New section 9-102(a)(64) omits a reference to “income” as contained in the definition of product in previous sections 9-306(1). However, this would make little sense if a security right did not retain proceeds (provided it could identify itself). Official Comment 13c of the new article 9-102 states that “the idea of `product of the product shall be included in the revised definition of warranty and no change in meaning shall be foreseen`. The term “security right” is defined in new article 9-102(a)(12) to refer essentially to real property that is the subject of a farm security right or lien, including income to which a security right is attached under new article 9-315(a)(2). Danielle Debtor operates a gambling casino. Your client holds a security interest in Danielle`s slot machines under a security agreement that describes the title as “the debtor`s equipment, present and subsequently acquired”. Therefore, under the new article 9, security rights in income in insolvency proceedings other than bankruptcy are enforceable to the same extent as they are enforceable in the absence of such proceedings. When it comes to non-bankruptcy cases, your job is to master only one set of rules – the new Rules in Article 9 that apply to products in general. However, in the event of bankruptcy, the Federal Bankruptcy Act applies and this law may qualify the new rules in Article 9. Given the frequency of bankruptcy filings today, it`s important that you have an idea of how bankruptcy can affect the rules of Section 9. 3.
Subsequent purchase of consumer goods. Paragraph (b) (1) renders invalid a retrospectively acquired ownership clause for consumer goods (as defined in Article 9-109), unless the accessions (see Article 9-335) acquired more than 10 days after the valuation of the secured party. Subsection (b) (1) is essentially unchanged from the corresponding provision of former subsection 9-204(2). (1) consumer goods that are not supplied as an additional guarantee of membership, unless the debtor acquires rights in them within 10 days of valuation by the secured party; or the second bank holds a security interest in the crops grown at the time of the loan and also in all funds generated by the sale of the crops grown at the time of the loan, which can be identified as funds generated by the sale of the crops grown at the time of the loan. Suppose the Second Bank has no security, but a local law gives the Second Bank a privilege over Danielle`s crops. Danielle Debtor sells machine tools in the retail trade. Danielle just bought a shipment of machine tools from All Tools, Inc. for $25,000. All Tools, Inc. sells only in cash. Danielle borrowed Leslie Lender`s $25,000.
The loan agreement between Danielle and Leslie gives Leslie an interest in providing machine tools from All Tools, Inc. to secure the loan. The agreement also provides that “the lender has an interest in the machine tools in order to guarantee advances that may be made from time to time by the lender to the debtor.” Two months later, Danielle borrowed $5,000 from Leslie to finance her son`s wedding. 5. Future progress; Covered bonds. In subparagraph (c), the guarantee may cover both future advances and past or present if the guarantee contract so provides. This is consistent with the policy in this article regarding post-acquisition security rights, as set out in subparagraph (a). The parties are free to agree that a security right guarantees any obligation.
The determination of the obligations secured by a guarantee is solely a matter of interpretation of the agreement of the parties under the applicable law. This Article rejects stocks of cases decided under former Article 9 where other criteria have been applied.B, i.e. whether a future advance or other subsequent commitment was of the same or similar type as previous advances and commitments secured by the guarantee. Donald Debtor owes Ready Lender $10,000 that Donald borrowed to finance his business operations. Ready Lender has a security right in the inventory and in the debtor`s receivables. Donald borrows $10,000 more. In Chapter 11 (Enforceability and Seizure of Security Rights in Consumer Transactions), we will see that under the new Article 9-204(b)(1), a security right cannot be linked to consumer goods subsequently acquired more than ten days after the creation of value of a secured party, unless the goods are accessions. “Memberships” are defined in the new Article 9-102(a)(1) as “goods that are physically joined to other goods in such a way that the identity of the original goods is not lost”. Examples of access are memory added to a computer and a CD drive installed in an automobile.
It is useful to understand that goods that cannot be obtained as products, for example, because goods are not identifiable as products, can sometimes be obtained more directly. The following problem shows how it is. The rule in new article 9-315(a)(1) that a security right in security continues to exist unless the secured party or the holder of the lien has authorized a sale without a security right or lien creates a presumption that a buyer is subject to the security right or lien. In order to overcome the presumption, it must be shown that the holder of the security right or lien not only authorized the sale, but also authorized that the sale is “free of security or lien”. Whether the necessary authorization was available in the individual case will continue to be a matter of the intention of the parties, but the presumption will work in favour of the secured parties. .