This is just a Test 23s must wear: Equipment or inventory

a. Napkins, paper cups and bags: Equipment or inventory; probably more an equipment
b. DDs secret recipe for chocolate butter crunch donuts: General intangible or equipment? Its more a
GI b/c its the recipe information that is of value.
c. Cash register, oven, pans, and trays: Equipment, but may be fixtures too; you could use both terms
also b/c theyre not mutually exclusive; anytime you have an equipment, it could be a fixture.
Problem 2.6, page 74
AI is a genetic laboratory that grows various life forms that it sells for use in medical research.
Classify the life forms if AI offers them as collateral for a loan. How would you classify its patent for life
form C-256H? What about a computer program AI developed to test the performance of its products?
Data reports produced by the program?
Life forms grown is inventory. It may be a farm product too when we sell it.
The patent would be a general intangible.
Computer program would be a general intangible.
Data reports would be a general intangible. If not, itll have to be equipment as the residual.
Scope of Interest Taken
Citizens Bank & Trust v. Gibson Lumber Co., page 97
Facts: G granted a SI in its property to C. A SA was perfected between them. The SA described the
collateral in which C took a SI as all inventory of lumber and logs, accounts receivable, all sawmill
equipment and all rolling stock, including, but not limited to Items not specifically listed as
collateral were Gs gang saw, Delta feeder mechanism and a Detroit Allison diesel generator. These
items were sold at auction. C claimed that it was entitled to the proceeds. Bankruptcy court found
the omnibus clause describing the collateral were not sufficient to include the latter items.
Issue 1: Whether or not omnibus clauses are effective in Kentucky when used to describe general
types of collateral in security agreements.
Issue 2: Whether it remains effective against certain specific collateral that is not listed on a schedule
of specific items of collateral which is also part of the security agreement.
Holding: Court here did find the omnibus clause all equipment to be effective as to cover the latter
items.
As for the second issue, intent of the parties was ambiguous. Here, the use of both a schedule listing
specific items of collateral and an omnibus clause describing a general type of collateral creates
ambiguity when a specific item fails to appear on the schedule but is ostensibly covered by the
omnibus clause.
Rule: If a SA contains an omnibus clause and a schedule of specific collateral which does not list all
that the omnibus clause ostensibly describes, then the initial creditor has failed to provide adequate
notice to subsequent creditors and the ambiguity shall be construed against the initial creditor.
The drafter should have decided whether he wanted to be general or specific in describing the collateral.
Rely either on a specific least or the omnibus clause.
Lets assume that Zinnecker borrows 3K from you. He wants to secure a SI in his TV.
Could Z say all assets? Too broad
TV or television? We dont know which one; he may have more than one.
RCA XL-100 19 SN #456AZ? Yes. Specific
Can you get too particular? Yes. It depends on how court sees it.
Standard to follow: It has to reasonably identify the collateral
Lets assume on Friday, X goes out and buys another TV?
Would I get it? Debtor would say all means all as of now, not in the future.

Generally, if you want to grant a SI in assets not yet acquired, you must include language describing so.
Creditors, however, can include after-acquired assets ! 9-204
Account receivable and inventory are usually what creditors would want to include in after-acquired SI.
Not only assets of today, but also in the future.
Exceptions: 9-204(b)
Other than that, creditor can obtain after-acquired property in anything else.
*If you wanted to circumvent the after-acquired clause, you could always execute another security
agreement. Do this to avoid worrying about the creditor every time you acquire new property.
9-204 After-acquired Property; Future Advances
(a) After-acquired collateral:
(b) When after-acquired clause is not effective: A SI does not attach under a term
constituting an after-acquired property clause to:
1. consumer goods, other than an accession when given as additional security,
unless the debtor acquires rights in them within 10 days after the secured party
gives value; or
2. a commercial tort claim
(c) Future advances and other value:
Problem #2-3 in handout: After-acquired property clause; consumer protection: 9-204(b)
On 9/1, TRZ borrows $6,000 from WFB. TRZ executes a SA that creates a SI in (i) Steinway piano w/
bench and (ii) all electronic entertainment equipment (including, w/o limitation, stereo equipment, TVs,
and VCRs), whether now owned or hereafter acquired. TRZ makes the following acquisitions during the
month of September:
9/5
Borrows $6,000
9/5
Compact disk player ($150)
9/8
Personal computer ($3,000 using WFBs money)
9/12 TV ($400)
Which of the three purchases are part of the collateral? All of them (its within 10 days).
Has WFB committed an unfair act or practice under the Federal Trade Commission Act? See FTC
Credit Practices Rules 444.2(a)(4) and 444.1(i) [pp. 1907-1909 0f 2001 statutes book.] Yes, see
444.2(4)
Ask who or what is the debtor?
Ask what are the goods used for?
Assume here that they are consumer goods.
No timing problem (its within 10 days)
We have a description problem. Its possible that the PC is not part of the collateral.
Without limitation is the tricky language here.
Unless we specifically mention PC, theres a danger it may not be included.
What about FTC issue?
When the statute refers to a nonpossessory, we ask is the secured party in possession. If not, its a
nonpossessory interest. Next, ask if it is household goods? If it is a household good, there will be a FTC
violation. Piano is furniture. Compact disk player? Probably not b/c its under exclusion clause. TV?
Yes, especially if its the only one you own. CP? We dont care b/c facts tells you whose money you
used to buy it (Wells Fargo). This makes it a purchase money security interest and therefore will not
violate FTC rules. Anytime that a creditor lends you money to buy something and turns around and takes

a secured interest in the very collateral that youre obtaining, it is a purchase money security interest
(PMSI 9-103). Well discuss this more later on in the semester b/c it is important.
9-204(c) means basically that you dont have to promise to make the loan; just acknowledge that there
is future debt.
2 components of SI:
d. s must wear: Equipment or inventory
e. Napkins, paper cups and bags: Equipment or inventory; probably more an equipment
f. DDs secret recipe for chocolate butter crunch donuts: General intangible or equipment? Its more a
GI b/c its the recipe information that is of value.
g. Cash register, oven, pans, and trays: Equipment, but may be fixtures too; you could use both terms
also b/c theyre not mutually exclusive; anytime you have an equipment, it could be a fixture.
Problem 2.6, page 74
AI is a genetic laboratory that grows various life forms that it sells for use in medical research.
Classify the life forms if AI offers them as collateral for a loan. How would you classify its patent for life
form C-256H? What about a computer program AI developed to test the performance of its products?
Data reports produced by the program?
Life forms grown is inventory. It may be a farm product too when we sell it.
The patent would be a general intangible.
Computer program would be a general intangible.
Data reports would be a general intangible. If not, itll have to be equipment as the residual.
Scope of Interest Taken
Citizens Bank & Trust v. Gibson Lumber Co., page 97
Facts: G granted a SI in its property to C. A SA was perfected between them. The SA described the
collateral in which C took a SI as all inventory of lumber and logs, accounts receivable, all sawmill
equipment and all rolling stock, including, but not limited to Items not specifically listed as
collateral were Gs gang saw, Delta feeder mechanism and a Detroit Allison diesel generator. These
items were sold at auction. C claimed that it was entitled to the proceeds. Bankruptcy court found
the omnibus clause describing the collateral were not sufficient to include the latter items.
Issue 1: Whether or not omnibus clauses are effective in Kentucky when used to describe general
types of collateral in security agreements.
Issue 2: Whether it remains effective against certain specific collateral that is not listed on a schedule
of specific items of collateral which is also part of the security agreement.
Holding: Court here did find the omnibus clause all equipment to be effective as to cover the latter
items.
As for the second issue, intent of the parties was ambiguous. Here, the use of both a schedule listing
specific items of collateral and an omnibus clause describing a general type of collateral creates
ambiguity when a specific item fails to appear on the schedule but is ostensibly covered by the
omnibus clause.
Rule: If a SA contains an omnibus clause and a schedule of specific collateral which does not list all
that the omnibus clause ostensibly describes, then the initial creditor has failed to provide adequate
notice to subsequent creditors and the ambiguity shall be construed against the initial creditor.
The drafter should have decided whether he wanted to be general or specific in describing the collateral.
Rely either on a specific least or the omnibus clause.
Lets assume that Zinnecker borrows 3K from you. He wants to secure a SI in his TV.
Could Z say all assets? Too broad
TV or television? We dont know which one; he may have more than one.
RCA XL-100 19 SN #456AZ? Yes. Specific

Can you get too particular? Yes. It depends on how court sees it.
Standard to follow: It has to reasonably identify the collateral
Lets assume on Friday, X goes out and buys another TV?
Would I get it? Debtor would say all means all as of now, not in the future.
Generally, if you want to grant a SI in assets not yet acquired, you must include language describing so.
Creditors, however, can include after-acquired assets ! 9-204
Account receivable and inventory are usually what creditors would want to include in after-acquired SI.
Not only assets of today, but also in the future.
Exceptions: 9-204(b)
Other than that, creditor can obtain after-acquired property in anything else.
*If you wanted to circumvent the after-acquired clause, you could always execute another security
agreement. Do this to avoid worrying about the creditor every time you acquire new property.
9-204 After-acquired Property; Future Advances
(a) After-acquired collateral:
(b) When after-acquired clause is not effective: A SI does not attach under a term
constituting an after-acquired property clause to:
1. consumer goods, other than an accession when given as additional security,
unless the debtor acquires rights in them within 10 days after the secured party
gives value; or
2. a commercial tort claim
(c) Future advances and other value:
Problem #2-3 in handout: After-acquired property clause; consumer protection: 9-204(b)
On 9/1, TRZ borrows $6,000 from WFB. TRZ executes a SA that creates a SI in (i) Steinway piano w/
bench and (ii) all electronic entertainment equipment (including, w/o limitation, stereo equipment, TVs,
and VCRs), whether now owned or hereafter acquired. TRZ makes the following acquisitions during the
month of September:
9/5
Borrows $6,000
9/5
Compact disk player ($150)
9/8
Personal computer ($3,000 using WFBs money)
9/12 TV ($400)
Which of the three purchases are part of the collateral? All of them (its within 10 days).
Has WFB committed an unfair act or practice under the Federal Trade Commission Act? See FTC
Credit Practices Rules 444.2(a)(4) and 444.1(i) [pp. 1907-1909 0f 2001 statutes book.] Yes, see
444.2(4)
Ask who or what is the debtor?
Ask what are the goods used for?
Assume here that they are consumer goods.
No timing problem (its within 10 days)
We have a description problem. Its possible that the PC is not part of the collateral.
Without limitation is the tricky language here.
Unless we specifically mention PC, theres a danger it may not be included.
What about FTC issue?

When the statute refers to a nonpossessory, we ask is the secured party in possession. If not, its a
nonpossessory interest. Next, ask if it is household goods? If it is a household good, there will be a FTC
violation. Piano is furniture. Compact disk player? Probably not b/c its under exclusion clause. TV?
Yes, especially if its the only one you own. CP? We dont care b/c facts tells you whose money you
used to buy it (Wells Fargo). This makes it a purchase money security interest and therefore will not
violate FTC rules. Anytime that a creditor lends you money to buy something and turns around and takes
a secured interest in the very collateral that youre obtaining, it is a purchase money security interest
(PMSI 9-103). Well discuss this more later on in the semester b/c it is important.
9-204(c) means basically that you dont have to promise to make the loan; just acknowledge that there
is future debt.
2 components of SI:
h. s must wear: Equipment or inventory
i. Napkins, paper cups and bags: Equipment or inventory; probably more an equipment
j. DDs secret recipe for chocolate butter crunch donuts: General intangible or equipment? Its more a
GI b/c its the recipe information that is of value.
k. Cash register, oven, pans, and trays: Equipment, but may be fixtures too; you could use both terms
also b/c theyre not mutually exclusive; anytime you have an equipment, it could be a fixture.
Problem 2.6, page 74
AI is a genetic laboratory that grows various life forms that it sells for use in medical research.
Classify the life forms if AI offers them as collateral for a loan. How would you classify its patent for life
form C-256H? What about a computer program AI developed to test the performance of its products?
Data reports produced by the program?
Life forms grown is inventory. It may be a farm product too when we sell it.
The patent would be a general intangible.
Computer program would be a general intangible.
Data reports would be a general intangible. If not, itll have to be equipment as the residual.
Scope of Interest Taken
Citizens Bank & Trust v. Gibson Lumber Co., page 97
Facts: G granted a SI in its property to C. A SA was perfected between them. The SA described the
collateral in which C took a SI as all inventory of lumber and logs, accounts receivable, all sawmill
equipment and all rolling stock, including, but not limited to Items not specifically listed as
collateral were Gs gang saw, Delta feeder mechanism and a Detroit Allison diesel generator. These
items were sold at auction. C claimed that it was entitled to the proceeds. Bankruptcy court found
the omnibus clause describing the collateral were not sufficient to include the latter items.
Issue 1: Whether or not omnibus clauses are effective in Kentucky when used to describe general
types of collateral in security agreements.
Issue 2: Whether it remains effective against certain specific collateral that is not listed on a schedule
of specific items of collateral which is also part of the security agreement.
Holding: Court here did find the omnibus clause all equipment to be effective as to cover the latter
items.
As for the second issue, intent of the parties was ambiguous. Here, the use of both a schedule listing
specific items of collateral and an omnibus clause describing a general type of collateral creates
ambiguity when a specific item fails to appear on the schedule but is ostensibly covered by the
omnibus clause.
Rule: If a SA contains an omnibus clause and a schedule of specific collateral which does not list all
that the omnibus clause ostensibly describes, then the initial creditor has failed to provide adequate
notice to subsequent creditors and the ambiguity shall be construed against the initial creditor.

The drafter should have decided whether he wanted to be general or specific in describing the collateral.
Rely either on a specific least or the omnibus clause.
Lets assume that Zinnecker borrows 3K from you. He wants to secure a SI in his TV.
Could Z say all assets? Too broad
TV or television? We dont know which one; he may have more than one.
RCA XL-100 19 SN #456AZ? Yes. Specific
Can you get too particular? Yes. It depends on how court sees it.
Standard to follow: It has to reasonably identify the collateral
Lets assume on Friday, X goes out and buys another TV?
Would I get it? Debtor would say all means all as of now, not in the future.
Generally, if you want to grant a SI in assets not yet acquired, you must include language describing so.
Creditors, however, can include after-acquired assets ! 9-204
Account receivable and inventory are usually what creditors would want to include in after-acquired SI.
Not only assets of today, but also in the future.
Exceptions: 9-204(b)
Other than that, creditor can obtain after-acquired property in anything else.
*If you wanted to circumvent the after-acquired clause, you could always execute another security
agreement. Do this to avoid worrying about the creditor every time you acquire new property.
9-204 After-acquired Property; Future Advances
(a) After-acquired collateral:
(b) When after-acquired clause is not effective: A SI does not attach under a term
constituting an after-acquired property clause to:
1. consumer goods, other than an accession when given as additional security,
unless the debtor acquires rights in them within 10 days after the secured party
gives value; or
2. a commercial tort claim
(c) Future advances and other value:
Problem #2-3 in handout: After-acquired property clause; consumer protection: 9-204(b)
On 9/1, TRZ borrows $6,000 from WFB. TRZ executes a SA that creates a SI in (i) Steinway piano w/
bench and (ii) all electronic entertainment equipment (including, w/o limitation, stereo equipment, TVs,
and VCRs), whether now owned or hereafter acquired. TRZ makes the following acquisitions during the
month of September:
9/5
Borrows $6,000
9/5
Compact disk player ($150)
9/8
Personal computer ($3,000 using WFBs money)
9/12 TV ($400)
Which of the three purchases are part of the collateral? All of them (its within 10 days).
Has WFB committed an unfair act or practice under the Federal Trade Commission Act? See FTC
Credit Practices Rules 444.2(a)(4) and 444.1(i) [pp. 1907-1909 0f 2001 statutes book.] Yes, see
444.2(4)
Ask who or what is the debtor?
Ask what are the goods used for?
Assume here that they are consumer goods.

No timing problem (its within 10 days)

We have a description problem. Its possible that the PC is not part of the collateral.
Without limitation is the tricky language here.
Unless we specifically mention PC, theres a danger it may not be included.
What about FTC issue?
When the statute refers to a nonpossessory, we ask is the secured party in possession. If not, its a
nonpossessory interest. Next, ask if it is household goods? If it is a household good, there will be a FTC
violation. Piano is furniture. Compact disk player? Probably not b/c its under exclusion clause. TV?
Yes, especially if its the only one you own. CP? We dont care b/c facts tells you whose money you
used to buy it (Wells Fargo). This makes it a purchase money security interest and therefore will not
violate FTC rules. Anytime that a creditor lends you money to buy something and turns around and takes
a secured interest in the very collateral that youre obtaining, it is a purchase money security interest
(PMSI 9-103). Well discuss this more later on in the semester b/c it is important.
9-204(c) means basically that you dont have to promise to make the loan; just acknowledge that there
is future debt.
2 components of SI:
l. s must wear: Equipment or inventory
m. Napkins, paper cups and bags: Equipment or inventory; probably more an equipment
n. DDs secret recipe for chocolate butter crunch donuts: General intangible or equipment? Its more a
GI b/c its the recipe information that is of value.
o. Cash register, oven, pans, and trays: Equipment, but may be fixtures too; you could use both terms
also b/c theyre not mutually exclusive; anytime you have an equipment, it could be a fixture.
Problem 2.6, page 74
AI is a genetic laboratory that grows various life forms that it sells for use in medical research.
Classify the life forms if AI offers them as collateral for a loan. How would you classify its patent for life
form C-256H? What about a computer program AI developed to test the performance of its products?
Data reports produced by the program?
Life forms grown is inventory. It may be a farm product too when we sell it.
The patent would be a general intangible.
Computer program would be a general intangible.
Data reports would be a general intangible. If not, itll have to be equipment as the residual.
Scope of Interest Taken
Citizens Bank & Trust v. Gibson Lumber Co., page 97
Facts: G granted a SI in its property to C. A SA was perfected between them. The SA described the
collateral in which C took a SI as all inventory of lumber and logs, accounts receivable, all sawmill
equipment and all rolling stock, including, but not limited to Items not specifically listed as
collateral were Gs gang saw, Delta feeder mechanism and a Detroit Allison diesel generator. These
items were sold at auction. C claimed that it was entitled to the proceeds. Bankruptcy court found
the omnibus clause describing the collateral were not sufficient to include the latter items.
Issue 1: Whether or not omnibus clauses are effective in Kentucky when used to describe general
types of collateral in security agreements.
Issue 2: Whether it remains effective against certain specific collateral that is not listed on a schedule
of specific items of collateral which is also part of the security agreement.
Holding: Court here did find the omnibus clause all equipment to be effective as to cover the latter
items.
As for the second issue, intent of the parties was ambiguous. Here, the use of both a schedule listing
specific items of collateral and an omnibus clause describing a general type of collateral creates

ambiguity when a specific item fails to appear on the schedule but is ostensibly covered by the
omnibus clause.
Rule: If a SA contains an omnibus clause and a schedule of specific collateral which does not list all
that the omnibus clause ostensibly describes, then the initial creditor has failed to provide adequate
notice to subsequent creditors and the ambiguity shall be construed against the initial creditor.
The drafter should have decided whether he wanted to be general or specific in describing the collateral.
Rely either on a specific least or the omnibus clause.
Lets assume that Zinnecker borrows 3K from you. He wants to secure a SI in his TV.
Could Z say all assets? Too broad
TV or television? We dont know which one; he may have more than one.
RCA XL-100 19 SN #456AZ? Yes. Specific
Can you get too particular? Yes. It depends on how court sees it.
Standard to follow: It has to reasonably identify the collateral
Lets assume on Friday, X goes out and buys another TV?
Would I get it? Debtor would say all means all as of now, not in the future.
Generally, if you want to grant a SI in assets not yet acquired, you must include language describing so.
Creditors, however, can include after-acquired assets ! 9-204
Account receivable and inventory are usually what creditors would want to include in after-acquired SI.
Not only assets of today, but also in the future.
Exceptions: 9-204(b)
Other than that, creditor can obtain after-acquired property in anything else.
*If you wanted to circumvent the after-acquired clause, you could always execute another security
agreement. Do this to avoid worrying about the creditor every time you acquire new property.
9-204 After-acquired Property; Future Advances
(a) After-acquired collateral:
(b) When after-acquired clause is not effective: A SI does not attach under a term
constituting an after-acquired property clause to:
1. consumer goods, other than an accession when given as additional security,
unless the debtor acquires rights in them within 10 days after the secured party
gives value; or
2. a commercial tort claim
(c) Future advances and other value:
Problem #2-3 in handout: After-acquired property clause; consumer protection: 9-204(b)
On 9/1, TRZ borrows $6,000 from WFB. TRZ executes a SA that creates a SI in (i) Steinway piano w/
bench and (ii) all electronic entertainment equipment (including, w/o limitation, stereo equipment, TVs,
and VCRs), whether now owned or hereafter acquired. TRZ makes the following acquisitions during the
month of September:
9/5
Borrows $6,000
9/5
Compact disk player ($150)
9/8
Personal computer ($3,000 using WFBs money)
9/12 TV ($400)
Which of the three purchases are part of the collateral? All of them (its within 10 days).

Has WFB committed an unfair act or practice under the Federal Trade Commission Act? See FTC
Credit Practices Rules 444.2(a)(4) and 444.1(i) [pp. 1907-1909 0f 2001 statutes book.] Yes, see
444.2(4)
Ask who or what is the debtor?
Ask what are the goods used for?
Assume here that they are consumer goods.
No timing problem (its within 10 days)
We have a description problem. Its possible that the PC is not part of the collateral.
Without limitation is the tricky language here.
Unless we specifically mention PC, theres a danger it may not be included.
What about FTC issue?
When the statute refers to a nonpossessory, we ask is the secured party in possession. If not, its a
nonpossessory interest. Next, ask if it is household goods? If it is a household good, there will be a FTC
violation. Piano is furniture. Compact disk player? Probably not b/c its under exclusion clause. TV?
Yes, especially if its the only one you own. CP? We dont care b/c facts tells you whose money you
used to buy it (Wells Fargo). This makes it a purchase money security interest and therefore will not
violate FTC rules. Anytime that a creditor lends you money to buy something and turns around and takes
a secured interest in the very collateral that youre obtaining, it is a purchase money security interest
(PMSI 9-103). Well discuss this more later on in the semester b/c it is important.
9-204(c) means basically that you dont have to promise to make the loan; just acknowledge that there
is future debt.
2 components of SI:
p. s must wear: Equipment or inventory
q. Napkins, paper cups and bags: Equipment or inventory; probably more an equipment
r. DDs secret recipe for chocolate butter crunch donuts: General intangible or equipment? Its more a
GI b/c its the recipe information that is of value.
s. Cash register, oven, pans, and trays: Equipment, but may be fixtures too; you could use both terms
also b/c theyre not mutually exclusive; anytime you have an equipment, it could be a fixture.
Problem 2.6, page 74
AI is a genetic laboratory that grows various life forms that it sells for use in medical research.
Classify the life forms if AI offers them as collateral for a loan. How would you classify its patent for life
form C-256H? What about a computer program AI developed to test the performance of its products?
Data reports produced by the program?
Life forms grown is inventory. It may be a farm product too when we sell it.
The patent would be a general intangible.
Computer program would be a general intangible.
Data reports would be a general intangible. If not, itll have to be equipment as the residual.
Scope of Interest Taken
Citizens Bank & Trust v. Gibson Lumber Co., page 97
Facts: G granted a SI in its property to C. A SA was perfected between them. The SA described the
collateral in which C took a SI as all inventory of lumber and logs, accounts receivable, all sawmill
equipment and all rolling stock, including, but not limited to Items not specifically listed as
collateral were Gs gang saw, Delta feeder mechanism and a Detroit Allison diesel generator. These
items were sold at auction. C claimed that it was entitled to the proceeds. Bankruptcy court found
the omnibus clause describing the collateral were not sufficient to include the latter items.
Issue 1: Whether or not omnibus clauses are effective in Kentucky when used to describe general
types of collateral in security agreements.

Issue 2: Whether it remains effective against certain specific collateral that is not listed on a schedule
of specific items of collateral which is also part of the security agreement.
Holding: Court here did find the omnibus clause all equipment to be effective as to cover the latter
items.
As for the second issue, intent of the parties was ambiguous. Here, the use of both a schedule listing
specific items of collateral and an omnibus clause describing a general type of collateral creates
ambiguity when a specific item fails to appear on the schedule but is ostensibly covered by the
omnibus clause.
Rule: If a SA contains an omnibus clause and a schedule of specific collateral which does not list all
that the omnibus clause ostensibly describes, then the initial creditor has failed to provide adequate
notice to subsequent creditors and the ambiguity shall be construed against the initial creditor.
The drafter should have decided whether he wanted to be general or specific in describing the collateral.
Rely either on a specific least or the omnibus clause.
Lets assume that Zinnecker borrows 3K from you. He wants to secure a SI in his TV.
Could Z say all assets? Too broad
TV or television? We dont know which one; he may have more than one.
RCA XL-100 19 SN #456AZ? Yes. Specific
Can you get too particular? Yes. It depends on how court sees it.
Standard to follow: It has to reasonably identify the collateral
Lets assume on Friday, X goes out and buys another TV?
Would I get it? Debtor would say all means all as of now, not in the future.
Generally, if you want to grant a SI in assets not yet acquired, you must include language describing so.
Creditors, however, can include after-acquired assets ! 9-204
Account receivable and inventory are usually what creditors would want to include in after-acquired SI.
Not only assets of today, but also in the future.
Exceptions: 9-204(b)
Other than that, creditor can obtain after-acquired property in anything else.
*If you wanted to circumvent the after-acquired clause, you could always execute another security
agreement. Do this to avoid worrying about the creditor every time you acquire new property.
9-204 After-acquired Property; Future Advances
(a) After-acquired collateral:
(b) When after-acquired clause is not effective: A SI does not attach under a term
constituting an after-acquired property clause to:
1. consumer goods, other than an accession when given as additional security,
unless the debtor acquires rights in them within 10 days after the secured party
gives value; or
2. a commercial tort claim
(c) Future advances and other value:
Problem #2-3 in handout: After-acquired property clause; consumer protection: 9-204(b)
On 9/1, TRZ borrows $6,000 from WFB. TRZ executes a SA that creates a SI in (i) Steinway piano w/
bench and (ii) all electronic entertainment equipment (including, w/o limitation, stereo equipment, TVs,
and VCRs), whether now owned or hereafter acquired. TRZ makes the following acquisitions during the
month of September:
9/5

Borrows $6,000

9/5
Compact disk player ($150)
9/8
Personal computer ($3,000 using WFBs money)
9/12 TV ($400)
Which of the three purchases are part of the collateral? All of them (its within 10 days).
Has WFB committed an unfair act or practice under the Federal Trade Commission Act? See FTC
Credit Practices Rules 444.2(a)(4) and 444.1(i) [pp. 1907-1909 0f 2001 statutes book.] Yes, see
444.2(4)
Ask who or what is the debtor?
Ask what are the goods used for?
Assume here that they are consumer goods.
No timing problem (its within 10 days)
We have a description problem. Its possible that the PC is not part of the collateral.
Without limitation is the tricky language here.
Unless we specifically mention PC, theres a danger it may not be included.
What about FTC issue?
When the statute refers to a nonpossessory, we ask is the secured party in possession. If not, its a
nonpossessory interest. Next, ask if it is household goods? If it is a household good, there will be a FTC
violation. Piano is furniture. Compact disk player? Probably not b/c its under exclusion clause. TV?
Yes, especially if its the only one you own. CP? We dont care b/c facts tells you whose money you
used to buy it (Wells Fargo). This makes it a purchase money security interest and therefore will not
violate FTC rules. Anytime that a creditor lends you money to buy something and turns around and takes
a secured interest in the very collateral that youre obtaining, it is a purchase money security interest
(PMSI 9-103). Well discuss this more later on in the semester b/c it is important.
9-204(c) means basically that you dont have to promise to make the loan; just acknowledge that there
is future debt.
2 components of SI: