Scope of UCC Article 9 & Types of Collateral Flashcards

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1
Q

What does Article 9 of the U.C.C. govern?

A

Governs any transaction (regardless of its form) that creates a security interest

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2
Q

What is the scope of U.C.C. Article 9?

A

Substance over form controls as to whether a security interest is created.
How the parties classify the transaction is immaterial.

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3
Q

Does a person have to have title to create a security interest in that collateral?

A

No. Title to collateral is immaterial. UCC Article 9 applies to a security interest regardless of whether title to the collateral is in the name of the secured party.

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4
Q

How do courts determine if a lease is actually a security interest?

A

Courts will look at the economic reality of the agreement.

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5
Q

When is a lease actually a security interest?

A
  1. there is a commitment to make payments for a term; AND
  2. Either: (a) the original term is equal to (or greater) than the remaining economic life of the goods; (b) the lessee must renew the lease for the remaining economic life of the goods (or is forced to take ownership); (c) the lessee has an option to renew the lease for the remaining economic life for no additional consideration; OR (d) lessee has the optionto become the owner of the goods for no additional consideration.
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6
Q

What is an account?

A

A right to payment of a monetary obligation (whether or not earned by performance)

Includes > property that has been (or is to be) sold, leased, or disposed of, services rendered, policy of insurance, secondary obligation incurred, energy provided, use or hire of a vessel under a charter/contract, credit card debt, and lottery winnings.

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7
Q

What type of collateral can only be perfected by “control”?

A

A deposit account, which is any demand, time, savings, or single account maintained with a bank, but does not include investment property or accounts evidenced by an instrument.

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8
Q

Inventory as Collateral Includes?

A

Goods that are:
1. leased;
2. held for sale/lease or to be given under a contract of service;
3. given under a contract of service; OR
4. consisting of raw materials, work in process, or materials used/consumed in a business

Does NOT include farm products or goods only held for repair.

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9
Q

Equipment as collateral includes what?

A

Goods other than inventory, farm products, or consumer goods

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10
Q

What are Goods?

A

All things movable when the security interest attaches (including fixtures, timber, unborn young of animals, crops, and manufactured homes)

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11
Q

Define Consumer Goods as a type of Collateral

A

Goods purchased primarily for personal, family, or household purposes

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12
Q

What are proceeds?

A

Collateral in the following types of property:
1. acquired upon the sale, lease, or other disposition of collateral;
2. collected/distributed on account of collateral;
3. rights arising out of collateral;
4. claims arising out of the loss, nonconformity, defect, or interference with the use of collateral; or
5. insurance payable by loss of collateral

A check given in exchange for collateral is “cash proceeds.”

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13
Q

Define Chattel Paper

A

A record that evidences:
1. a monetary obligation; and
2. either: (a) a security interest in specific goods, (b) a lease of specific goods, or (c) a security interest in specific goods with software (or a software license used in the goods)

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14
Q

As collateral, what is a monetary obligation?

A

An obligation to pay moeny that is:
1. secured by the goods; OR
2. owed under a lease of the goods

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15
Q

What is a Certificate of Title Statute?

A

Some states require that a security interest on a motor vehicle be noted on the title in order to be perfected.

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