Basic Uniform Commercial Code
- crops grown, growing, or to be grown, including:
- crops produced on trees, vines, and bushes; and
- aquatic goods produced in aquacultural operations;
- livestock, born or unborn, including aquatic goods produced in aquacultural operations;
- supplies used or produced in a farming operation; or
- products of crops or livestock in their unmanufactured states.
- crops grown, growing, or to be grown, including:
Something must fall into one of these categories to be a good.
- If split exactly 50/50, it is not a consumer good, as that requires "primarily" consumer use. 50% is not primarily.
"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
- charters or other contracts involving the use or hire of a vessel or
- 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.
"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
E.g., checks, CDs, etc.
Pure intangibles are rights that have no physical embodiment.
- for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of,
- for services rendered or to be rendered,
- for a policy of insurance issued or to be issued,
- for a secondary obligation incurred or to be incurred,
- for energy provided or to be provided,
- for the use or hire of a vessel under a charter or other contract,
- arising out of the use of a credit or charge card or information contained on or for use with the card, or
- 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
- rights to payment evidenced by chattel paper or an instrument,
- commercial tort claims,
- deposit accounts,
- investment property,
- letter-of-credit rights or letters of credit, or
- 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.
E.g., payment intangibles, non-embedded software, etc.
- It will even remain perfected.
- Except as otherwise provided in subsection (e), a buyer in ordinary course of business, . . . takes free of a security interest created by the buyer's seller, even if the security interest is perfected and the buyer knows of its existence.
- Except as otherwise provided in subsection (e), a buyer of goods from a person who used or bought the goods for use primarily for personal, family, or household purposes takes free of a security interest, even if perfected, if the buyer buys:
"Buyer in ordinary course of business" means a person that buys goods in good faith, without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind. A person buys goods in the ordinary course if the sale to the person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller's own usual or customary practices.
A financing statement does not have to be very specific.
Courts are mainly concerned about preventing violence.
Secured transactions are much easier to collect upon as it does not require a lawsuit to collect.
To collect on a defaulted unsecured credit (or technically if secured too), the creditor must sue, obtain a judgment, and get a writ of execution issued to the sheriff, who would then take sufficient nonexempt personal property from the debtor. (Or real property if personal is insufficient)
- This is expensive and time-consuming and therefore often not worth it.
- (This can be used to negotiate lesser payments. Often under 20¢ per dollar.)
- ... [I]t is an unfair act or practice ... for a lender or retail installment seller directly or indirectly to take or receive from a consumer an obligation that:
- Constitutes or contains a cognovit or confession of judgment (for purposes other than executory process in the State of Louisiana), warrant of attorney, or other waiver of the right to notice and the opportunity to be heard in the event of suit or process thereon.
- Constitutes or contains an executory waiver or a limitation of exemption from attachment, execution, or other process on real or personal property held, owned by, or due to the consumer, unless the waiver applies solely to property subject to a security interest executed in connection with the obligation.
- Constitutes or contains an assignment of wages or other earnings unless:
- The assignment by its terms is revocable at the will of the debtor, or
- The assignment is a payroll deduction plan or preauthorized payment plan, commencing at the time of the transaction, in which the consumer authorizes a series of wage deductions as a method of making each payment, or
- The assignment applies only to wages or other earnings already earned at the time of the assignment.
- Constitutes or contains a nonpossessory security interest in household goods other than a purchase money security interest.
- Clothing, furniture, appliances, one radio and one television, linens, china, crockery, kitchenware, and personal effects (including wedding rings) of the consumer and his or her dependents, provided that the following are not included within the scope of the term household goods:
- Works of art;
- Electronic entertainment equipment (except one television and one radio);
- Items acquired as antiques; and
- Jewelry (except wedding rings).
- A security interest in goods is a purchase-money security interest:
- to the extent that the goods are purchase-money collateral with respect to that security interest;
- if the security interest is in inventory that is or was purchase-money collateral, also to the extent that the security interest secures a purchase- money obligation incurred with respect to other inventory in which the secured party holds or held a purchase-money security interest; and
- also to the extent that the security interest secures a purchase-money obligation incurred with respect to software in which the secured party holds or held a purchase-money security interest.
"purchase-money obligation" means an obligation of an obligor incurred as all or part of the price of the collateral or for value given to enable the debtor to acquire rights in or the use of the collateral if the value is in fact so used.
You have to have an obligation to use the money in that way.
TL;DR: Someone gave you money to buy something, and you used the money to buy it.
Sellers with PMSIs prevail over lenders with PMSIs.