Scope of UCC Article 9 & Types of Collateral Flashcards
What does Article 9 of the U.C.C. govern?
Governs any transaction (regardless of its form) that creates a security interest
What is the scope of U.C.C. Article 9?
Substance over form controls as to whether a security interest is created.
How the parties classify the transaction is immaterial.
Does a person have to have title to create a security interest in that collateral?
No. Title to collateral is immaterial. UCC Article 9 applies to a security interest regardless of whether title to the collateral is in the name of the secured party.
How do courts determine if a lease is actually a security interest?
Courts will look at the economic reality of the agreement.
When is a lease actually a security interest?
- there is a commitment to make payments for a term; AND
- Either: (a) the original term is equal to (or greater) than the remaining economic life of the goods; (b) the lessee must renew the lease for the remaining economic life of the goods (or is forced to take ownership); (c) the lessee has an option to renew the lease for the remaining economic life for no additional consideration; OR (d) lessee has the optionto become the owner of the goods for no additional consideration.
What is an account?
A right to payment of a monetary obligation (whether or not earned by performance)
Includes > property that has been (or is to be) sold, leased, or disposed of, services rendered, policy of insurance, secondary obligation incurred, energy provided, use or hire of a vessel under a charter/contract, credit card debt, and lottery winnings.
What type of collateral can only be perfected by “control”?
A deposit account, which is any demand, time, savings, or single account maintained with a bank, but does not include investment property or accounts evidenced by an instrument.
Inventory as Collateral Includes?
Goods that are:
1. leased;
2. held for sale/lease or to be given under a contract of service;
3. given under a contract of service; OR
4. consisting of raw materials, work in process, or materials used/consumed in a business
Does NOT include farm products or goods only held for repair.
Equipment as collateral includes what?
Goods other than inventory, farm products, or consumer goods
What are Goods?
All things movable when the security interest attaches (including fixtures, timber, unborn young of animals, crops, and manufactured homes)
Define Consumer Goods as a type of Collateral
Goods purchased primarily for personal, family, or household purposes
What are proceeds?
Collateral in the following types of property:
1. acquired upon the sale, lease, or other disposition of collateral;
2. collected/distributed on account of collateral;
3. rights arising out of collateral;
4. claims arising out of the loss, nonconformity, defect, or interference with the use of collateral; or
5. insurance payable by loss of collateral
A check given in exchange for collateral is “cash proceeds.”
Define Chattel Paper
A record that evidences:
1. a monetary obligation; and
2. either: (a) a security interest in specific goods, (b) a lease of specific goods, or (c) a security interest in specific goods with software (or a software license used in the goods)
As collateral, what is a monetary obligation?
An obligation to pay moeny that is:
1. secured by the goods; OR
2. owed under a lease of the goods
What is a Certificate of Title Statute?
Some states require that a security interest on a motor vehicle be noted on the title in order to be perfected.
