Unit 13 - Secured transactions

Word

Definition

Example

to provide credit

To extend a financial arrangement or loan that allows a borrower to access funds or make purchases on credit, often with an agreement to repay at a later date

The bank is willing to provide credit to businesses with a strong financial history and creditworthiness

beneficiary

The individual or entity designated to receive benefits, assets, or proceeds from a financial arrangement, such as an insurance policy or trust

The insurance policy's beneficiary is entitled to the proceeds in the event of the insured person's death

security Interest

A legal claim or interest held by a creditor or lender over a borrower's property or assets to secure the repayment of a debt or loan

The lender holds a security interest in the borrower's property as collateral for the loan

loan

A sum of money borrowed from a lender with the agreement to repay the principal amount along with interest or other charges

The bank approved a loan for the purchase of a new home, subject to the borrower's creditworthiness

security

Assets or property provided to a creditor or lender as collateral to secure a loan or financial obligation

The valuable artwork was used as security for the loan, ensuring that the lender had collateral in case of default

in rem

A legal term referring to actions or claims that relate to property or assets themselves, rather than personal liability

The legal action against the property is in rem, meaning it pertains to the property itself rather than the owner

quasi-security

Arrangements or measures that offer some level of protection or security but may not meet all the formal requirements of a security interest

The promissory note acted as quasi-security for the loan, providing some assurance of repayment but not a tangible asset

possessory

Pertaining to a security interest where the creditor has physical possession of the collateral or property

The possessory lien allowed the repair shop to retain possession of the vehicle until the outstanding fees were paid

non-possessory

Pertaining to a security interest where the creditor does not have physical possession of the collateral but has a legal claim to it

The non-possessory security interest granted the lender a claim to the debtor's accounts receivable as collateral

pledge

A type of security interest where the debtor (pledgor) provides property or assets as collateral for a debt or loan

The borrower agreed to pledge their valuable jewelry as collateral for the loan, providing security for the lender

pledgor

The individual or entity providing property or assets as collateral for a debt or loan in a pledge agreement

The pledgor handed over the title deed as collateral for the loan, ensuring that the lender had legal recourse if needed

fixed charge

A security interest that specifically covers certain identified assets or property, creating a fixed lien or claim against them

The fixed charge over the company's assets provided the lender with a priority claim in case of insolvency

floating charge

A security interest that covers a shifting pool of assets or property, allowing the debtor to use and dispose of assets in the ordinary course of business

A floating charge allows the lender to claim assets that may change over time, such as inventory or accounts receivable

ordinary course of business

Regular and routine activities conducted by a business entity as part of its standard operations

The sale of goods in the ordinary course of business refers to routine transactions related to the company's primary operations

consensual

Arising from mutual consent or agreement, typically involving parties willingly entering into a contract or arrangement

Both parties entered into a consensual security agreement, outlining the terms and conditions of the collateral

security agreement

A legal document that outlines the terms and conditions of a security interest, often detailing the collateral and the rights of the parties involved

The security agreement detailed the rights and responsibilities of the lender and debtor regarding the pledged assets

whereby

By means of which; through which; typically used to explain how something is accomplished or achieved

The security interest is created whereby the debtor pledges their accounts receivable as collateral for the loan

debtor

The party that owes money or a financial obligation to a creditor, often in exchange for having received a loan or credit

The debtor is responsible for repaying the loan amount along with any interest and fees as specified in the agreement

creditor

The party or entity that extends a loan or credit to a debtor, expecting repayment of the principal amount along with interest or other charges

The creditor is the entity that provided the loan or credit and is entitled to receive repayment from the debtor

collateral

Property or assets provided by a debtor as security to a creditor or lender to ensure the repayment of a debt or loan

The valuable artwork served as collateral, providing assurance to the lender that there was an asset to secure the loan

non-consensual

Arising without the voluntary agreement or consent of all parties involved, often imposed by law or circumstance

The non-consensual lien on the property was imposed by a court order, without the property owner's agreement

liens

Legal claims or encumbrances against property or assets to secure the payment of a debt or performance of an obligation

The property had several liens against it, making it challenging to sell without first satisfying these obligations

perfection

The process of taking legal steps to ensure the priority and enforceability of a security interest, often through registration or filing

Proper perfection of the security interest ensures that it is legally recognized and protected against other claims

priority

The order in which multiple claims or security interests are ranked or treated when it comes to repayment or enforcement

The priority of a security interest determines the order in which creditors are entitled to receive payment from the collateral

attachment

The legal process of creating a security interest or lien on a debtor's property, often by agreement or court order

The attachment of the security interest occurred when the borrower agreed to pledge their property as collateral

on notice of the security interest

When a party is aware or informed about the existence of a security interest or lien on specific property or assets

The subsequent creditor had priority over the collateral since they acquired it without notice of the prior security interest

to perfect a security interest

To complete all necessary legal requirements to establish and secure a priority claim or lien on specific collateral

The lender needs to perfect the security interest by filing the necessary documentation with the appropriate authorities

to pledge collateral

To provide property or assets as collateral to secure a debt or financial obligation, often in a pledge agreement

The business owner decided to pledge their company's inventory as collateral to secure a loan for expansion

to secure payment

To ensure that a debt or financial obligation is covered or guaranteed through the provision of collateral or security

The real estate developer offered the land as collateral to secure payment for the construction loan

to provide performance

To fulfill one's obligations or commitments, often in the context of repaying a debt or meeting contractual terms

The contractor agreed to provide performance by completing the construction project within the specified timeframe

to enforce a loan

To take legal actions or measures to ensure the repayment and compliance with the terms of a loan or financial agreement

If the borrower defaults on the loan, the lender may have to enforce the loan by seizing and selling the collateral

of even date

written on the same date

Both parties signed the contract on the same day, and the agreement stipulated that it was executed "of even date."

misrepresentation

a false statement, often in order to obtain an advantage

The misrepresentation of the property's condition in the sale agreement led to a legal dispute between the buyer and seller

contingent

depending on something else in the future in order to happen

The payment of the bonus was contingent on the employee meeting specific performance targets during the year

non-performance

failure or refusal to fulfil contractually agreed upon terms or actions

Non-performance of contractual obligations can result in legal consequences, such as breach of contract claims

receivership

The situation in which, during bankruptcy proceedings of an insolvent corporation or person, the court appoints a person to take charge of all assets in order to preserve them for creditors

The company went into receivership, and a court-appointed receiver was responsible for managing its financial affairs

to pawn

To temporarily transfer personal property (such as jewelry or electronics) to a lender as collateral in exchange for a loan, with the intention of reclaiming the property upon repayment of the loan

To secure a short-term loan, the individual decided to pawn their valuable watch, which would be returned upon repayment

bankruptcy proceeding

A legal process that allows individuals or entities to seek relief from overwhelming debts by declaring bankruptcy

The bankruptcy proceeding allowed the company to restructure its debts and seek protection from creditors

debenture holder

An individual or entity that owns and holds debentures, which are debt securities or bonds issued by a corporation or government entity

The debenture holder has a claim on the company's assets and is entitled to receive interest payments according to the terms

categorical description

A detailed and specific description or classification of something, often used in legal documents to precisely identify assets, liabilities, or terms

The inventory list provided a categorical description of each item, including quantity, value, and condition

book debts

Debts or accounts receivable listed in a company's accounting records, representing amounts owed to the company by its customers or clients

The company's accounts receivable, often referred to as book debts, represented outstanding payments owed by customers