected to become enforceable against any third parties that attempt to intervene.
If a secured editor takes possession of the collateral until the debt pledged is paid back, that is considered perfection by possession. This item typically occurs if the collateral is movable, like jewelry and stocks.
There are other forms of perfected security interest. However, this one is one of the most common for items that aren’t real estate or something similar that cannot shift from one place to another.
What Are the Most Common Forms of Secured Debt?
There are many different types of secured debt involved in loans, each with varying levels of interest from those involved in the agreement. However, some forms of security are more common than others.
The following are the most common formats of secured debt:
- Auto loans
You will see these more often than others.
There is a reason these items are the most common forms of secured debt. They have an inherent structure, which means the collateral is very physical. For instance, if it’s a home, a default on a loan means the lender can seize the physical home for themselves.
What Law Precedes UCC 9-308?
The law that precedes UCC 9-308 is UCC 9-307, which covers the Location of Debtor. According to Cornell Law School, here is the legal definition of that section:
(a) ."Place of business.".
In this section, "place of business" means a place where a debtor conducts its affairs.
(b) .Debtor's location: general rules..
Except as otherwise provided in this section, the following rules determine a debtor's location:
(1) A debtor who is an individual is located at the individual's principal residence.
(2) A debtor that is an organization and has only one place of business is located at its place of business.
(3) A debtor that is an organization and has more than one place of business is located at its chief executive office.
(c) .Limitation of applicability of subsection (b)..
Subsection (b) applies only if a debtor's residence, place of business, or chief executive office, as applicable, is located in a jurisdiction whose law generally requires information concerning the existence of a nonpossessory security interest to be made generally available in a filing, recording, or registration system as a condition or result of the security interest's obtaining priority over the rights of a lien creditor with respect to the collateral. If subsection (b) does not apply, the debtor is located in the District of Columbia.
(d) .Continuation of location: cessation of existence, etc..
A person that ceases to exist, have a residence, or have a place of business continues to be located in the jurisdiction specified by subsections (b) and (c).
(e) .Location of registered organization organized under State law..
A registered organization that is organized under the law of a State is located in that State.
(f) .Location of registered organization organized under federal law; bank branches and agencies..
Except as otherwise provided in subsection (i), a registered organization that is organized under the law of the United States and a branch or agency of a bank that is not organized under the law of the United States or a State are located:
(1) in the State that the law of the United States designates, if the law designates a State of location;
(2) in the State that the registered organization, branch, or agency designates, if the law of the United States authorizes the registered organization, branch, or agency to designate its State of location, including by designating its main office, home office, or other comparable office; or
(3) in the District of Columbia, if neither paragraph (1) nor paragraph (2) applies.
(g) .Continuation of location: change in status of registered organization..
A registered organization continues to be located in the jurisdiction specified by subsection (e) or (f) notwithstanding:
(1) the suspension, revocation, forfeiture, or lapse of the registered organization's status as such in its jurisdiction of organization; or
(2) the dissolution, winding up, or cancellation of the existence of the registered organization.
(h) .Location of United States..
The United States is located in the District of Columbia.
(i) .Location of foreign bank branch or agency if licensed in only one state..
A branch or agency of a bank that is not organized under the law of the United States or a State is located in the State in which the branch or agency is licensed, if all branches and agencies of the bank are licensed in only one State.
(j) .Location of foreign air carrier..
A foreign air carrier under the Federal Aviation Act of 1958, as amended, is located at the designated office of the agent upon which service of process may be made on behalf of the carrier.
(k) .Section applies only to this part..
This section applies only for purposes of this part.
Reference Legal Explanations
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"What is UCC 9-308?". Legal Explanations. Accessed on December 10, 2023. https://legal-explanations.com/blog/what-is-ucc-9-308/.
"What is UCC 9-308?". Legal Explanations, https://legal-explanations.com/blog/what-is-ucc-9-308/. Accessed 10 December, 2023
What is UCC 9-308?. Legal Explanations. Retrieved from https://legal-explanations.com/blog/what-is-ucc-9-308/.