Ch 5. Advanced Issues of Attachment

Question 1

absent an After-Acquired Property Clause, what happens to property acquired later?

Answer 1

property acquired AFTER the S.I attaches is NOT a collateral UNLESS there’s an after-acquired property clause.

Exception: if SI includes inventory or accounts, presumed that the description includes after-acquired inventory or accounts as well (i.e. grocery store)

Question 2

Accessions

Answer 2

a good that is physically united w/ another good, but it’s original identity is NOT lost

when a collateral becomes an accession, the SI in the collateral is NOT lost, but continues to the accession.
(i.e. stereo -> stereo is installed in a car)

Question 3

Commingled goods

Answer 3

a good that is physically united w/ another good so it’s identity is LOST
(i.e. Egg, flour -> cookie)

when collateral becomes commingled goods, the SI will NOT continue in the original, but will attach to the new larger product instead.

Question 4

Attachment rule for Proceeds
(what happens when you sell/lease/license the collateral?)

Answer 4

collateral automatically attaches to the proceeds (i.e. cash, watch in exchange for the cash, etc.)

Question 5

Collateral for Purchase Money Security Interests (PMSI) is limited to: (2)

Answer 5

special type of SI subject to its own perfection and priority rules
collateral must be either goods or software

Question 6

Lender PMSI

Answer 6

When lender loans $ to debtor so debtor can acquire goods…
1. the value must actually be used acquire the goods
2. the lender takes a security interest in those same goods

Question 7

Seller PMSI

Answer 7

goods bought on credit