Mechanics: Classification of Collateral
Security Interest right to keep/sell collateral if debtor defaults on obligation Quasi/Intangible Goods
Test: primary use, by debtor, determines classification of collateral, Instruments: (Possession/Auto perfection if true sale) promissory
original use rules notes (even if non-negotiable if in the regular course of business) which
Collateral Use Rule: classification occurs at moment of conception and are transferred by indorsement plus delivery – NOT investment
cannot change in same person’s hands –based on intent property
communicated by purchaser to seller Documents: documents of title (term of art, not a piece of paper)
Except: farm products which are processed turn into inventory - Warehouse receipts (Possession)
- Bill of Lading: issued by common carriers
rd
- Delivery order: 3 party document where the holder is the bailee who
directs delivery
Goods – tangible movable personal property Chattel Paper: (Filing, Control, Possession) a record (written or
Consumer Goods: used/bought primarily for personal, family or electronic) that contains both:
household purposes 1. A promise to pay, and
Farm Products: (not standing timber) used/produced in farming 2. A security interest in or lease of specific goods
operations – if in possession of debtor engaged in farming operation Investment Property (Control)
Crops: growing or to be grown 1. Certificated Securities
Livestock: born or unborn 2. Uncertificated Securities: record held in computer
Supplies: used or produced in farming operation 3. Securities Accounts: intermediary holding company
Products of crops or livestock in unmanufactured state Accounts: (File) right to payment either with no writing or a writing
Inventory (Short Term): goods held by business for sale or lease to insufficient to be an instrument or chattel paper
others or for that businesses use in the short term - Includes credit cards, policy of insurance to be issued, lottery winnings
Equipment (Long Term): goods used in a business long term (catchall) - Does NOT include deposit accounts, health care or insurance
Software: if embedded in goods then part of the goods, if not then receivables and investment property
general intangible Health Care/Insurance Receivables: right to payment, under
insurance, for health care goods or services provided ONLY when
assigned to a health care provider
Deposit Accounts: (Control) accounts maintained with a bank - NOT
consumer accounts, unless used as proceeds
Commercial Tort Claims: claims filed by organizations and business
related, non-personal injury claims filed by individuals
- Requires specificity and NO after acquired tort claims
General Intangibles: (File) everything else, catchall for non-goods
(goodwill, literary rights, and rights of performance)
* Liquor licenses: not property but a business asset, though some
courts have ruled it is an Article 9 asset
* Payment Intangibles: general intangibles under which the account
debtor’s principal obligation is the payment of money – must be oral
(if written then its an instrument)
*Proceeds: whatever is acquired under disposition of collateral