UCC Article 9 applies to
any transaction, regardless of its form, that creates a security interest in personal property or fixtures by contract
A security interest arises when
a party (the debtor) uses property as collateral to secure repayment of funds to another party (the secured party)
A security interest is
a creditor’s interest in personal property or fixtures (collateral)
What are the categories of collateral?
- goods
- tangible intangibles
- intangible intangibles
- investment property
Under Article 9
What are goods?
all things that are movable at the time the security interest attaches
Collateral refers to the property in which a security interest is created, and it extends to
all identifiable proceeds from the property that serves as collateral
Under Article 9,
What are the different categories of goods?
- consumer goods
- inventory
- farm products
- equipment
Under Article 9,
What are consumer goods?
goods bought mainly for personal, family, and household use
Under Article 9,
What is inventory?
- goods held for sale or lease,
- goods that are to be furnished under service contracts, and
- materials used or consumed in a business in a short period of time
includes consumable office supplies
Under Article 9,
What is equipment?
goods other than inventory, farm products, or consumer goods that are used or bought for use in business
Under Article 9,
What are farm products?
crops or livestock or supplies used or produced in farming operations or products of crops or livestock in their unmanufactured states if they are in possession of a farmer
What are tangible intangibles?
- Documents of Title - represent right to receive goods (bill of lading, warehouse receipt)
- Chattel Paper
- Negotiable Instruments - pieces of paper representing the right to be paid money (promissory notes, checks, etc.)
Under Article 9,
What is chattel paper?
a record or records evidencing a monetary obligation and a security interest in, or lease of specific goods
What are intangible intangibles?
- Accounts
- Commercial tort claims
- General intangibles
A security interest is not enforceable against a debtor unless it has
attached
What are the requirements for attachment?
- agreement to create a security interest
- value given by creditor to debtor
- debtor possesses rights in collateral
How is an agreement to create a security interest evidenced?
- creditor taking possession of the collateral
- creditor takling control over nonconsumer deposit accounts, electronic chattel paper, or investment property
- an authenticated security agreement
What are the requirements for an authenticated security agreement?
- in writing
- contain a granting clause (intent to create the security interest)
- reasonable description of collateral
- signed by the debtor
What is the rule about After-Acquired Property?
If there is an explicit after-acquired property clause in the security agreement, the security interest attaches to newly acquired property as soon as the debtor acquires interest in it
Even without an after-acquired property clause, a security interest will attach automatically to
collateral that’s rapidly depleted and replenished such as accounts and inventory; and to identifiable proceeds of collateral
An after-acquired property clause does not apply to consumer goods unless
the debtor acquires rights in the goods within 10 days after the creditor gives value
Does after-acquired property clauses apply to commercial tort claims
No
Under Article 9,
What are proceeds?
Anything acquired upon the sale, lease, exchange, or other disposition of collateral, or proceeds of original collateral
Proceeds must be identifiable. What does it mean to be “identifiable”?
the proceeds can be traced back to the original collateral
