Collateral

Question 1

Collateral

Answer 1

Property subject to a security interest

Question 2

Tangible Goods

Answer 2

Anything that is moveable at the time that a security interest attaches

Four classes:
1. Consumer Goods
2. Farm Products
3. Inventory
4. Equipment

Question 3

Consumer Goods

Answer 3

Goods acquired primarily for personal, family, or household purposes

i.e., a bicycle or telescope purchased for home use

Question 4

Farm Products

Answer 4

Goods that are crops or livestock and include supplies that are used or produced in farming.

The obligor must be engaged in a farming operation for goods to be considered farm products

Question 5

Inventory

Answer 5

Goods (other than farm products) that are:

i. held for sale or lease;
ii. are furnished under a service contract;
iii. consist of raw materials;
iv. works in process; or,
v. materials used or consumed in a business

i.e., gasoline used to run the machines in a factory

Question 6

Equipment

Answer 6

A catchall class that consists of goods that are not consumer goods, farm products, or inventory.

Goods that are used or bought for use primarily in a business, such as employees’ desks or machinery used in manufacturing

Question 7

Principal Use

Answer 7

The principal use to which the obligor puts the property determines the class of goods

Question 8

Intangible Collateral

Answer 8

1. Accounts
2. Deposit Accounts

Question 9

Accounts

Answer 9

Right to payment for goods sold, property licensed, or services rendered.

Right to payment for the issuance of an insurance policy, the use of a credit or charge card, or winning a lottery

Business accounts

Question 10

Deposit Account

Answer 10

Savings, passbook, time, or demand account maintained with a bank

Question 11

Other Agreements Subject to Article 9

Answer 11

When the economic reality or substance of an agreement is in reality a secured transaction

Determined on a case-by-case basis

Examples: Lease, consignment, agricultural lien, purchase of personal property

Question 12

Lease

Answer 12

A transaction in the form of a lease creates a security interest if lease payments must be made for the full term of the lease and are not subject to termination, and the lessee has an option to become the owner of the goods for a nominal consideration at the conclusion of the lease agreement

i.e., can purchase for $10

Note: watch out for leases and sellers that retain title of goods