Article 9 that became effective in 2001 provided for a new type of collateral, "electronic chattel paper
." (30) Chattel paper
consists of a record or records evidencing a monetary obligation and either a security interest in specific goods or a lease of specific goods.
For example, the collateral can be described as accounts, chattel paper
, instruments, inventory, equipment, general intangibles and other categories of personal property.
Among specific topics are leases of goods, perfection by possession, perfection on investment property and deposit accounts, sales and other transfers of collateral, chattel paper
and account financing, and the foreclosure sale.
Care also needs to be exercised in identifying whether the subject matter of the dealing is an account or chattel paper
. Chattel paper
is a new concept under Australian law.
"This is significant not only in adding to the weight of the evidence in general, but also because in addition to proving delivery of notices, factors must exercise 'control' over documents such as electronic chattel paper
to ensure their enforceability under Article 9 of the Uniform Commercial Code.
For instance, in FDIC v Herald Square Fabrics Corp, (15) the court said that because Article 9 did not cover the sale of chattel paper
, the transaction at issue was subject to what is now the pre-revision version of UCC section 1-206 statute of frauds requirement as opposed to the enforceability requirements set out in section 9-203 of the UCC.
One type of secured transaction significantly impacted by the Internet is transactions involving chattel paper
. Chattel paper
is a form of agreement, common in both consumer and business transactions that evidences both a monetary obligation and a security agreement in or lease of identified goods.
For example, the two laws apply to the sale and leasing of goods, but not to the creation of security interests in or the sale of chattel paper
(secured leasing transactions).
To be more precise, section 541(a)(1) of the Bankruptcy Code indicates that the bankruptcy estate includes "all legal or equitable interests of the debtor in property as of the commencement of the case."(11) If a debtor were to convey to the SPV a mere lien on accounts(12) or chattel paper
,(13) the assets would not have escaped bankruptcy jurisdiction.(14) In such a case, the debtor retains an equity interest in the collateral--enough to justify bankruptcy jurisdiction.(15) But since the debtor sells the accounts, the debtor supposedly retains nothing.(16)
The blanket UCC-1 Financing Statement, which is filed with the Secretary of State, secures "all inventories, chattel paper
, accounts, contract rights, equipment and general intangibles" of debtor's business.
Revised Article 9 expands the types of collateral for which a secured party may or must perfect a security interest by control to include deposit accounts, electronic chattel paper
, investment property and letter of credit rights.
an obligation to pay fees under a license), revised Article 9 renders wholly ineffective any restriction in an account, promissory note, payment intangible, or chattel paper
, or under other law, that would interfere with the creation or perfection of a security interest in the right to payment, or enforcement of the secured party's security interest in the right to payment.