Collateral

Question 1

What are the types of collateral identified in Article 9?

Answer 1

Tangible (Goods/Fixtures), Intangible, and Quasi-Intangible property

Question 2

What are the different types of Goods as classified by Article 9?

Answer 2

1. Consumer Goods
2. Equipment
3. Farm Products
4. Inventory

Question 3

What are “consumer goods” as classified in Article 9?

Answer 3

Goods used primarily for personal, family, or household purposes

Question 4

What is “equipment” as classified in Article 9?

Answer 4

Goods used primarily in business. Generally equipment is the default category for “goods,” even if it does not fit the definition

Question 5

What are “farm products” as classified in Article 9?

Answer 5

Crops or livestock or supplies used or produced in farming operations or products of crops or livestock in their unmanufactured states (such as ginned cotton, wool-clip, maple syrup, milk and eggs) if they are in the possession of a debtor engaged in farming operations (easy to spot because there is a farmer

Question 6

What is “inventory” as classified in Article 9?

Answer 6

Held by a person who holds them for sale or lease or to be furnished under service contracts; materials used or consumed in a business

Question 7

What is a guitar purchased by Harry Homebody as a present for his son Marvin?

Answer 7

Harry Debtor purchases guitar - This is a consumer good
I think this is a consumer good under art. 9, The definition of consumer good in article 9 is …, and then specify the fact that I think makes it a consumer good (personal reasons, etc.)

Question 8

What kind of collateral is a guitar purchased by Sterling Studly, a professional rock musician, to be used on tour

Answer 8

Equipment, equipment is used…, Sterling uses this for .. .

Question 9

What kind of collateral is milk in the hands of a farmer (who got it from his cows)?

Answer 9

A farm product

Question 10

What kind of collateral is milk in the hands of a grocery store (or a restaurant)?

Answer 10

Inventory

Question 11

What kind of collateral are automobiles held by a local car rental agency?

Answer 11

Inventory

Question 12

What kind of collateral are pencils and other stationery supplies used by Office Depot or some other large retailer in its credit offices?

Answer 12

Equipment, on the other hand this could be inventory - In the real world there can only be one - Mutually exclusive, on the bar you can hypothesize how it could be both (that would be good for points)

Question 13

What are the 8 types of semi-intangible and intangible property?

Answer 13

1. Instruments
2. Documents
3. Chattel Paper
4. Investment Property
5. Accounts
6. Investment Accounts
7. Commercial Tort Claims
8. General Intangibles

Question 14

In quasi-intangible and intangible property what is an instrument?

Answer 14

Negotiable instruments and any other writing which evidences a right to the payment of a monetary obligation, and which are in the ordinary course of business transferred by delivery with any necessary indorsement or assignment (does not include investment property).

Question 15

In semi-intangible and intangible property what is a document?

Answer 15

A document which in the regular course of business is treated as evidencing that the person in possession of it is entitled to receive, hold, and dispose of the document and the goods it covers (e.g., bill of lading, warehouse receipt).

Question 16

In quasi-intangible and intangible property what is chattel paper?

Answer 16

A promise to pay and a security interest and put them together - A record or records which evidence both a monetary obligation and a security interest in or a lease of specific goods. A record is information that is stored in either a tangible medium (e.g., written on paper), or an intangible medium (e.g., electronically stored). Chattel paper that is stored in an electronic medium also is called electronic chattel paper.

Question 17

In quasi-intangible and intangible property what is investment property?

Answer 17

Includes items such as stocks, bonds, mutual funds, and brokerage accounts containing such items.

Question 18

In quasi-intangible and intangible property what are accounts?

Answer 18

A right to payment [not evidenced by an instrument or chattel paper] (1) for goods, (2) for services, (3) for real property, (4) for a policy of insurance issued or to be issued, (5) for a secondary obligation incurred or to be incurred, (6) for energy provided or to be provided, (7) for the use or hire of a vessel, (8) arising out of the use of a credit card, or (9) as lottery winnings. Health care insurance receivables are included. A contractual obligation arising from a loan of money is not an account - it is a general intangible (usually just the 1 & 2)

Question 19

In quasi-intangible and intangible property what are deposit accounts?

Answer 19

An account maintained with a bank. Note: Article 9 only applies to nonconsumer deposit accounts and deposit accounts that are claimed as proceeds of other collateral. (i.e. Bank cannot take an article 9 security interest in a personal bank checking account)

Question 20

In quasi-intangible and intangible property what is a commercial tort claim? (2 ways)

Answer 20

A claim arising in tort with respect to which the claimant is an organization (e.g., partnership or corporation), or;
where the claimant is an individual and the claim arose in the claimant’s business or profession and does not include damages for personal injury or the death of an individual.

Question 21

In semi-intangible and intangible property what is a general intangible? (Default category)

Answer 21

Any personal property not coming within the scope of the other definitions (e.g. software, patent and trademark rights, copyrights, goodwill). A general intangible under which the account debtor’s principal obligation is a monetary obligation is a payment intangible.

Question 22

How would a promissory note be classified?

Answer 22

Instrument of semi-intangible and intangible property, art. 9 defintion of instrument

Question 23

How would a stock certificate be classified?

Answer 23

Investment property of semi-intangible and intangible property

Question 24

How would a receipt given to a farmer by a silo operator when the farmer stored her grain there be classified?

Answer 24

It’s a Warehouse receipt so a Document of semi-intangible and intangible property

Question 25

How would a written contract in which a car buyer purchasing on credit promises to pay the car dealership for the car and grants the dealership a security interest in the car be classified?

Answer 25

Chattel Paper of semi-intangible and intangible property - Put them together

Question 26

Big T sells tires on credit. What are its customers’ obligations? - How would that be classified?

Answer 26

Accounts of semi-intangible and intangible property- People owe me money for goods, ie tires

Question 27

A hospital has patients who come in for treatment sign paperwork authorizing the hospital to seek payment from their health insurance coverage provider. Can the hospital use the monies due from the various health plans as collateral?

Answer 27

Yes - These are accounts, health care insurance receivables (of semi-intangible and intangible property)

Question 28

Credit Card Company issues millions of credit cards to cardholders, who use them in transactions with merchants. Merchants send the resulting paperwork to Credit Card Company for reimbursement (minus certain fees). Can Credit Card Company use these credit card transactions as collateral?

Answer 28

Yes - These are accounts (of semi-intangible and intangible property)

Question 29

What is the checking account that you have at your bank, can that be used as collateral?

Answer 29

A deposit account under Art. 9 Speak, the question is how is it categorized

Question 30

What are patent and trademark rights, copyrights, goodwill, a tax refund claim, a liquor license, a commercial clamming license, a right to the return of a security deposit held by a landlord be used?

Answer 30

General Intangibles (the default)

Question 31

What type of collateral is the right to sue a corporation for wooing away a trusted employee?

Answer 31

Commercial Tort claim - Horrific collateral - No one will take it as collateral on its own

Question 32

What type of collateral is a claim arising in tort that has been settled and reduced to a contractual obligation to pay?

Answer 32

General intangible - Account cannot be for a lawsuit, right to payment for services or goods

Question 33

What type of collateral is a computer program.

Answer 33

If sold separately then general intangible, if embedded on the computer, follows the computers classification