What is "chattel paper" under UCC Article 9?

What is "chattel paper" under UCC Article 9?

• A. Records that detail ownership of real estate.
• B. Documents that evidence a security interest and a monetary obligation.
• C. Promissory notes that are secured by goods.
• D. Invoices related to the sale of goods.

Answer: (B)

Chattel paper, as defined under UCC Article 9, refers specifically to documents that evidence both a security interest in personal property and a monetary obligation. This dual nature is what sets chattel paper apart from other types of financial documents. The first component indicates that there is a security interest, meaning there is a right to collateral to secure the payment of the monetary obligation, which is the second component. This type of documentation plays a crucial role in financing transactions because it allows a lender or seller to have a claim over the personal property described in the paper if the borrower defaults on their payment obligations. This definition encapsulates the unique characteristics of chattel paper, distinguishing it from other forms of records related to ownership, promissory notes, or invoices, which do not necessarily carry both elements of security interest and monetary obligation.

Chattel paper, as defined under UCC Article 9, refers specifically to documents that evidence both a security interest in personal property and a monetary obligation. This dual nature is what sets chattel paper apart from other types of financial documents. The first component indicates that there is a security interest, meaning there is a right to collateral to secure the payment of the monetary obligation, which is the second component.

This type of documentation plays a crucial role in financing transactions because it allows a lender or seller to have a claim over the personal property described in the paper if the borrower defaults on their payment obligations. This definition encapsulates the unique characteristics of chattel paper, distinguishing it from other forms of records related to ownership, promissory notes, or invoices, which do not necessarily carry both elements of security interest and monetary obligation.