What Is a Collateral Exclusion Agreement

As we mentioned earlier, the correct classification of guarantees affects aspects as important as the adequacy of a description. Would a security arrangement established after the entry into force of new article 9, which designates the security as a general intangible asset, cover a right to payment of lottery winnings? Before you respond, you can consult the new article 9-102(a)(2). Apparently, in order to cover all the grounds, the court also concludes that the plea is the proceeds of the debtors` cows and milk, which are expressly covered by the Protective Convention. It is preferable to leave the discussion of this conclusion to Chapter 9 (The specifics of enforceability after the acquisition of security, future advances, security and proceeds transferred, and the problem of the new debtor). If the cause of action is negligence or any other tort that does not result from a contract, then it would be a tort claim and it would be necessary to determine whether or not it is a claim in commercial tort, given that under new article 9-109 (d) (12), security rights in commercial tort claims are covered as initial security by new article 9, while security rights in other unauthorized receivables are covered only as proceeds. See Chapter 4 (Scope of Article 9). In addition, a commercial tort action is defined separately in new Article 9-102(a)(13) and is excluded from the definition of a general intangible asset under new Article 9-102(a)(42) and would not be covered by a security agreement in which the security is called a general intangible asset. See Wiersma, above. Chapter 4 (Scope of Article 9) recalls that shares of insurance claims which are not income did not fall within the scope of former Article 9. New Section 9, Section 9-109(d)(8) contains a similar exclusion, but under this provision, new Section 9 covers health insurance claims as initial coverage.

“Health insurance claims” are defined in the new article 9-102(a)(46) essentially as the right to payment of a monetary obligation for health goods or services provided. The definition of general intangible assets also excludes investment property, as defined in new Article 9-102(a)(49), which designates a security, whether securitised or not, such as a debt on securities, a securities account, a commodity contract or a commodity account. Without this exclusion, many types of investment property, with the exception of securitized securities, may well be considered general intangible assets. The exclusion leaves open the question of when real estate is an investment property. In many cases, the answer to the question will be clear. However, there are types of properties to which the answer is not entirely free of doubts. A commercial tort claim is another purely immaterial claim. As we saw in Chapter 4 (Scope of Article 9), the creation of security rights in tort claims did not fall within the scope of former Article 9, but proceeds from tort claims and shares of commercial tort claims as initial security are covered by the new Article 9.

Under new section 9-102(a)(13), a tort action is a “commercial tort claim” if the plaintiff is an organization or individual and the claim arose in the course of the plaintiff`s business or profession and the claim does not include damages resulting from a person`s injury or death. The treatment of classification provides an early opportunity to participate in the legal interpretation activity that is at the heart of the law and practice of Article 9 and illustrates the crucial importance of definitions in working with legal law. Consideration of definitions can be cumbersome, but it provides an essential basis for dealing with such important issues as the proper description of the security, as in Chapter 8 (Details of Enforceability – A Debtor-Certified Constituting Agreement or its Legal Equivalent) and perfection and priority as discussed in Parts V and VI. As is clear from Wiersma`s discussion, unwinding trade receivables are not general intangible assets. The definition of “generally intangible” in new articles 9-102(a)(42) also excludes security rights as large as deposit accounts and instruments. These and other exclusions relate to important issues of how collateral is to be described in a securities agreement or financing statement, issues discussed in Chapter 8 (Details of Applicability After The Acquisition of Security, Future Advances, Security and Proceeds Transferred, and the Problem of the New Debtor) and Chapter 14 (Deposit Details). As explained in section 37 (Enforcement of intangible assets), exclusions also affect the creation of security rights in intangible assets, in particular where the security right has been assigned. The way in which safeguards are classified essentially affects all aspects of Article 9, from creation and improvement to priority and enforcement.

An appropriate classification of collateral is particularly important when deciding how to describe real property in security arrangements and financial statements, which is discussed in detail in Chapters 8-11 and 12-14. The definition of the deposit account becomes more important in the new Article 9 than in the previous Article 9, since the new Article 9, as set out in Chapter 4 (Scope of Article 9), covers collateral in deposit accounts as initial security, except in the case of a consumer transaction, while the former Article 9 covers collateral in deposit accounts only as income. It makes sense to divide immovable property, which can be used as collateral under Article 9, essentially into three main categories. The first is that of “material things,” especially goods. The second category includes “pure intangible assets”, including selected measures ranging from payment or enforcement entitlements to special protection or privileges. The third category is “quasi-assets”, which consist of intangible assets that have acquired a certain material or marketable quality as a result of the merging of a right or claim into a document or registration, the paradigm being a negotiable instrument. To obtain a loan, Ready Lender is taking an interest in Danielle Debtor`s receivables (unsecured payment receivables for goods or services sold on credit), a drill used in Danielle`s business, and a negotiable promissory note to pay Danielle. .