Commercial Law
Introduction
Administrative
•	Text
•	“In-house” materials
•	One Volume
•	Evaluation
•	100% open-book final examination during the regularly scheduled examination period
•	Open-book
•	Computers and similar electronic aids are not permitted
•	No library materials
•	You are responsible for
•	All material covered in class
•	You are not responsible for material which is not assigned 
Administrative
•	The text of these slides is available online
•	http://www.law.unb.ca/Siebrasse/Comm/Comm.htm
•	E-mail will be used as a regular means of communication for course purposes
•	Notice of cancelled classes etc
What is Commercial Law?
•	Commercial law
•	Debt
•	Transactional
•	Corporate law (business associations)
•	Equity
•	Organizational

What is Commercial Law?
•	Debt Financing  
•	Unsecured debt
•	Secured debt
•	Bankruptcy
•	Transfer of Debt
•	Assignment of Debt
•	Negotiable Instruments
Course Topics
•	Debt Financing
•	Secured & Unsecured Debt
•	Real & Personal Property (Secured)
•	Pre- & Post-Judgment (Unsecured)
•	Before & After Bankruptcy
Course Topics
•	Comparative approach
•	Jurisdictional variation
•	Secured v unsecured
•	Land v Personal Property
•	Effect of Bankruptcy
Issues
•	Policy
•	Minimize ex ante cost of debt 
•	Law
•	Enforcement
•	Creditor v Debtor
•	Priorities
•	Creditor v Creditor
•	Creditor v Third Party
Policy
•	Ex ante cost of debt
•	You need to borrow money
•	To start a business
•	To buy a house or car
•	Pretend you get to write the law before you borrow the money
•	What law do you want?
•	Why not ask what law you want after you borrow the money (ex post)?
Policy
•	Cost of debt = 
•	Return to capital +
•	Default risk +
•	Transaction costs
•	Return to capital
•	Is set by financial markets
•	Commercial law 
•	Affects default risk & transaction costs
Law
•	Enforcement
•	Creditor v Debtor
•	What remedies does lender have against D after default
•	Priorities
•	Creditor v Creditor
•	Creditor v Third Party
•	What rights to 3^rd parties have in D’s assets?
Enforcement
Enforcement
•	No enforcement against the person of the debtor
•	Imprisonment to enforcement payment no longer exists
•	Enforcement against the assets of the debtor 
•	All creditors – secured and unsecured – ultimately have recourse against essentially all the assets of the debtor
Secured v Unsecured
•	Enforcement difference is the mechanism for realizing against those assets
•	How are the assets turned into cash to satisfy the debt without the cooperation of the debtor?
•	Two key differences between secured & unsecured debt
•	Self-help
•	Role of judgment
Enforcement
•	Secured
•	Self-help 
•	No judgment required after default
•	Unsecured
•	Enforcement by public officer (sheriff)
•	Judgment required
Self-Help
•	Secured creditor generally has self-help remedies
•	The creditor ‘owns’ the collateral
•	No self-help enforcement before or after judgment for unsecured creditor
•	Has a personal right of action against the debtor: ie has the right to sue to judgment
•	Extremely limited rights against debtor’s assets prior to judgment: must obtain judgment in order to seize debtor’s assets
•	Enforcement by public officer – sheriff or trustee in bankruptcy
Unsecured Creditor – Enforcement
•	Unsecured creditor enforcement mechanism in many jurisdictions depends on the type of property
•	Memorials and Executions Act – tangible property
•	Garnishee Act – debts
Unsecured Creditor – Enforcement
•	Why are there different enforcement systems?
•	Functional differences
•	Historical accident
•	Reformed jurisdictions 
•	Nfld
•	Alta
Bankruptcy
•	An enforcement mechanism 
•	For unsecured creditors
•	Trustee in bankruptcy replaces sheriff as enforcement ‘officer’
•	Secured creditors are (mostly) unaffected
•	Priorities are (mostly) unaffected
Priorities
Priorities between Creditors
•	When there is more than one creditor and insufficient assets, how are the assets divided?
•	Key difference between secured and unsecured
•	Pro rata sharing
•	Each creditor receives eg 25 cents on the dollar of debt
•	Unsecured creditors
•	Lexical ranking
•	Highest ranking creditors is paid out in full before any other creditor receives anything
•	Secured creditors
Third Party Priorities
•	Third parties may also have or acquire rights in the debtor’s assets
•	Eg Purchaser
•	What is the priority of the third party?
•	Especially when dealing with prior non-possessory security interest
•	Separation of ownership & control
•	The problem of ostensible ownership
Secured Creditors
•	Enforcement affects only the debtor and the creditor
•	Priority of security interests affects third parties
•	So, to obtain priority in property, you must “perfect” your interest – publicize it to the world
•	Secured lending law is hostile to secret prior interests
•	But cf ownership interests
Security Interests – Publicity
•	Perfection is by 
•	Registration – most important
•	Possession
•	Different types of property have different registration systems
•	Personal Property Security Act/Registry
•	Land Titles Act/Registry
Security Interests – Registration
•	Why are there different registration systems?
•	Functional differences
•	Historical accident
•	Other ‘types’ of (federal) property with separate registration
•	Bank Act
•	Intellectual Property
•	Ships – Canada Shipping Act
Secured Creditor
•	Convenient to say that secured creditor has a “property” right in the debtor’s goods
•	But a secured party’s rights are determined by statute and equity, not primarily by property law
•	Nemo dat quod non habet is NOT the law
•	D can give what it doesn’t have
Types of Secured Creditor
•	Consensual secured creditor - “secured party”
•	Mortgages, Chattel mortgages, Conditional Sales Agreement, Financing lease
•	Now referred to as “security interests”
•	Personal Property – Personal Property Security Act
•	Land – Land Titles Act / Registry Act
•	Non-consensual secured creditor - “lien holder”
•	A security interest which arises by operation of law
•	Mechanics’ Lien Act (builders)
•	Liens on Goods and Chattels (mechanics)
•	Government liens
Types of Collateral
•	Enforcement and priorities depend on type of collateral
•	Personal property v Land
•	Why?
Unsecured Creditor
•	Pro rata sharing priority system between creditors
•	Unsecured creditors generally rank behind third parties who take prior to (registration of) judgment

Secured Creditor - Summary
•	Self-help enforcement
•	Can seize assets without prior judicial approval
•	Judicial supervision of enforcement is ex post
•	Lexical priority system
•	Highest ranking secured creditor paid out in full before second ranking creditor receives anything
•	Secured parties generally rank before subsequent third parties
Unsecured Creditor - Summary
•	No self-help enforcement
•	Enforcement by sheriff or trustee in bankruptcy
•	Pro rata sharing among unsecured creditors
•	Rank below third parties who take prior to (registration of judgment)
Summary
•	Secured creditor
•	Self-help enforcement, no judgment required
•	Lexical priority system
•	Strong rights against third parties
•	Unsecured creditor
•	No self-help enforcement, judgment required
•	Pro rata sharing
•	Few rights against third parties
•	As a practical matter, an unsecured creditor gets almost nothing in bankruptcy
Secured Debt - Acts
•	Personal Property 
•	Personal Property Security Act – PPSA
•	Real Property
•	Priorities
•	Land Titles Act/ Registry Act 
•	Enforcement
•	Property Act
•	Other types of property
•	Eg Bank Act, Copyright Act, Patent Act, Canada Shipping Act
Unsecured Debt - Acts
•	Priorities
•	Creditors Relief Act
•	PPSA
•	Bankruptcy Act (federal)
•	Enforcement – Real and Personal Property
•	Memorials and Executions Act
•	Enforcement – Choses in Action (Debts)
•	Garnishee Act