Florida International University Paul Barton v KDM Electronics Case Study

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The case of Paul Barton v KDM Electronics shows that a financing statement should be valid even if it does not have the debtor’s exact name, but in order for this to be true all of the specific requirements must be met. The filing of financing statements is governed by several key sections of the Uniform Commercial Code. All UCC filings must be registered with state and federal authorities within a reasonably short period of time after the debtor receives the goods or services. And in some cases, failure to file can be costly: since lenders are prohibited from changing their rights under a debtor’s security interest without prior consent, failure to register can result in complete loss of priority over subsequent lenders. The consequences would not be as severe if KDM Electronics had recorded a financing statement that listed Barton as the debtor’s name but failed to list “Brighton Homes” as a secured party. In this case, there would be no automatic penalty for failure to register; instead, KDM Electronics would have to rely on its common law rights against Barton.

In any type of economy, businesses are going to default and when that happens, creditors need to be protected. This will allow them to know who still has an interest in a particular property so they can take their assets away from them. By following a strict set of protocol and conducting business legally it will help protect both parties involved in any type of transaction. The most essential in this financial law debate is that in secure contract payments, creditors ought to be willing to seek restitution when debtors constantly stopped making the loan payments or do not pay the money back with the approved interest.

There are two main arguments for the effectiveness of financing statements that do not have the exact name of the debtor. The first argument is that the law should protect all creditors from a non-debtor who may come along and attempt to get financing by using someone else’s name (Miller, 202). The other argument says that it is rare for a fraudster to have enough information about a company to successfully process a financing statement with just partial information, even if such statements were permissible under law.

References

Miller, R. L. (2020). Business Law Today, Standard: Text & Summarized Cases. Cengage Learning.