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2011 Commercial Law Developments

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2011 Commercial Law Developments 2011 COMMERCIAL LAW DEVELOPMENTS Steven O. Weise PROSKAUER ROSE LLP Los Angeles, California Teresa Wilton Harmon SIDLEY AUSTIN LLP Chicago, Illinois Lynn A. Soukup PILLSBURY WINTHROP SHAW PITTMAN LLP Washington, DC February 23, 2012 1080/99999-590 current/25279187v4 TABLE OF CONTENTS Page I. PERSONAL PROPERTY SECURED TRANSACTIONS ............................................ 1 A. Scope of Article 9 and Existence of a Secured Transaction .......................................................................................... 1 1. General ....................................................................................... 1 2. Insurance ................................................................................... 1 3. Licensing .................................................................................... 2 4. Consignments ........................................................................... 3 5. Real Property ............................................................................ 3 6. Leasing ....................................................................................... 5 7. Sales ............................................................................................ 8 8. Intellectual Property .............................................................. 10 9. Tort Claims .............................................................................. 10 B. Security Agreement and Attachment of Security Interest ................................................................................................ 11 1. Security Agreement ............................................................... 11 2. Rights in the Collateral .......................................................... 15 3. Restrictions on Transfer ........................................................ 19 C. Description or Indication of Collateral and the Secured Debt — Security Agreements and Financing Statements ....................................................................... 22 D. Perfection ........................................................................................... 29 -i- 1080/99999-590 current/25279187v4 1. Certificates of Title ................................................................. 29 2. Control ..................................................................................... 33 3. Possession ................................................................................ 35 4. Financing Statements: Debtor and Secured Party Name ............................................................................. 35 5. Filing of Financing Statement — Manner and Location ............................................................................ 39 6. Termination and Lapse of Financing Statement ................................................................................. 41 E. Priority ............................................................................................... 43 1. Lien Creditors ......................................................................... 43 2. Buyers ...................................................................................... 44 3. Statutory Liens; Forfeiture .................................................... 47 4. Subordination and Subrogation ........................................... 50 5. Equitable Claims .................................................................... 51 6. Set Off ....................................................................................... 53 7. Priority — Competing Security Interests ........................... 54 8. Purchase-Money Security Interests ..................................... 56 9. Proceeds ................................................................................... 57 F. Default and Foreclosure .................................................................. 59 1. Default ..................................................................................... 59 2. Repossession of Collateral .................................................... 60 3. Notice of Foreclosure Sale ..................................................... 63 -ii- 1080/99999-590 current/25279187v4 4. Commercial Reasonableness of Foreclosure Sale ............................................................................................ 66 5. Effect of Failure to Give Notice, Conduct Commercially Reasonable Foreclosure Sale, or Otherwise Comply with Part 6 of Article 9 .................................................................................... 70 G. Collection ........................................................................................... 74 H. Retention of collateral ...................................................................... 80 II. REAL PROPERTY SECURED TRANSACTIONS .................................................. 82 III. GUARANTIES .................................................................................................. 84 A. Existence and Formation ................................................................. 84 B. Scope ................................................................................................... 87 C. Discharge ........................................................................................... 88 IV. FRAUDULENT TRANSFERS ............................................................................. 89 V. LENDER AND BORROWER LIABILITY ............................................................. 92 A. Regulatory and Tort Claims – Good Faith, Fiduciary Duties, Interference With Prospective Economic Advantage, Libel, Invasion of Privacy ........................ 92 B. Obligations Under Corporate Laws .............................................. 95 C. Borrower Liability ............................................................................ 96 D. Disputes Among Creditors and Intercreditor Issuer .................................................................................................. 96 VI. U.C.C. – SALES AND PERSONAL PROPERTY LEASING .................................. 99 A. Scope ................................................................................................... 99 -iii- 1080/99999-590 current/25279187v4 1. General ..................................................................................... 99 2. Software and Other Intangibles ........................................... 99 B. Contract Formation and Modification; Statute of Frauds; “Battle of the Forms”; Contract Interpretation; Title Issues .............................................................. 99 1. General ..................................................................................... 99 2. Battle of the Forms ............................................................... 100 C. Warranties and Products Liability ............................................... 100 1. Warranties ............................................................................. 100 2. Limitation of Liability .......................................................... 100 3. “Economic Loss” Doctrine .................................................. 101 D. Performance, Breach and Damages ............................................. 101 E. Personal Property Leasing ............................................................ 101 VII. COMMERCIAL PAPER AND ELECTRONIC FUNDS TRANSFERS ..................... 104 A. Negotiable Instruments and Holder in Due Course .............................................................................................. 104 B. Electronic Funds Transfer ............................................................. 110 VIII. LETTERS OF CREDIT, INVESTMENT SECURITIES, AND DOCUMENTS OF TITLE ................................................................................. 111 A. Letters of Credit .............................................................................. 111 B. Investment Securities ..................................................................... 111 IX. CONTRACTS ................................................................................................. 114 A. Formation, Scope, and Meaning of Agreement ......................... 114 -iv- 1080/99999-590 current/25279187v4 B. Adhesion Contracts, Unconscionable Agreements, Good Faith and Other Public Policy Limits, Interference with Contract ............................................... 122 C. Choice of Law .................................................................................. 125 D. Arbitration ....................................................................................... 129 X. OTHER LAWS AFFECTING COMMERCIAL TRANSACTIONS ......................... 130 A. Bankruptcy Code ............................................................................ 130 1. Automatic Stay ..................................................................... 130 2. Substantive Consolidation .................................................. 132 3. Claims .................................................................................... 135 4. Bankruptcy Estate ................................................................ 142 5. Secured Parties, Set Off, Leases ......................................... 145 6. Avoidance Actions ............................................................... 149 7. Executory Contract .............................................................. 151 8. Plan ......................................................................................... 151 9. Other .....................................................................................
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