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SECURED TRANSACTIONS PROFESSOR HENNIGAN I. Classifying the Collateral UCC 9-105, 9-106, 9-109 * Goods * inventory * farm products * consumer goods * equipment * Semi-intangibles * documents * chattel paper: a writing which evidences both a monetary obligation and a security interest in or lease of specific goods * instruments: a negotiable instrument or any other writing which evidences a right to the payment of money and is not itself a security agreement or lease * negotiable instrument UCC 3-104 an unconditional promise to pay a fixed amount of money which * is payable to bearer or to order * is payable on demand or at a definite time * does not require anything else of either party * Pure intangibles: no physical embodiment of the right * accounts: any right to payment for goods sold or leased which is not evidenced by an instrument or chattel paper * general intangibles * Sui Generis * investment property * fixtures * money * To determine if something is a pure intangible or an instrument, ask if the right to payment is embodied in the contract. If payment can be made to someone other than the holder of the piece of paper, it is a pure intangible * a promissory note is not a pure intangible * a contract which only requires payment upon further commitment by seller * credit card payment is unclear under the current UCC, under Revised 9-102 (a) (2), it is an account * The difference between consumer good and equipment is the intended use by the buyer. If it is primarily personal use it is consumer goods, otherwise equipment. (50/50 goes to equipment) * under Revised 9-102 (42) software is a general intangible * under Revised 9-102 (44) a computer program imbedded in goods is a good II. Creating a Security Interest: UCC 9-203 * 3 requirements for a security interest to attach: * signed security agreement with a description of collateral * value given * debtor has rights in the collateral
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* Security Agreement, UCC 9-105 (l): an agreement that creates or provides for a security interest * no specific writing is technically required, the court can find a security agreement where various documents evidence an intention to create a security agreement * UCC 9-110: any description of the collateral is sufficient if it reasonably identifies what is described * omnibus clause: “all saw mill equipment”, alone these clauses are generally fine, some case law has suggested that including a list along with an omnibus clause can make the omnibus clause meaningless or exclude those things not on the list from the clause * after acquired items: the majority rule is that an agreement covering inventory and accounts includes after acquired because the nature of the collateral is that turnover is expected * Value given is generally not a problem, value includes giving a loan or a letter of credit * Debtor must have some legal right in the collateral, ownership is not required * UCC 2-105 (2): goods must be existing and identified before any
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