Negotiable Instruments Law
Article 9 - Secured Transactions: Sales of Accounts, Contract Right and Chattel Paper
1: Short Title, Applicability and Definitions
9-101. Short Title.
Article shall be known and may be cited as Uniform Commercial Code - Secured
9-102. Policy and Scope
Except as otherwise provided in Section 9-103 on multiple state
transactions and in Section 9-104 on excluded transactions, this Article
applies so far as concerns any personal property and fixtures within the
jurisdiction of this state
to any transaction (regardless of its form) which is intended
to create a security interest in personal property or fixtures including
goods, documents, instruments, general intangibles, chattel papers, accounts
of contract rights; and also
any sale of accounts, contract rights or chattel paper.
This Article applies to security interests created by contract
including pledge, assignment, chattel mortgage, chattel trust, trust deed,
factor's lien, equipment trust, conditional sale, trust receipt, other
lien or title retention contract and lease or consignment intended as
security. This Article does
not apply to statutory liens except as provided in Section 9-310.
The application of this Article to a security interest in a secured
obligation is not affected by the fact that the obligation is itself secured
by a transaction or interest to which this Article does not apply.
The adoption of this Article should be accompanied by the repeal
of existing statutes dealing with conditional sales, trust receipts, factor's
liens where the factor is given a non-possessory lien, chattel mortgages,
crop mortgages, mortgages on railroad equipment, assignment of accounts
and generally statutes regulating security interests in personal property.
the state has a retail installment selling act or small loan act, that
legislation should be carefully examined to determine what changes in
those acts are needed to conform them to this Article.
This Article primarily sets out rules defining rights of a secured
party against persons dealing with the debtor; it does not prescribe regulations
and controls which may be necessary to curb abuses arising in the small
loan business or in the financing of consumer purchases on credit.
Accordingly, there is no intention to repeal existing regulatory
acts in those fields. See
Section 9-203(2) and the Note thereto.
9-103. Accounts, Contract
Rights, General Intangibles and Equipment Relating to Another Jurisdiction;
and Incoming Goods already Subject to a Security Interest.
If the office where the assignor of accounts or contracts rights
keeps his records concerning them is in this state, the validity and perfection
of a security interest therein and the possibility and effect or proper
filing is governed by this Article; otherwise by the law (including the
conflict of laws rules) or the jurisdiction where such office is located.
If the chief place of business of a debtor is in this state; this
Article governs the validity and perfection of a security interest and
the possibility and effect of proper filing with regard to general intangibles
or with regard to goods of a type which are normally used in more than
one jurisdiction (such as automotive equipment, rolling stock, airplanes,
road building equipment, commercial harvesting equipment, construction
machinery and the like) if such goods are classified as equipment or classified
as inventory by reason of their being leased by the debtor to others.
Otherwise, the law (including the conflict of laws rules) of the
jurisdiction where such chief place of business is located shall govern.
If the chief place of business is located in a jurisdiction which
does not provide for perfection of the security interest by filing or
recording in that jurisdiction, then the security interest may be perfected
by filing in this state. (For
the purpose of determining the validity and perfection of a security interest
in an airplane, the chief place of business of a debtor who is a foreign
air carrier under the Federal Aviation Act of 1958, as amended, is the
designated office of the agent upon whom service of process may be made
on behalf of the debtor.)
If personal property other than that governed by subsections (1)
and (2) is already subject to a security interest when it is brought into
this state, the validity of the security interest in this state is to
be determined by the law (including the conflict of laws rules) of the
jurisdiction where the property was when the security interest attached.
However, if the parties to the transaction understood at the time
that the security interest attached that the property would be kept in
this state and it was brought into this state within 30 days after the
security interest attached for purposes other than transportation through
this state, then the validity of the security interest in this state is
to be determined by the law of this state.
If the security interest was already perfected under the law of
the jurisdiction where the property was when the security interest attached
and before being brought into this state, the security interest continues
perfected in this state for four months and also thereafter if within
the four month period it is perfected in this state.
The security interest may also be perfected in this state after
the security interest may also be perfected in this state after the expiration
of the four month period; in such case perfection dates from the time
of perfection in this state. If
the security interest was not perfected under the law of the jurisdiction
where the property was when the security interest attached and before
being brought into this state, it may be perfected in this state; in such
case perfection dates from the time of perfection in this state.
Notwithstanding subsections (2) and (3), if personal property is
covered by a certificate of title issued under a statute of this state
or any other jurisdiction which requires indication on a certificate of
title of any security interest in the property as a condition of perfection,
then the perfection is governed by the law of the jurisdiction which issued
Notwithstanding subsection (1) and Section 9-302, if the office
where the assignor of accounts contract rights keeps his records concerning
them is not located in a jurisdiction which is a part of the United States,
its territories or possessions, and the accounts or contract rights are
within the jurisdiction of this state or the transaction which creates
the security interest otherwise bears an appropriate relation to this
state, this Article governs the validity and perfection of the security
interest and the security interest may only be perfected by notification
to the account debtor.)
The last sentence of subsection (2) and subsection (5) are in parentheses
to indicate optional enactment. In
states engaging in financing or airplanes of foreign carriers and of international
open accounts receivable, (the) language in parentheses will be of value.
In other states not engaging in financing of this type, (the) language
in parentheses may not be considered necessary.
Excluded from Article.
Article does not apply
to a security interest subject to any statute of the United States
such as the Ship Mortgage Act, 1920, to the extent that such statute governs
the rights of parties to and third parties affected by transactions in
particular types of property; or
to a landlord's lien; or
to a lien given by statute or other rules of law for services or
materials except as provided in Section 9-310 on priority of such liens;
to a transfer of a claim for wages, salary or other compensation
of an employee; or
an equipment trust covering railway rolling stock; or
to a sale of accounts, contract rights or chattel paper as part
of a sale of the business out of which they arose, or an assignment of
accounts, contract rights or chattel paper which is for the purpose of
collection only, or a transfer of a contract right to an assignee who
is also to do the performance under the contract; or
to a transfer of an interest or claim in or under any policy of
to a right represented by a judgment; or
to any right of setoff; or
except to the extent that provision is made for fixtures in Section
9-313, to the creation or transfer of an interest in or lien on real estate,
including a lease or rents there-under; or
to a transfer in whole or in part of any of the following any claim
arising out of tort; any deposit, savings, passbook or like account maintained
with a bank, savings and loan association, credit union or like organization.
9-105. Definitions and
Index of Definitions.
In this Article unless the context otherwise requires:
"Account debtor" means the person who is obligated on an
account, chattel paper, contract right or general intangible;
"Chattel paper" means a writing or writings which evidence
both a monetary obligation and a security interest in or a lease of specific
goods. When a transaction
is evidenced both by such a security agreement or a lease and by an instrument
or a series of instruments, the group of writings taken together constitutes
"Collateral" means the property subject to a security interest,
and includes accounts, contract rights and chattel paper which have been
"Debtor" means the person who owes payment or other performance
of the obligation secured, whether or not he owns or has rights in the
collateral, and includes the seller of accounts, contract rights or chattel
paper. Where the debtor and
the owner of the collateral are not the same person, the term "debtor"
means the owner of the collateral in any provision of the Article dealing
with the collateral, the obligor in any provision dealing with the obligation,
and may include both where the context to requires;
"Document" means document of title as defined in the general
definitions of Article 1 (Section 1-201);
"Goods" includes all things which are movable at the time
the security interest attached or which are fixtures (Section 9-313),
but does not include money, documents, instruments, and other things in
action. "Goods" also include
the unborn young of animals and growing crops;
"Instrument" means a negotiable instrument (defined in Section
3-104), or a security (defined in Section 8-102) or any other writing
which evidences a right to the payment of money and is not itself a security
agreement or lease and is of a type which is in ordinary course of business
transferred by delivery with any necessary endorsement or assignment;
"Security agreement" means an agreement which creates or
provides for a security interest;
"Secured party" means a lender, seller or other person in
whose favor there is a security interest, including a person to whom accounts,
contract rights or chattel paper have been sold.
When the holders of obligations issued under an indenture of trust,
equipment trust agreement or the like are represented by a trustee or
other person, the representative is the secured party.
Other definitions applying to this Article and the section in which
they appear are
goods." Section 9-109 (1).
right." Section 9-106.
products." Section 9-109(3).
intangibles." Section 9-106.
creditor." Section 9-301 (3).
Section 9-306 (1).
money security interest." Section
(3) The following definitions in other Articles apply to this Article:
for sale." Section 2-106.
in due course." Section 3-3-2.
In addition Article 1 contains general definitions and principles
of construction and interpretation applicable throughout this Article.
"Account"; "Contract Right"; "General Intangibles."
means any right to payment for goods sold or leased or for services rendered
which is not evidenced by an instrument or chattel paper.
"Contract right" means any right to payment under a contract not
yet earned by performance and not evidenced by an instrument or chattel
paper. "General intangibles"
means any personal property (including things in action) other than goods,
accounts, contract rights, chattel paper, documents and instruments.
"Purchase Money Security Interest."
security interest is a "purchase money security interest" to the extent
that it is
taken or retained by the seller of the collateral to secure all
or part of its price; or
taken by a person who by making advances or incurring an obligation
gives value to enable the debtor to acquire rights in or the use of collateral
if such value is in fact so used.
of Goods; "Consumer Goods"; "Equipment"; "Farm Products"; "Inventory."
"consumer goods" if they are used or bought for use primarily for
personal, family or household purposes;
"equipment" if they are used or bought for use primarily in business
(including farming or a profession) or by a debtor who is a non-profit
organization or a governmental subdivision or agency, or
if the goods are not included in the definitions of inventory,
farm products or consumer goods;
"farm products" if they are crops or livestock or supplies used
or produced in farming operations or if they are products of crops of
livestock in their un-manufactured states (such as ginned cotton, wool-clip,
maple syrup, milk and eggs), and if they are in the possession of a debtor
engaged in raising, fattening, grazing or other farming operations.
If goods are farm products, they are neither equipment nor inventory;
"inventory" if they are held by a person who holds them for sale
or lease or to be furnished under contracts or service or if he has so
furnished them, or if they are raw materials, work in process or materials
used or consumed in a business. Inventory
of a person is not to be classified as his equipment.
9-110. Sufficiency of
the purposes of this Article any description of personal property or real
estate is sufficient whether or not it is specific if it reasonably identifies
what is described.
9-112. Where Collateral
Is Not Owned by Debtor.
otherwise agreed, when a secured party knows that collateral is owned
by a person who is not the debtor, the owner of the collateral is entitled
to receive from the secured party any surplus under Section 9-502(2) or
under Section 9-504(1), and is not liable for the debt or for any deficiency
after resale, and he has the same right as the debtor
to receive statements under Section 9-208;
to receive notice of and to object to a secured party's proposal
to retain the collateral in satisfaction of the indebtedness under Section
to redeem the collateral under Section 9-506;
to obtain injunctive or other relief under Section 9-507(1); and
to recover losses caused to him under Section 9-208(2).
9-113. Security Interests
Arising Under Article on Sales.
security interest arising solely under the Article on Sales (Article 2)
is subject to the provisions of this Article except that to the extent
that and so long as the debtor does not have or does not lawfully obtain
possession of the goods.
no security agreement is necessary to make the security interest
no filing is required to perfect the security interest; and
the rights of the secured party on default by the debtor are governed
by the Article on Sales (Article 2).
Continue to Part 2: Validity
of Security Agreement and Rights of Parties Thereto
Continue to Part 2: Validity of Security Agreement and Rights of Parties Thereto