In General

Question 1

Security Interest

Answer 1

A security interest is generally an interest in personal property or fixtures that secures payment or performance of an obligation.

Question 2

Article 9

Answer 2

Applies to a consensual agreement that provides for a security interest. It is the substance of the transaction, not its form, that determines applicability.

Question 3

Secured Party

Answer 3

A secured party is the person in whose favor a security interest is created under the security agreement.

Question 4

Obligor

Answer 4

An obligor is a person who must pay (or otherwise perform) with respect to the obligation that is secured by a security interest in the collateral.

Question 5

Debtor

Answer 5

A debtor is a person who has an interest, other than a security interest or other lien, in the collateral, such as the sole owner of the collateral.

Question 6

Collateral

Answer 6

Property subject to a security interest.

Question 7

Tangible Collateral–Goods

Answer 7

“Goods” encompasses anything that is moveable at the time that a security interest attaches.

Question 8

Consumer goods

Answer 8

Goods acquired primarily for personal, family, or household purposes.

Question 9

Farm products

Answer 9

Goods that are crops grown, growing, or to be grown, livestock born or unborn, supplies that are used or produced in farming, and products of crops or livestock in their unmanufactured state.

Question 10

Inventory

Answer 10

Goods, other than farm products, that are held for sale or lease; are furnished under a service contract; or consist of raw materials, works in process, or materials used or consumed in a business.

Question 11

Equipment

Answer 11

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

Question 12

Chattel paper

Answer 12

Consists of one or more records that evidence both (i) a monetary obligation and (ii) a security interest in specific goods or a lease of specific goods.

Question 13

Document

Answer 13

Refers to a document of title, which confers on the holder ownership rights in goods held by a bailee.

Question 14

Instruments

Answer 14

Encompass negotiable instruments, such as promissory notes and checks.

Question 15

Accounts

Answer 15

Include the right to payment for property sold, leased, licensed, or otherwise disposed of, or services rendered or to be rendered.

Question 16

Deposit account

Answer 16

Includes a savings, passbook, time, or demand account maintained with a bank.

Question 17

Leases creating a security interest

Answer 17

A lease creates a security interest if the lessee must pay consideration to the lessor for the right to possess and use the goods for the term of the lease, the payment obligation cannot be terminated by the lessee, and one of the following is also met:

(i) The original term of the lease is equal to or greater than the remaining economic life of the goods;
(ii) The lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become owner of the goods;
(iii) The lessee has an option to renew the lease for the remaining economic life of the goods for no additoinal consideration or nominal additional consideration upon compliance with the lease agreement; or
(iv) The lessee has an option to become the owner of the goods, for no additional compensation or nominal consideration, upon completion of the lease agreement.

Question 18

Consignments

Answer 18

In order for a consignment to be subject to Article 9, the following must be met:

(i) A person (consignor) must deliver goods to a merchant for the merchant to sell;

(ii) The merchant (consignee) must:
a) Deal in goods of that kind,
b) Not operate under the name of the consignor,
c) Not be generally known by its creditors to be substantially engaged in selling the goods of others, and
d) Not be an auctioneer;

(iii) With respect to each delivery, the value of the goods delivered must be at least $1,000 at the time of the delivery; and

(iv) The goods must not be consumer goods immediately before the delivery.

Question 19

Value

(may be given by)

Answer 19

(i) By providing consideration sufficient to support a simple contract;
(ii) By extending credit, either immediately or under a binding commitment to do so;
(iii) By accepting delivery under a preexisting contract.