General Info Flashcards
Security Interest
When a party (debtor) uses certain property as collateral to secure repayment of funds to another party (creditor/secured party). The creditor’s interest is the security interest.
UCC Article 9
Applies to:
- any transaction that creates a security interest in PP or fixtures by K (remember that the substance of the transaction controls, not the label given by parties)
- certain leases (for PP)
- sales of accounts receivable, chattel paper, negotiable instruments, and payment intangibles
When a Lease Might be Considered a Secured Transaction (Subject to UCC Article 9)
When:
- the lease term is not subject to termination early by the lessee; and
- the lease term is for the economic life of the goods, or the lessee has a purchase option at the end of the lease term for zero or nominal consideration
Things UCC Article 9 Does Not Apply to
Include:
- landlord’s liens
- an interest in or lien on real property, including a lease or rents thereunder
Types of Security Interests
Include:
- Goods
- Tangible intangibles
- Intangible intangibles
- Investment property
- Proceeds for other collateral
Goods
All things that are movable at the time the security interest attaches (includes fixtures)
Types of Goods
- Consumer Goods
- Inventory
- Farm Products
- Equipment
Consumer Goods
Goods used or bought primarily for personal, family, or household purposes
Inventory Goods
Goods other than farm products that are held for sale or lease or to be furnished under a K of service. Also includes raw materials, work in process, or materials used or consumed in business.
Farm Products
Goods from a debtor’s farming operation. Crops, livestock, products of crops or livestock in their unmanufactured state, acquatic goods, and supplies used or produced in a farming operation (does not include timber).
Equipment
A catch-all category, defined merely as all other goods. This term usually refers to goods that are used or bought for use primarily in a business (e.g. machinery used farming operations or manufacturing, tools of a mechanic or repairmen, delivery trucks).
How to Determine What Type of Good Something Is
Look at its primary use. Remember that if there are multiple transfers that a good might be of a different type for different transfers (because they have different primary uses (e.g. a telescope at a telescope store is inventory but it can become a consumer good of a purchaser)).
Tangible Intangibles
Writings of K obligations to hold or delivery goods or to pay $ or owners of goods or business entities
Types of Tangible Intangibles
Include:
- Instruments
- Documents
Instruments
Negotiable instruments (e.g. drafts or notes) that are “of a type that in ordinary course of business is transferred by delivery with any necessary endorsement or assignment”
Documents
Documents of title (e.g. bills of lading, dock receipts, warehouse receipts, delivery orders).
What is Required to be a Document of Title?
A document must purport to be issued by, or addressed to, a bailee and purport to cover goods in the bailee’s possession that are either identified or fungible portions of an identified mass.
Chattel Paper
Is a record or records evidencing both a monetary obligation and a security interest in or a lease of specified goods. Can be electronic.
Intangible Intangibles
Monetary obligations or literary rights possibly evidenced by writings are treated as intangibles. Includes general intangibles and accounts.
Intangible Intangibles: General Intangibles
Intangible collateral that fails to fit into any other category. It includes things (choses) in action, payment intangibles, and software.
Intangible Intangibles: Accounts
Are right to payment of a monetary obligation, generally for property sold or to be sold, or for services rendered or to be rendered.
Investment Property
Includes certificated and uncertificated securities, securities accounts, and entitlements.
Proceeds
Can include whatever is received upon the sale, lease, license, exchange or other disposition of collateral, including payment of insurance proceeds.
