Intro: Scope and Key Terms

Question 1

When does Art. 9 (and thus secured transactions law) apply?

Answer 1

Art. 9 applies to CONSENSUAL/VOLUNTARY collateralizations of PERSONALTY or FIXTURES (i.e. not real estate, and not mechanics liens)

In essence, we’re dealing with voluntary transfers of a security interest in somebody’s shit.

Question 2

What does personalty mean?

Answer 2

Generally speaking, goods

Question 3

Define the following terms:

Debtor

Secured party / creditor

Security agreement

Security interests:

Collateral

Answer 3

1. Person/entity that owes the money
2. The lender
3. The contract / record
4. Right that the creditor has in the debtor’s personalty/fixtures
5. The personalty/fixtures to which the creditor can look for satisfaction

Question 4

What are the types of tangible collateral?

Answer 4

1) Consumer goods (used for personal or familial purposes - e.g. blender, oven, car, etc.)
2) Equipment (used in business - e.g. cash registers)
3) Inventory (goods held for sale or lease, such as stereos at Circuit City)
4) Farm products (crops, livestock, supplies)
5) Fixtures (items annexed to realty - sprinkler systems, furnaces, etc).

Question 5

Why is classifying tangible collateral important?

Answer 5

It determines the primary use in the hands of the debtor (a subjective test)

Question 6

What are examples of intangible or semi-tangible collateral?

Answer 6

Patents, trademarks, stocks, bonds, mutual funds, proceeds from sale of collateral, promissory notes, etc.