Scope of Article 9

Question 1

Scope of Art. 9: Required Types of Transactions

Answer 1

• collateralized transaction
• sale of receivables
• consignments
• agriculture liens created by statute
• lease purchase agreements

Question 2

Scope of Art. 9: Collateralized Transactions

Answer 2

• most tested

any transaction which is intended to create a security interest in personal property or fixtures

Property to be used as collateral may be:

(a) already owned by debtor
(b) to be acquired with a loan (a PMSI); or
(c) after-acquired (e.g. security interest in store inventory including later acquired goods)

Question 3

Scope of Art. 9: Sales of Receivables

Answer 3

account receivables, chattel paper, payment intangibles, and promissory notes

Question 4

Scope of Art. 9: Consignments

Answer 4

Consignee appears to own the goods and thus the true owner (consignor) may be required to comply with Art. 9 to gain protection over consignee’s other creditors if:

(a) consigned goods worth a total of $1k or more, and
(b) consignor did not use the goods for personal, family, or household purposes, and
(c) consignee is in a position to deceive potential creditors with consigned goods

Question 5

Scope of Art. 9: Agricultural liens created by state statute

Answer 5

Nonpossessory liens on farm products such as crops and livestock created by state law in favor of a person who provides goods or services to a farmer.

Question 6

Scope of Art. 9: Lease-purchase agreements

Answer 6

Ordinary leases of personal property do not fall under Art. 9.

BUT

lease which is installment sale is covered if lessee cannot terminate the lease and:

(a) lease term is equal or greater than remaining economic life of goods, or
(b) lessee owns the property at the ends of the lease terms, or
(c) lessee has option to buy property for nominal value at end of lease term.

Question 7

Scope of Art. 9: exclusions from Art. 9?

Answer 7

• LAND/REAL PROPERTY (except for fixtures), because this is a mortgage under property law
• rights governed by federal law (if some parts aren’t governed by federal law, then art. 9 would apply)
• non-commercial tort claims (commercial tort claims i.e. biz torts like unfair competition are covered)
• deposit accounts in consumer transactions
• statutory liens (landlord, mechanics, storage, etc.)
• wage assignments

Question 8

• purchase money security interest

Answer 8

arises if:

(i) creditor sells the goods to the debtor on credit, retaining a security interest in the goods for the purchase price (e.g. debtor buys a stereo from a store on credit and the store retains a security interest in the stereo); or
(ii) creditor advances the debtor funds used to buy the goods, and creditor takes a security interest in the goods (e.g. a debtor borrows money from a bank to buy a stereo and the bank takes a security interest in the stereo for the purchase price)

Question 9

*Tangible Goods

Answer 9

look to the primary use of the debtor

consumer goods: goods bought or used for personal, family, or household purposes

inventory: goods held for sale or lease and goods consumed by a business (e.g. fuel to run a factory)

farm products: goods (including crops and animals) used or produced in farming that are in possession of or used by farmer

equipment: all other things (e.g. machinery for a factory)

Question 10

*Intangible Goods

Answer 10

pretty much anything that isn’t tangible

Chattel paper (record that evidences both a monetary obligation and a security interest; e.g. promissory note), bank accounts, bank deposits, intellectual property like patents.