Goods

Question 1

Inventory

Answer 1

Goods other than farm products,
• leased out to others,
• held for sale or lease to others,
• furnished to others on contract for services,
• raw materials,
• work in process,
• materials used up or consumed in a business. (This language will cover office supplies used by faculty and staff at school, etc.)
Goods are inventory when they are used up or consumed in a short period of time in the production of sum and product;
• Can be inventory even if not held for sale.

Question 2

To determine if a good is inventory or equipment

Answer 2

Determine the principal use.
Factors are
• whether the goods are for immediate or ultimate sale;
• whether the goods have a relatively long or short period of use in the business.

Question 3

Farm products are

Answer 3

1. Crops,
2. Livestock
3. Supplies used
   or produced in
   farming,
4. Products of crops or livestock.

Question 4

Equipment

Answer 4

Goods which are not inventory, farm products, or consumer goods.

Catchall.

Equipment if used in business and
• they are fixed assets or
• have a relatively long period of use.

Question 5

Goods under Article 9

Answer 5

All things tangible, movable at time security interest attaches.

Question 6

Consumer Goods are

Answer 6

goods used or bought for personal, family or household purposes.

Question 7

Are “money” goods?

Answer 7

NO.
Section 9-102(a)(44) defines “goods” as “all things that are movable when a security interest attaches.” The last sentence of the definition of “goods” expressly excludes “money” (defined in Section 1-201 in a manner that includes U.S. coins and currency).

Question 8

Fixtures are

Answer 8

“goods that have become so related to particular real property that an interest in them arises under real property.” Notice that a fixture, by definition, must be a “good,” a term defined in Section 9-102(a)(44). The definition of “goods” excludes “oil, gas, or other minerals before extraction,” so oil reserves not yet extracted from the ground are not fixtures.

Question 9

A fixture filing must include

Answer 9

the same information as a regular financing statement. It also must

(i) state that it covers fixtures,
(ii) state that it is to be filed in the real estate records,
(iii) provide a description of the real estate, and
(iv) provide the name of the record owner of the real estate if the debtor does not have a recorded interest.

Question 10

Category of Collateral - Quasi-Tangible Property:

Answer 10

• A negotiable instrument
• Investment property: securities (like stocks and bonds), etc.
• Document: Bill of lading or warehouse receipt (gives holder right to take possession of goods held by shipper or warehouse)
• Chattel paper: records that indicate a monetary obligation and security interest in specific goods
• Letter of credit: gives right to payment or performance if certain events (defaults) occur.

Question 11

Category of Collateral - Intangible Property

Answer 11

• Account: right to payment (accounts receivable, credit cards, lottery winnings)
• Commercial tort
• Deposit account
• Health care insurance receivable
• General intangible: catchall for any intangible property not caught in the other categories like trademarks, patents, software (not embedded in the goods), goodwill, etc.
• Payment intangible: a general intangible under which the account debtor’s principal obligation is a monetary obligation
Includes: “no note” loan agreements where the
payment obligation is in the loan agreement and
there is no promissory note evidencing a promise
to pay, includes participation interest in loans

Question 12

Classification for collateral is determined

Answer 12

at the time of the creation of the security interest

Question 13

Florida’s 3 part test as to if a fixture

Answer 13

• whether the item has been annexed to the realty;
• whether the item is appropriately applied to the use or purpose of that part of the realty to which it is connected; and
• whether the party making the annexation intended the item to be a permanent accession.
o The third factor is the primary criterion; method of
annexation and the character of the article annexed are factors to determine intent.
Did the parties intend by affixing the goods to the
realty for the goods to remain personal property or
become party of the realty.

Question 14

Security interest in fixtures is subordinate to the interest

Answer 14

of an encumbrancer of the real property, such as the bank. However, there is an exception under § 9-334(d) that arises when the security interest is a PMSI, the interest of the encumbrancer arose before the goods became fixtures, and the security interest is perfected by a fixture filing within 20 days after the goods become fixtures.

Question 15

Collateral

Answer 15

is “the property subject to a security interest.” Note that the classifications require us to look at the property from the debtor’s point of view; when the debtor answers the creditor’s question, the debtor will be describing the property in its hands.

Question 16

“Collateral” consists of

Answer 16

The Collateral consists of all of the following personal property of Debtor, wherever located, and now owned or hereafter acquired, including:

2. 1. Accounts;
3. 2. Chattel paper, including equipment leases and conditional sales agreements;
4. 3. Inventory, including property held for sale or lease and raw materials;
5. 4. Equipment, including property used in the Debtor’s business, machinery, and production machines;
6. 5. Instruments, notes, negotiable instruments, and negotiable certificates of deposit;
7. 6. Investment property;
8. 7. Documents, including documents of title, warehouse receipts, and bills of lading;
9. 8. Deposit accounts;
10. 9. Debtor’s claim for interference with contract against a Company;
11. 10. Letter-of-credit rights; and
12. 11. General intangibles, including payment intangibles, licenses, intellectual property, and tax returns.

Question 17

Various Classifications of Collateral

Answer 17

1. Goods (§ 9-102(a)(44)):

Consumer goods (§ 9-102(a)(23))

Equipment (§ 9-102(a)(33))

Farm products (§ 9-102(a)(34))

Inventory (§ 9-102(a)(48))

2. Intangible property (not a Code classification, but a name used here for property having no significant physical form):

Accounts (§ 9-102(a)(2)) (health-care-insurance receivables, defined
in § 9-102(a)(46), are a subcategory of accounts)

Deposit accounts (§ 9-102(a)(29))

General intangibles (§ 9-102(a)(42)) (payment intangibles, defined in § 9-102(a)(61), and software, defined in § 9-102(a)(76), are subcategories of general intangibles)

Commercial tort claims (§ 9-102(a)(13))

Letter of credit rights (§ 9-102(a)(51))

3. Quasi-tangible property (not a Code classification, but a name used here for property that historically consisted of a piece of paper but that today might take electronic form):

Instruments (§§ 9-102(a)(47) and 3-104) (promissory notes, defined in § 9-102(a)(65), are a subcategory of instruments)

Investment property (§ 9-102(a)(49))

Documents (for example, warehouse receipts and bills of lading) (§§ 9-102(a)(30), 1-201(b)(15), 7-202)

Chattel paper (§ 9-102(a)(11))

4. Fixtures (§ 9-102(a)(41))

Question 18

Certificate of title statutes do not apply to collateral that is held

Answer 18

as inventory by the debtor.

Question 19

An account

Answer 19

is a right to payment of a monetary obligation, whether or not earned by performance,
• For property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of,
• For services rendered or to be rendered,
• For a policy of insurance issued or to be issued,
• For a secondary obligation incurred or to be
incurred (this is when someone undertakes a
suretyship obligation)
• For energy provided or to be provided
• For the use or hire of a vessel under a charter or
other contract
• Arising out of the use of a credit or charge card or
information contained on or for use with the card,
• As winnings in a lottery or other game of chance
• Health-care insurance receivables.