Secured Transactions

Question 1

Security Interest
U.C.C. § 1-201(a)(35)

Answer 1

“Security interest” means an interest in personal property or fixtures which secures payment or performance of an obligation. “Security interest” includes any interest of a consignor and a buyer of accounts, chattel paper, a payment intangible, or a promissory note in a transaction that is subject to Article 9. “Security interest” does not include the special property interest of a buyer of goods on identification of those goods to a contract for sale under Section 2-401, but a buyer may also acquire a “security interest” by complying with Article 9. Except as otherwise provided in Section 2-505, the right of a seller or lessor of goods under Article 2 or 2A to retain or acquire possession of the goods is not a “security interest”, but a seller or lessor may also acquire a “security interest” by complying with Article 9. The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under Section 2-401 is limited in effect to a reservation of a “security interest.” Whether a transaction in the form of a lease creates a “security interest” is determined pursuant to Section 1-203.

Question 2

Consignment
U.C.C. § 9-102(a)(20)

Answer 2

(19) “Consignee” means a merchant to which goods are delivered in a consignment.
(20) “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.

Question 3

Goods
U.C.C. § 9-102(a)(44)

Answer 3

“Goods” means all things that are movable when a security interest attaches. The term includes (i) fixtures, (ii) standing timber that is to be cut and removed under a conveyance or contract for sale, (iii) the unborn young of animals, (iv) crops grown, growing, or to be grown, even if the crops are produced on trees, vines, or bushes, and (v) manufactured homes. The term also includes a computer program embedded in goods and any supporting information provided in connection with a transaction relating to the program if (i) the program is associated with the goods in such a manner that it customarily is considered part of the goods, or (ii) by becoming the owner of the goods, a person acquires a right to use the program in connection with the goods. The term does not include a computer program embedded in goods that consist solely of the medium in which the program is embedded. The term also does not include accounts, chattel paper, commercial tort claims, deposit accounts, documents, general intangibles, instruments, investment property, letter-of-credit rights, letters of credit, money, or oil, gas, or other minerals before extraction.

Question 4

Documents
U.C.C. § 9-102(a)(30)

Answer 4

“Document” means a document of title or a receipt of the type described in Section 7-201(b).

Question 5

Instrument
U.C.C. § 9-102(a)(47)

Answer 5

“Instrument” means a negotiable instrument or any other writing that evidences a right to the payment of a monetary obligation, is not itself a security agreement or lease, and is of a type that in ordinary course of business is transferred by delivery with any necessary indorsement or assignment. The term does not include (i) investment property, (ii) letters of credit, or (iii) writings that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card.

Question 6

Chattel Paper
U.C.C. § 9-102(a)(11)

Answer 6

“Chattel paper” means a record or records that evidence both a monetary obligation and a security interest in specific goods, a security interest in specific goods and software used in the goods, a security interest in specific goods and license of software used in the goods, a lease of specific goods, or a lease of specific goods and license of software used in the goods. In this paragraph, “monetary obligation” means a monetary obligation secured by the goods or owed under a lease of the goods and includes a monetary obligation with respect to software used in the goods. The term does not include (i) charters or other contracts involving the use or hire of a vessel or (ii) records that evidence a right to payment arising out of the use of a credit or charge card or information contained on or for use with the card. If a transaction is evidenced by records that include an instrument or series of instruments, the group of records taken together constitutes chattel paper.

Question 7

Account
U.C.C. § 9-102(a)(2)

Answer 7

“Account”, except as used in “account for”, means a right to payment of a monetary obligation, whether or not earned by performance, (i) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, (v) for energy provided or to be provided, (vi) for the use or hire of a vessel under a charter or other contract, (vii) arising out of the use of a credit or charge card or information contained on or for use with the card, or (viii) as winnings in a lottery or other game of chance operated or sponsored by a State, governmental unit of a State, or person licensed or authorized to operate the game by a State or governmental unit of a State. The term includes health-care-insurance receivables. The term does not include (i) rights to payment evidenced by chattel paper or an instrument, (ii) commercial tort claims, (iii) deposit accounts, (iv) investment property, (v) letter-of-credit rights or letters of credit, or (vi) rights to payment for money or funds advanced or sold, other than rights arising out of the use of a credit or charge card or information contained on or for use with the card.

Question 8

Investment Property
U.C.C. § 9-102(a)(49)

Answer 8

“Investment property” means a security, whether certificated or uncertificated, security entitlement, securities account, commodity contract, or commodity account.

Question 9

General Intangibles
U.C.C. § 9-102(a)(42)

Answer 9

“General intangible” means any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas, or other minerals before extraction. The term includes payment intangibles and software.

Question 10

Inventory
U.C.C. § 9-102(a)(48)

Answer 10

“Inventory” means goods, other than farm products, which:

(A) are leased by a person as lessor;
(B) are held by a person for sale or lease or to be furnished under a contract of service;
(C) are furnished by a person under a contract of service; or
(D) consist of raw materials, work in process, or materials used or consumed in a business.

Question 11

Promissory Note
U.C.C. § 9-102(a)(65)

Answer 11

“Promissory note” means an instrument that evidences a promise to pay a monetary obligation, does not evidence an order to pay, and does not contain an acknowledgment by a bank that the bank has received for deposit a sum of money or funds.

Question 12

Proceeds
U.C.C. § 9-102(a)(64)

Answer 12

“Proceeds”, except as used in Section 9-609(b), means the following property:
(A) whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral;
(B) whatever is collected on, or distributed on account of, collateral;
(C) rights arising out of collateral;
(D) to the extent of the value of collateral, claims arising out of the loss, nonconformity, or interference with the use of, defects or infringement of rights in, or damage to, the collateral; or
(E) to the extent of the value of collateral and to the extent payable to the debtor or the secured party, insurance payable by reason of the loss or nonconformity of, defects or infringement of rights in, or damage to, the collateral.

Question 13

Equipment
U.C.C. § 9-102(a)(33)

Answer 13

“Equipment” means goods other than inventory, farm products, or consumer goods.

Question 14

Farm Products
U.C.C. § 9-102(a)(34)

Answer 14

“Farm products” means goods, other than standing timber, with respect to which the debtor is engaged in a farming operation and which are:
(A) crops grown, growing, or to be grown, including:
(i) crops produced on trees, vines, and bushes; and
(ii) aquatic goods produced in aquacultural operations;
(B) livestock, born or unborn, including aquatic goods produced in aquacultural operations;
(C) supplies used or produced in a farming operation; or
(D) products of crops or livestock in their unmanufactured states.

Question 15

Cash Proceeds
U.C.C. § 9-102(a)(9)

Answer 15

“Cash proceeds” means proceeds that are money, checks, deposit accounts, or the like.

Question 16

Certificate of Title
U.C.C. § 9-102(a)(10)

Answer 16

“Certificate of title” means a certificate of title with respect to which a statute provides for the security interest in question to be indicated on the certificate as a condition or result of the security interest’s obtaining priority over the rights of a lien creditor with respect to the collateral. The term includes another record maintained as an alternative to a certificate of title by the governmental unit that issues certificates of title if a statute permits the security interest in question to be indicated on the record as a condition or result of the security interest’s obtaining priority over the rights of a lien creditor with respect to the collateral.

Question 17

Agricultural Lien
U.C.C. § 9-102(a)(5)

Answer 17

“Agricultural lien” means an interest, other than a security interest, in farm products:
(A) which secures payment or performance of an obligation for:
(i) goods or services furnished in connection with a debtor’s farming operation; or
(ii) rent on real property leased by a debtor in connection with its farming operation;
(B) which is created by statute in favor of a person that:
(i) in the ordinary course of its business furnished goods or services to a debtor in connection with a debtor’s farming operation; or
(ii) leased real property to a debtor in connection with the debtor’s farming operation; and
(C) whose effectiveness does not depend on the person’s possession of the personal property.

Question 18

Authenticate
U.C.C. § 9-102(a)(7)

Answer 18

“Authenticate” means:
(A) to sign; or
(B) with present intent to adopt or accept a record, to attach to or logically associate with the record an electronic sound, symbol, or process.

Question 19

Consumer Goods
U.C.C. § 9-102(a)(23)

Answer 19

“Consumer goods” means goods that are used or bought for use primarily for personal, family, or household purposes.

Question 20

Consumer Goods Transaction
U.C.C. § 9-102(a)(24)

Answer 20

“Consumer-goods transaction” means a consumer transaction in which:
(A) an individual incurs an obligation primarily for personal, family, or household purposes; and
(B) a security interest in consumer goods secures the obligation.

Question 21

Payment Intangibles
U.C.C. § 9-102(a)(61)

Answer 21

“Payment intangible” means a general intangible under which the account debtor’s principal obligation is a monetary obligation.

Question 22

Health Care Insurance Receivables
U.C.C. § 9-102(a)(46)

Answer 22

“Health-care-insurance receivable” means an interest in or claim under a policy of insurance which is a right to payment of a monetary obligation for health-care goods or services provided.