It’s not always what a business person might expect. The practical application of Uniform Commercial Code Article 9, which governs secured transactions, can be a bit mysterious. Even well-documented and properly perfected security interests are sometimes illusory. This is especially true in the case of goods sent to another company for toll processing (i.e., processing for a fee) or to be joined with other raw materials in a finished product. The problem arises from the concept of “commingled goods” in UCC Section 9-336. The UCC calls goods “commingled goods” when they are “physically united” with others such that “their identity is lost in a product or mass.” The loss of separate identity is the essence of commingled goods. Goods that are joined with others but that nevertheless retain their separate identities are called “accessions” and are treated under different rules. After commingling, no security interest survives in the formerly separate goods. Rather, after commingling, the security interest in the original goods attaches to the resulting product or mass. However, if the product or mass or any of its other components is also the subject of a pre-commingling security interest, then the issue becomes the priority and value of the competing… Read full this story
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Mysteries of Uniform Commercial Code Article 9: Security Interests in Commingled Goods have 295 words, post on www.natlawreview.com at May 20, 2012. This is cached page on Law Breaking News. If you want remove this page, please contact us.