Scope of Article 9 Flashcards
Scope of Article 9
Except as otherwise provided this article applies to: (9-
109 (a)).
1. A transaction, regardless of its form, that creates a security interest in
personal property or fixtures by contract;
2. An agricultural lien;
3. A sale of accounts, chattel paper, payment intangibles, or promissory
notes;
4. A consignment
Security interest is:
An interest in personal property or fixtures which secures payment or performance of an obligation 1-201(b)(35).
Personal Property
Personal property is anything that is not real property.
What are the types of personal property?
They are two types of personal property:
1. Tangible personal property:
things you can touch directly like animals, merchandise, jewelry, etc.
2. Intangible personal property: things you cannot touch directly like the rights (embodied) in stocks, trust fund accounts, etc.
What falls outside the scope of Article 9?
“an assignment of a claim for wages, salary, or other compensation of any employee.”
“Consignment”
means a transaction, regardless of its form, in which a person delivers goods to a merchant for the purpose of sale and:
(A) the merchant:
(i) deals in goods of that kind under a name other than the name of the person making delivery;
(ii) is not an auctioneer; and
(iii) is not generally known by its creditors to be substantially engaged in selling the goods of others;
(B) with respect to each delivery, the aggregate value of the goods is $1,000 or more at the time of delivery;
(C) the goods are not consumer goods immediately before delivery; and
(D) the transaction does not create a security interest that secures an obligation.
Notice that a transaction is a consignment under subsection (A) only if the merchant who receives the goods “deals in goods of that kind; . . . is not an auctioneer; and . . . is not generally known by its creditors to be substantially engaged in selling the goods of others.” In the three situations outlined, creditors should know from the circumstances that the goods are not part of the regular inventory of the merchant. So in that event, the transaction is not a consignment for purposes of Article 9.
Article 9 applies to
any voluntary transaction in which the collateral is not real estate (unless the real estate qualifies as a fixture).
Article 9 covers
any transaction “that creates a security interest in personal property or fixtures by contract.”
What is expressly excluded from the scope of Article 9?
“the creation or transfer of an interest in or lien on real property” (subject to some inapplicable exceptions).
Article 9 excludes from its scope the creation of …
As a general rule, Article 9 excludes from its scope the creation of an interest in real property (such as a collateral interest in a residence or a building contractually created by a mortgage or a deed of trust)
