General Terms

Question 1

Chattel paper

Answer 1

A record or records which evidence both
(1) a monetary obligation, and (2) a security interest in
or a lease of specific goods. A “record” is information
that is stored in either a tangible medium (for example,
written on paper), or an intangible medium (for example,
electronically stored). Chattel paper that is stored in
an electronic medium is also called “electronic chattel
paper.”

Question 2

Documents

Answer 2

A document that represents the right to
receive goods (for example, a bill of lading, a warehouse
receipt)

Question 3

Instruments

Answer 3

Pieces of paper representing the right to
be paid money, like promissory notes, drafts (for example,
checks), and certificates of deposit

Question 4

Inventory

Answer 4

goods held for sale or lease, goods that are to
be furnished under service contracts, and materials used
or consumed in a business in a short period of time

Question 5

Farm products

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

Question 6

Accounts

Answer 6

Includes a right to payment (that is not evidenced
by an instrument or chattel paper) for property
sold or services rendered. Note: A contractual obligation
arising from a loan of money is not an account—it is a
general intangible

Question 7

Deposit accounts

Answer 7

An account maintained with a bank.
Note: In general, Article 9 only applies to security interests
in nonconsumer deposit accounts and account monies
that are claimed as proceeds of other collateral.

Question 8

Commercial tort Claims

Answer 8

A tort claim where (1) the claimant
is an organization (for example, a partnership or
corporation), or (2) the claimant is an individual, the claim
arose out of the claimant’s business or profession, and
the claim does not include damages for personal injury or
the death of an individual (note that Article 9 also applies
to noncommercial tort claims that are claimed as proceeds
of other collateral)

Question 9

General intangibles—

Answer 9

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

Question 10

What is a disguised security agreement?

Answer 10

secured sale disguised as a lease
leases
A
—that is,
that
intended to serve as security arrangements
are
(but not
true leases); and a lease where the rental obligation is not
terminable by the lessee and either: (1) the lease term is
equal to or greater than the remaining economic life of
the goods, (2) the lessee is bound to purchase the goods
at the end of the lease or to renew the lease for the
remaining economic life of the goods, or (3) at the end of
the lease, the lessee has an option to purchase the goods
or renew the lease for the remaining economic life of the
goods for no or nominal consideration

Question 11

What are the requirements for attachements

Answer 11

1) The parties must agree to a security interest
2) The debtor must have rights in the collateral
3) The creditor must give value

The parties must agree to create the security interest
(that is, they must enter into a security agreement), as
evidenced by (1) the creditor taking possession of the
collateral, (2) an authenticated security agreement, or
(3) the creditor taking control of nonconsumer deposit
accounts, electronic chattel paper, and investment property
(see Module 4 for the methods of obtaining control),
and
• Value must be given by the secured party, and
• The debtor must have rights (for example, ownership) in
the collateral

Question 12

Requirements for a security agreement (one of the sub elements to create attachment)

Answer 12

1)Signed by the debtor
2)Evidenced by a record that shows intent to create a security agreement
3) A description of the collateral : agreement must contain a description of the collateral
(and if the security interest covers timber to be cut, a description
of the land concerned). The description must reasonably
identify the collateral. Collateral can be described
broadly by category or type (for example, “all of the debtor’s
equipment”) or specifically (for example, by serial number
or by saying “the debtor’s television” if the debtor has only 1
television). Exception: Consumer goods, consumer securities
accounts, and commercial tort claims cannot be described by
type alone; a more specific description is needed.
**Cannot be super generic
4)

Question 13

When does an interest occur automatically to after acquired property without an “after acquired property” clause?

Answer 13

Its the exception.
Even without an after-acquired property clause, a security
interest will attach automatically to collateral of a type that’s
rapidly depleted and replenished, such asaccounts and
inventory.
A security interest will also automatically attach to
identifiable PROCEEDS of collateral, even without an after-acquired
property clause

Question 14

Lowest intermediate balance rule.

Answer 14

When proceeds have been comingled with other money.
In the case of commingled cash proceeds (for example, in
a bank account), the identifiable proceeds can be traced
using the lowest intermediate balance rule. Under that
rule, you will look at the bank account starting at the time
the proceeds are deposited and ending at the time you are
applying the rule. The lowest balance during that time period is the secured party’s identifiable proceeds (but the amount
cannot exceed the value of the cash proceeds originally
deposited).

Question 15

What are the five methods of perfection?

Answer 15

There are five methods of
perfection: (1) filing; (2) taking possession of the collateral;
(3) control; (4) automatic perfection; and (5) temporary
perfection.

Question 16

What are the exceptions to automatic attachment of PMSI in consumer goods?

Answer 16

A security interest in motor vehicles can be perfected only
by notation on the vehicle’s certificate of title (see Section
4.5, infra), and a PMSI in fixtures will have priority over an
encumbrancer of the real estate only if the PMSI holder files
a fixture filing

Question 17

What are the requirements for a financing statement?

Answer 17

1) Debtors name and address
2) secured party’s name and address
3) a description of the collateral

Question 18

When is a financing statement not appropriate?

Answer 18

For deposit accounts and money.

Question 19

After how many months is a financing statement good against a debtor that changed their name?

Answer 19

4 months. Then, if you’re worried about after-acquired property, you would have needed to file a new financing statement.

Question 20

Which state’s law governs perfection?

Answer 20

The law of the state where the debtor is located generally
governs perfection of the security interest. Therefore, the
secured party must generally file the financing statement in
that state.

If the debtor is an individual, they are located in the state of
their principal residence. If the debtor is a registered organization
(for example, a corporation, limited liability company,
or limited partnership), the debtor is located in the state
under whose laws it is organized (that is, where its articles
of incorporation are filed). If the debtor is an unregistered
organization (for example, a general partnership), it is located
at its place of business if it only has one place of business or
at its chief executive office if it has more than one place of
business.

Question 21

How long does perfection in proceeds last?

Answer 21

If a secured party has a perfected security interest in
automatically
collateral, the secured party
has a perfected
20
security interest in any proceeds of the collateral for
days
after receipt of the proceeds.

Question 22

What is a buyer in the ordinary course? (BIOC)

Answer 22

Definition of “Buyer in the Ordinary Course”
A “buyer in the ordinary course” is one who buys goods
good faith,
without knowledge that the sale
(1) in
(2)
violates the rights of another person
in the goods, and
(3) in the ordinary course of business from a seller in the
business of selling goods of the kind purchased.

Question 23

What is an accession?

Answer 23

Accessions are goods that are physically united with other
goods in such a manner that the identity of the original
goods is not lost.