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Public Act 91-0893
SB1231 Enrolled LRB9106284WHdv
AN ACT in relation to secured transactions.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Uniform Commercial Code is amended by
changing Sections 9-101, 9-102, 9-103, 9-104, 9-105, 9-106,
9-107, 9-108, 9-109, 9-110, 9-112, 9-113, 9-114, 9-115,
9-116, 9-150, 9-201, 9-202, 9-203, 9-204, 9-205, 9-205.1,
9-206, 9-207, 9-208, 9-301, 9-302, 9-303, 9-304, 9-305,
9-306, 9-306.01, 9-306.02, 9-307, 9-307.1, 9-307.2, 9-308,
9-309, 9-310, 9-311, 9-312, 9-313, 9-314, 9-315, 9-316,
9-317, 9-318, 9-401, 9-401A, 9-402, 9-403, 9-404, 9-405,
9-406, 9-407, 9-408, 9-410, 9-501, 9-502, 9-503, 9-504,
9-505, 9-506, 9-507, 9-9901, and 9-9902, adding Sections
9-209, 9-210, 9-315.01, 9-315.02, 9-319, 9-320, 9-320.1,
9-320.2, 9-321, 9-322, 9-323, 9-324, 9-325, 9-326, 9-327,
9-328, 9-329, 9-330, 9-331, 9-332, 9-333, 9-334, 9-335,
9-336, 9-337, 9-338, 9-339, 9-340, 9-341, 9-342, 9-409,
9-508, 9-509, 9-510, 9-511, 9-512, 9-513, 9-514, 9-515,
9-516, 9-517, 9-518, 9-519, 9-520, 9-521, 9-522, 9-523,
9-524, 9-525, 9-526, 9-527, 9-601, 9-602, 9-603, 9-604,
9-605, 9-606, 9-607, 9-608, 9-609, 9-610, 9-611, 9-612,
9-613, 9-614, 9-615, 9-616, 9-617, 9-618, 9-619, 9-620,
9-621, 9-622, 9-623, 9-624, 9-625, 9-626, 9-627, 9-628,
9-701, 9-702, 9-703, 9-704, 9-705, 9-706, 9-707, 9-708,
9-709, and 9-710, changing the headings of Article 9 and
Parts 1, 2, 3, 4, 5, and 99 of Article 9, and adding headings
of Parts 6 and 7 of Article 9, Subparts 1 and 2 of Part 1 of
Article 9, Subparts 1 and 2 of Part 2 of Article 9, Subparts
1, 2, 3, and 4 of Part 3 of Article 9, Subparts 1 and 2 of
Part 5 of Article 9, and Subparts 1 and 2 of Part 6 of
Article 9 as follows:
(810 ILCS 5/Art. 9 heading)
ARTICLE 9
SECURED TRANSACTIONS: SALES OF ACCOUNTS,
CONTRACT RIGHTS AND CHATTEL PAPER
(810 ILCS 5/Art. 9, Part 1 heading)
PART 1. GENERAL PROVISIONS
SHORT TITLE, APPLICABILITY AND DEFINITIONS
(810 ILCS 5/Art. 9, Part 1, Subpart 1 heading new)
SUBPART 1. SHORT TITLE, DEFINITIONS, AND GENERAL CONCEPTS
(810 ILCS 5/9-101) (from Ch. 26, par. 9-101)
Sec. 9-101. Short title. This Article may be cited as
Uniform Commercial Code-Secured Transactions. Short title.
This Article shall be known and may be cited as Uniform
Commercial Code--Secured Transactions.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-102) (from Ch. 26, par. 9-102)
Sec. 9-102. Definitions and index of definitions.
(a) Article 9 definitions. In this Article:
(1) "Accession" means goods that are physically
united with other goods in such a manner that the
identity of the original goods is not lost.
(2) "Account", except as used in "account for",
means a right to payment of a monetary obligation,
whether or not earned by performance, (i) for property
that has been or is to be sold, leased, licensed,
assigned, or otherwise disposed of, (ii) for services
rendered or to be rendered, (iii) for a policy of
insurance issued or to be issued, (iv) for a secondary
obligation incurred or to be incurred, (v) for energy
provided or to be provided, (vi) for the use or hire of a
vessel under a charter or other contract, (vii) arising
out of the use of a credit or charge card or information
contained on or for use with the card, or (viii) as
winnings in a lottery or other game of chance operated or
sponsored by a State, governmental unit of a State, or
person licensed or authorized to operate the game by a
State or governmental unit of a State. The term includes
health-care-insurance receivables. The term does not
include (i) rights to payment evidenced by chattel paper
or an instrument, (ii) commercial tort claims, (iii)
deposit accounts, (iv) investment property, (v)
letter-of-credit rights or letters of credit, or (vi)
rights to payment for money or funds advanced or sold,
other than rights arising out of the use of a credit or
charge card or information contained on or for use with
the card.
(3) "Account debtor" means a person obligated on an
account, chattel paper, or general intangible. The term
does not include persons obligated to pay a negotiable
instrument, even if the instrument constitutes part of
chattel paper.
(4) "Accounting", except as used in "accounting
for", means a record:
(A) authenticated by a secured party;
(B) indicating the aggregate unpaid secured
obligations as of a date not more than 35 days
earlier or 35 days later than the date of the
record; and
(C) identifying the components of the
obligations in reasonable detail.
(5) "Agricultural lien" means an interest, other
than a security interest, in farm products:
(A) which secures payment or performance of an
obligation for:
(i) goods or services furnished in
connection with a debtor's farming operation;
or
(ii) rent on real property leased by a
debtor in connection with its farming
operation;
(B) which is created by statute in favor of a
person that:
(i) in the ordinary course of its
business furnished goods or services to a
debtor in connection with a debtor's farming
operation; or
(ii) leased real property to a debtor in
connection with the debtor's farming operation;
and
(C) whose effectiveness does not depend on the
person's possession of the personal property.
(6) "As-extracted collateral" means:
(A) oil, gas, or other minerals that are
subject to a security interest that:
(i) is created by a debtor having an
interest in the minerals before extraction; and
(ii) attaches to the minerals as
extracted; or
(B) accounts arising out of the sale at the
wellhead or minehead of oil, gas, or other minerals
in which the debtor had an interest before
extraction.
(7) "Authenticate" means:
(A) to sign; or
(B) to execute or otherwise adopt a symbol, or
encrypt or similarly process a record in whole or in
part, with the present intent of the authenticating
person to identify the person and adopt or accept a
record.
(8) "Bank" means an organization that is engaged in
the business of banking. The term includes savings
banks, savings and loan associations, credit unions, and
trust companies.
(9) "Cash proceeds" means proceeds that are money,
checks, deposit accounts, or the like.
(10) "Certificate of title" means a certificate of
title with respect to which a statute provides for the
security interest in question to be indicated on the
certificate as a condition or result of the security
interest's obtaining priority over the rights of a lien
creditor with respect to the collateral.
(11) "Chattel paper" means a record or records that
evidence both a monetary obligation and a security
interest in specific goods, a security interest in
specific goods and software used in the goods, a security
interest in specific goods and license of software used
in the goods, a lease of specific goods, or a lease of
specified goods and a license of software used in the
goods. In this paragraph, "monetary obligation" means a
monetary obligation secured by the goods or owed under a
lease of the goods and includes a monetary obligation
with respect to software used in the goods. The term
does not include (i) charters or other contracts
involving the use or hire of a vessel or (ii) records
that evidence a right to payment arising out of the use
of a credit or charge card or information contained on or
for use with the card. If a transaction is evidenced by
records that include an instrument or series of
instruments, the group of records taken together
constitutes chattel paper.
(12) "Collateral" means the property subject to a
security interest or agricultural lien. The term
includes:
(A) proceeds to which a security interest
attaches;
(B) accounts, chattel paper, payment
intangibles, and promissory notes that have been
sold; and
(C) goods that are the subject of a
consignment.
(13) "Commercial tort claim" means a claim arising
in tort with respect to which:
(A) the claimant is an organization; or
(B) the claimant is an individual and the
claim:
(i) arose in the course of the claimant's
business or profession; and
(ii) does not include damages arising out
of personal injury to or the death of an
individual.
(14) "Commodity account" means an account
maintained by a commodity intermediary in which a
commodity contract is carried for a commodity customer.
(15) "Commodity contract" means a commodity futures
contract, an option on a commodity futures contract, a
commodity option, or another contract if the contract or
option is:
(A) traded on or subject to the rules of a
board of trade that has been designated as a
contract market for such a contract pursuant to
federal commodities laws; or
(B) traded on a foreign commodity board of
trade, exchange, or market, and is carried on the
books of a commodity intermediary for a commodity
customer.
(16) "Commodity customer" means a person for which
a commodity intermediary carries a commodity contract on
its books.
(17) "Commodity intermediary" means a person that:
(A) is registered as a futures commission
merchant under federal commodities law; or
(B) in the ordinary course of its business
provides clearance or settlement services for a
board of trade that has been designated as a
contract market pursuant to federal commodities law.
(18) "Communicate" means:
(A) to send a written or other tangible
record;
(B) to transmit a record by any means agreed
upon by the persons sending and receiving the
record; or
(C) in the case of transmission of a record to
or by a filing office, to transmit a record by any
means prescribed by filing-office rule.
(19) "Consignee" means a merchant to which goods
are delivered in a consignment.
(20) "Consignment" means a transaction, regardless
of its form, in which a person delivers goods to a
merchant for the purpose of sale and:
(A) the merchant:
(i) deals in goods of that kind under a
name other than the name of the person making
delivery;
(ii) is not an auctioneer; and
(iii) is not generally known by its
creditors to be substantially engaged in
selling the goods of others;
(B) with respect to each delivery, the
aggregate value of the goods is $1,000 or more at
the time of delivery;
(C) the goods are not consumer goods
immediately before delivery; and
(D) the transaction does not create a security
interest that secures an obligation.
(21) "Consignor" means a person that delivers goods
to a consignee in a consignment.
(22) "Consumer debtor" means a debtor in a consumer
transaction.
(23) "Consumer goods" means goods that are used or
bought for use primarily for personal, family, or
household purposes.
(24) "Consumer-goods transaction" means a consumer
transaction in which:
(A) an individual incurs an obligation
primarily for personal, family, or household
purposes; and
(B) a security interest in consumer goods
secures the obligation.
(25) "Consumer obligor" means an obligor who is an
individual and who incurred the obligation as part of a
transaction entered into primarily for personal, family,
or household purposes.
(26) "Consumer transaction" means a transaction in
which (i) an individual incurs an obligation primarily
for personal, family, or household purposes, (ii) a
security interest secures the obligation, and (iii) the
collateral is held or acquired primarily for personal,
family, or household purposes. The term includes
consumer-goods transactions.
(27) "Continuation statement" means an amendment of
a financing statement which:
(A) identifies, by its file number, the
initial financing statement to which it relates; and
(B) indicates that it is a continuation
statement for, or that it is filed to continue the
effectiveness of, the identified financing
statement.
(28) "Debtor" means:
(A) a person having an interest, other than a
security interest or other lien, in the collateral,
whether or not the person is an obligor;
(B) a seller of accounts, chattel paper,
payment intangibles, or promissory notes; or
(C) a consignee.
(29) "Deposit account" means a demand, time,
savings, passbook, nonnegotiable certificates of deposit,
uncertificated certificates of deposit, nontransferrable
certificates of deposit, or similar account maintained
with a bank. The term does not include investment
property or accounts evidenced by an instrument.
(30) "Document" means a document of title or a
receipt of the type described in Section 7-201(2).
(31) "Electronic chattel paper" means chattel paper
evidenced by a record or records consisting of
information stored in an electronic medium.
(32) "Encumbrance" means a right, other than an
ownership interest, in real property. The term includes
mortgages and other liens on real property.
(33) "Equipment" means goods other than inventory,
farm products, or consumer goods.
(34) "Farm products" means goods, other than
standing timber, with respect to which the debtor is
engaged in a farming operation and which are:
(A) crops grown, growing, or to be grown,
including:
(i) crops produced on trees, vines, and
bushes; and
(ii) aquatic goods produced in
aquacultural operations;
(B) livestock, born or unborn, including
aquatic goods produced in aquacultural operations;
(C) supplies used or produced in a farming
operation; or
(D) products of crops or livestock in their
unmanufactured states.
(35) "Farming operation" means raising,
cultivating, propagating, fattening, grazing, or any
other farming, livestock, or aquacultural operation.
(36) "File number" means the number assigned to an
initial financing statement pursuant to Section 9-519(a).
(37) "Filing office" means an office designated in
Section 9-501 as the place to file a financing statement.
(38) "Filing-office rule" means a rule adopted
pursuant to Section 9-526.
(39) "Financing statement" means a record or
records composed of an initial financing statement and
any filed record relating to the initial financing
statement.
(40) "Fixture filing" means the filing of a
financing statement covering goods that are or are to
become fixtures and satisfying Section 9-502(a) and (b).
The term includes the filing of a financing statement
covering goods of a transmitting utility which are or are
to become fixtures.
(41) "Fixtures" means goods that have become so
related to particular real property that an interest in
them arises under real property law.
(42) "General intangible" means any personal
property, including things in action, other than
accounts, chattel paper, commercial tort claims, deposit
accounts, documents, goods, instruments, investment
property, letter-of-credit rights, letters of credit,
money, and oil, gas, or other minerals before extraction.
The term includes payment intangibles and software.
(43) "Good faith" means honesty in fact and the
observance of reasonable commercial standards of fair
dealing.
(44) "Goods" means all things that are movable when
a security interest attaches. The term includes (i)
fixtures, (ii) standing timber that is to be cut and
removed under a conveyance or contract for sale, (iii)
the unborn young of animals, (iv) crops grown, growing,
or to be grown, even if the crops are produced on trees,
vines, or bushes, and (v) manufactured homes. The term
also includes a computer program embedded in goods and
any supporting information provided in connection with a
transaction relating to the program if (i) the program is
associated with the goods in such a manner that it
customarily is considered part of the goods, or (ii) by
becoming the owner of the goods, a person acquires a
right to use the program in connection with the goods.
The term does not include a computer program embedded in
goods that consist solely of the medium in which the
program is embedded. The term also does not include
accounts, chattel paper, commercial tort claims, deposit
accounts, documents, general intangibles, instruments,
investment property, letter-of-credit rights, letters of
credit, money, or oil, gas, or other minerals before
extraction.
(45) "Governmental unit" means a subdivision,
agency, department, county, parish, municipality, or
other unit of the government of the United States, a
State, or a foreign country. The term includes an
organization having a separate corporate existence if the
organization is eligible to issue debt on which interest
is exempt from income taxation under the laws of the
United States.
(46) "Health-care-insurance receivable" means an
interest in or claim under a policy of insurance which is
a right to payment of a monetary obligation for
health-care goods or services provided.
(47) "Instrument" means a negotiable instrument or
any other writing that evidences a right to the payment
of a monetary obligation, is not itself a security
agreement or lease, and is of a type that in ordinary
course of business is transferred by delivery with any
necessary indorsement or assignment. The term does not
include (i) investment property, (ii) letters of credit,
(iii) nonnegotiable certificates of deposit, (iv)
uncertificated certificates of deposit, (v)
nontransferrable certificates of deposit, or (vi)
writings that evidence a right to payment arising out of
the use of a credit or charge card or information
contained on or for use with the card.
(48) "Inventory" means goods, other than farm
products, which:
(A) are leased by a person as lessor;
(B) are held by a person for sale or lease or
to be furnished under a contract of service;
(C) are furnished by a person under a contract
of service; or
(D) consist of raw materials, work in process,
or materials used or consumed in a business.
(49) "Investment property" means a security,
whether certificated or uncertificated, security
entitlement, securities account, commodity contract, or
commodity account.
(50) "Jurisdiction of organization", with respect
to a registered organization, means the jurisdiction
under whose law the organization is organized.
(51) "Letter-of-credit right" means a right to
payment or performance under a letter of credit, whether
or not the beneficiary has demanded or is at the time
entitled to demand payment or performance. The term does
not include the right of a beneficiary to demand payment
or performance under a letter of credit.
(52) "Lien creditor" means:
(A) a creditor that has acquired a lien on the
property involved by attachment, levy, or the like;
(B) an assignee for benefit of creditors from
the time of assignment;
(C) a trustee in bankruptcy from the date of
the filing of the petition; or
(D) a receiver in equity from the time of
appointment.
(53) "Manufactured home" means a structure,
transportable in one or more sections, which, in the
traveling mode, is eight body feet or more in width or 40
body feet or more in length, or, when erected on site, is
320 or more square feet, and which is built on a
permanent chassis and designed to be used as a dwelling
with or without a permanent foundation when connected to
the required utilities, and includes the plumbing,
heating, air-conditioning, and electrical systems
contained therein. The term includes any structure that
meets all of the requirements of this paragraph except
the size requirements and with respect to which the
manufacturer voluntarily files a certification required
by the United States Secretary of Housing and Urban
Development and complies with the standards established
under Title 42 of the United States Code.
(54) "Manufactured-home transaction" means a
secured transaction:
(A) that creates a purchase-money security
interest in a manufactured home, other than a
manufactured home held as inventory; or
(B) in which a manufactured home, other than a
manufactured home held as inventory, is the primary
collateral.
(55) "Mortgage" means a consensual interest in real
property, including fixtures, which secures payment or
performance of an obligation.
(56) "New debtor" means a person that becomes bound
as debtor under Section 9-203(d) by a security agreement
previously entered into by another person.
(57) "New value" means (i) money, (ii) money's
worth in property, services, or new credit, or (iii)
release by a transferee of an interest in property
previously transferred to the transferee. The term does
not include an obligation substituted for another
obligation.
(58) "Noncash proceeds" means proceeds other than
cash proceeds.
(59) "Obligor" means a person that, with respect to
an obligation secured by a security interest in or an
agricultural lien on the collateral, (i) owes payment or
other performance of the obligation, (ii) has provided
property other than the collateral to secure payment or
other performance of the obligation, or (iii) is
otherwise accountable in whole or in part for payment or
other performance of the obligation. The term does not
include issuers or nominated persons under a letter of
credit.
(60) "Original debtor", except as used in Section
9-310(c), means a person that, as debtor, entered into a
security agreement to which a new debtor has become bound
under Section 9-203(d).
(61) "Payment intangible" means a general
intangible under which the account debtor's principal
obligation is a monetary obligation.
(62) "Person related to", with respect to an
individual, means:
(A) the spouse of the individual;
(B) a brother, brother-in-law, sister, or
sister-in-law of the individual;
(C) an ancestor or lineal descendant of the
individual or the individual's spouse; or
(D) any other relative, by blood or marriage,
of the individual or the individual's spouse who
shares the same home with the individual.
(63) "Person related to", with respect to an
organization, means:
(A) a person directly or indirectly
controlling, controlled by, or under common control
with the organization;
(B) an officer or director of, or a person
performing similar functions with respect to, the
organization;
(C) an officer or director of, or a person
performing similar functions with respect to, a
person described in subparagraph (A);
(D) the spouse of an individual described in
subparagraph (A), (B), or (C); or
(E) an individual who is related by blood or
marriage to an individual described in subparagraph
(A), (B), (C), or (D) and shares the same home with
the individual.
(64) "Proceeds", except as used in Section
9-609(b), means the following property:
(A) whatever is acquired upon the sale, lease,
license, exchange, or other disposition of
collateral;
(B) whatever is collected on, or distributed
on account of, collateral;
(C) rights arising out of collateral;
(D) to the extent of the value of collateral,
claims arising out of the loss, nonconformity, or
interference with the use of, defects or
infringement of rights in, or damage to, the
collateral; or
(E) to the extent of the value of collateral
and to the extent payable to the debtor or the
secured party, insurance payable by reason of the
loss or nonconformity of, defects or infringement of
rights in, or damage to, the collateral.
(65) "Promissory note" means an instrument that
evidences a promise to pay a monetary obligation, does
not evidence an order to pay, and does not contain an
acknowledgment by a bank that the bank has received for
deposit a sum of money or funds.
(66) "Proposal" means a record authenticated by a
secured party which includes the terms on which the
secured party is willing to accept collateral in full or
partial satisfaction of the obligation it secures
pursuant to Sections 9-620, 9-621, and 9-622.
(67) "Public-finance transaction" means a secured
transaction in connection with which:
(A) debt securities are issued;
(B) all or a portion of the securities issued
have an initial stated maturity of at least 20
years; and
(C) the debtor, obligor, secured party,
account debtor or other person obligated on
collateral, assignor or assignee of a secured
obligation, or assignor or assignee of a security
interest is a State or a governmental unit of a
State.
(68) "Pursuant to commitment", with respect to an
advance made or other value given by a secured party,
means pursuant to the secured party's obligation, whether
or not a subsequent event of default or other event not
within the secured party's control has relieved or may
relieve the secured party from its obligation.
(69) "Record", except as used in "for record", "of
record", "record or legal title", and "record owner",
means information that is inscribed on a tangible medium
or which is stored in an electronic or other medium and
is retrievable in perceivable form.
(70) "Registered organization" means an
organization organized solely under the law of a single
State or the United States and as to which the State or
the United States must maintain a public record showing
the organization to have been organized.
(71) "Secondary obligor" means an obligor to the
extent that:
(A) the obligor's obligation is secondary; or
(B) the obligor has a right of recourse with
respect to an obligation secured by collateral
against the debtor, another obligor, or property of
either.
(72) "Secured party" means:
(A) a person in whose favor a security
interest is created or provided for under a security
agreement, whether or not any obligation to be
secured is outstanding;
(B) a person that holds an agricultural lien;
(C) a consignor;
(D) a person to which accounts, chattel paper,
payment intangibles, or promissory notes have been
sold;
(E) a trustee, indenture trustee, agent,
collateral agent, or other representative in whose
favor a security interest or agricultural lien is
created or provided for; or
(F) a person that holds a security interest
arising under Section 2-401, 2-505, 2-711(3),
2A-508(5), 4-210, or 5-118.
(73) "Security agreement" means an agreement that
creates or provides for a security interest.
(74) "Send", in connection with a record or
notification, means:
(A) to deposit in the mail, deliver for
transmission, or transmit by any other usual means
of communication, with postage or cost of
transmission provided for, addressed to any address
reasonable under the circumstances; or
(B) to cause the record or notification to be
received within the time that it would have been
received if properly sent under subparagraph (A).
(75) "Software" means a computer program and any
supporting information provided in connection with a
transaction relating to the program. The term does not
include a computer program that is included in the
definition of goods.
(76) "State" means a State of the United States,
the District of Columbia, Puerto Rico, the United States
Virgin Islands, or any territory or insular possession
subject to the jurisdiction of the United States.
(77) "Supporting obligation" means a
letter-of-credit right or secondary obligation that
supports the payment or performance of an account,
chattel paper, a document, a general intangible, an
instrument, or investment property.
(78) "Tangible chattel paper" means chattel paper
evidenced by a record or records consisting of
information that is inscribed on a tangible medium.
(79) "Termination statement" means an amendment of
a financing statement which:
(A) identifies, by its file number, the
initial financing statement to which it relates; and
(B) indicates either that it is a termination
statement or that the identified financing statement
is no longer effective.
(80) "Transmitting utility" means a person
primarily engaged in the business of:
(A) operating a railroad, subway, street
railway, or trolley bus;
(B) transmitting communications electrically,
electromagnetically, or by light;
(C) transmitting goods by pipeline or sewer;
or
(D) transmitting or producing and transmitting
electricity, steam, gas, or water.
(b) Definitions in other Articles. The following
definitions in other Articles apply to this Article:
"Applicant". Section 5-102.
"Beneficiary". Section 5-102.
"Broker". Section 8-102.
"Certificated security". Section 8-102.
"Check". Section 3-104.
"Clearing corporation". Section 8-102.
"Contract for sale". Section 2-106.
"Customer". Section 4-104.
"Entitlement holder". Section 8-102.
"Financial asset". Section 8-102.
"Holder in due course". Section 3-302.
"Issuer" (with respect to a letter of credit or
letter-of-credit right). Section 5-102.
"Issuer" (with respect to a security). Section 8-201.
"Lease". Section 2A-103.
"Lease agreement". Section 2A-103.
"Lease contract". Section 2A-103.
"Leasehold interest". Section 2A-103.
"Lessee". Section 2A-103.
"Lessee in ordinary course of business". Section 2A-103.
"Lessor". Section 2A-103.
"Lessor's residual interest". Section 2A-103.
"Letter of credit". Section 5-102.
"Merchant". Section 2-104.
"Negotiable instrument". Section 3-104.
"Nominated person". Section 5-102.
"Note". Section 3-104.
"Proceeds of a letter of credit". Section 5-114.
"Prove". Section 3-103.
"Sale". Section 2-106.
"Securities account". Section 8-501.
"Securities intermediary". Section 8-102.
"Security". Section 8-102.
"Security certificate". Section 8-102.
"Security entitlement". Section 8-102.
"Uncertificated security". Section 8-102.
(c) Article 1 definitions and principles. Article 1
contains general definitions and principles of construction
and interpretation applicable throughout this Article. Policy
and Subject Matter of Article.
(1) Except as otherwise provided in Section 9--104 on
excluded transactions, this Article applies
(a) to any transaction (regardless of its form)
which is intended to create a security interest in personal
property or fixtures including goods, documents, instruments,
general intangibles, chattel paper or accounts; and also
(b) to any sale of accounts or chattel paper.
(2) This Article applies to security interests created
by contract including pledge, assignment, chattel mortgage,
chattel trust, trust deed, factor's lien, equipment trust,
conditional sale, trust receipt, other lien or title
retention contract and lease or consignment intended as
security. This Article does not apply to statutory liens
except as provided in Section 9--310.
(3) The application of this Article to a security
interest in a secured obligation is not affected by the fact
that the obligation is itself secured by a transaction or
interest to which this Article does not apply.
(4) The application of this Article to a security
interest in a deposit account shall not displace a common law
right of set-off of the secured party as to a deposit account
maintained with the secured party.
(Source: P.A. 87-1037.)
(810 ILCS 5/9-103) (from Ch. 26, par. 9-103)
Sec. 9-103. Purchase-money security interest; application
of payments; burden of establishing.
(a) Definitions. In this Section:
(1) "purchase-money collateral" means goods or
software that secures a purchase-money obligation
incurred with respect to that collateral; and
(2) "purchase-money obligation" means an obligation
of an obligor incurred as all or part of the price of the
collateral or for value given to enable the debtor to
acquire rights in or the use of the collateral if the
value is in fact so used.
(b) Purchase-money security interest in goods. A
security interest in goods is a purchase-money security
interest:
(1) to the extent that the goods are purchase-money
collateral with respect to that security interest;
(2) if the security interest is in inventory that
is or was purchase-money collateral, also to the extent
that the security interest secures a purchase-money
obligation incurred with respect to other inventory in
which the secured party holds or held a purchase-money
security interest; and
(3) also to the extent that the security interest
secures a purchase-money obligation incurred with respect
to software in which the secured party holds or held a
purchase-money security interest.
(c) Purchase-money security interest in software. A
security interest in software is a purchase-money security
interest to the extent that the security interest also
secures a purchase-money obligation incurred with respect to
goods in which the secured party holds or held a
purchase-money security interest if:
(1) the debtor acquired its interest in the
software in an integrated transaction in which it
acquired an interest in the goods; and
(2) the debtor acquired its interest in the
software for the principal purpose of using the software
in the goods.
(d) Consignor's inventory purchase-money security
interest. The security interest of a consignor in goods that
are the subject of a consignment is a purchase-money security
interest in inventory.
(e) Application of payment in non-consumer-goods
transaction. In a transaction other than a consumer-goods
transaction, if the extent to which a security interest is a
purchase-money security interest depends on the application
of a payment to a particular obligation, the payment must be
applied:
(1) in accordance with any reasonable method of
application to which the parties agree;
(2) in the absence of the parties' agreement to a
reasonable method, in accordance with any intention of
the obligor manifested at or before the time of payment;
or
(3) in the absence of an agreement to a reasonable
method and a timely manifestation of the obligor's
intention, in the following order:
(A) to obligations that are not secured; and
(B) if more than one obligation is secured, to
obligations secured by purchase-money security
interests in the order in which those obligations
were incurred.
(f) No loss of status of purchase-money security
interest in non-consumer-goods transaction. In a transaction
other than a consumer-goods transaction, a purchase-money
security interest does not lose its status as such, even if:
(1) the purchase-money collateral also secures an
obligation that is not a purchase-money obligation;
(2) collateral that is not purchase-money
collateral also secures the purchase-money obligation; or
(3) the purchase-money obligation has been renewed,
refinanced, consolidated, or restructured.
(g) Burden of proof in non-consumer-goods transaction.
In a transaction other than a consumer-goods transaction, a
secured party claiming a purchase-money security interest has
the burden of establishing the extent to which the security
interest is a purchase-money security interest.
(h) Non-consumer-goods transactions; no inference. The
limitation of the rules in subsections (e), (f), and (g) to
transactions other than consumer-goods transactions is
intended to leave to the court the determination of the
proper rules in consumer-goods transactions. The court may
not infer from that limitation the nature of the proper rule
in consumer-goods transactions and may continue to apply
established approaches. Perfection of Security Interests in
Multiple State Transactions.
(1) Documents, instruments, letters of credit, and
ordinary goods.
(a) This subsection applies to documents,
instruments, rights to proceeds of written letters of
credit, and goods other than those covered by a
certificate of title described in subsection (2), mobile
goods described in subsection (3), and minerals described
in subsection (5).
(b) Except as otherwise provided in this
subsection, perfection and the effect of perfection or
non-perfection of a security interest in collateral are
governed by the law of the jurisdiction where the
collateral is when the last event occurs on which is
based the assertion that the security interest is
perfected or unperfected.
(c) If the parties to a transaction creating a
purchase money security interest in goods in one
jurisdiction understand at the time that the security
interest attaches that the goods will be kept in another
jurisdiction, then the law of the other jurisdiction
governs the perfection and the effect of perfection or
non-perfection of the security interest from the time it
attaches until 30 days after the debtor receives
possession of the goods and thereafter if the goods are
taken to the other jurisdiction before the end of the
30-day period.
(d) When collateral is brought into and kept in
this State while subject to a security interest perfected
under the law of the jurisdiction from which the
collateral was removed, the security interest remains
perfected, but if action is required by Part 3 of this
Article to perfect the security interest,
(i) if the action is not taken before the
expiration of the period of perfection in the other
jurisdiction or the end of 4 months after the
collateral is brought into this State, whichever
period first expires, the security interest becomes
unperfected at the end of that period and is
thereafter deemed to have been unperfected as
against a person who became a purchaser after
removal;
(ii) if the action is taken before the
expiration of the period specified in subparagraph
(i), the security interest continues perfected
thereafter;
(iii) for the purpose of priority over a buyer
of consumer goods (subsection (2) of Section 9-307),
the period of the effectiveness of a filing in the
jurisdiction from which the collateral is removed is
governed by the rules with respect to perfection in
subparagraphs (i) and (ii).
(2) Certificate of title.
(a) This subsection applies to goods covered by a
certificate of title issued under a statute of this State
or of another jurisdiction under the law of which
indication of a security interest on the certificate is
required as a condition of perfection.
(b) Except as otherwise provided in this
subsection, perfection and the effect of perfection or
non-perfection of the security interest are governed by
the law (including the conflict of laws rules) of the
jurisdiction issuing the certificate until 4 months after
the goods are removed from that jurisdiction and
thereafter until the goods are registered in another
jurisdiction, but in any event not beyond surrender of
the certificate. After the expiration of that period,
the goods are not covered by the certificate of title
within the meaning of this Section.
(c) Except with respect to the rights of a buyer
described in the next paragraph, a security interest,
perfected in another jurisdiction otherwise than by
notation on a certificate of title, in goods brought into
this State and thereafter covered by a certificate of
title issued by this State is subject to the rules stated
in paragraph (d) of subsection (1).
(d) If goods are brought into this State while a
security interest therein is perfected in any manner
under the law of the jurisdiction from which the goods
are removed and a certificate of title is issued by this
State and the certificate does not show that the goods
are subject to the security interest or that they may be
subject to security interests not shown on the
certificate, the security interest is subordinate to the
rights of a buyer of the goods to the extent that he
gives value and receives delivery of the goods after
issuance of the certificate and without knowledge of the
security interest.
(3) Accounts, general intangibles and mobile goods.
(a) This subsection applies to accounts (other than
an account described in subsection (5) on minerals) and
general intangibles (other than uncertificated
securities) and to goods which are mobile and which are
of a type normally used in more than one jurisdiction,
such as motor vehicles, trailers, rolling stock,
airplanes, shipping containers, road building and
construction machinery and commercial harvesting
machinery and the like, if the goods are equipment or are
inventory leased or held for lease by the debtor to
others, and are not covered by a certificate of title
described in subsection (2).
(b) The law (including the conflict of laws rules)
of the jurisdiction in which the debtor is located
governs the perfection and the effect of perfection or
non-perfection of the security interest.
(c) If, however, the debtor is located in a
jurisdiction which is not a part of the United States,
and which does not provide for perfection of the security
interest by filing or recording in that jurisdiction, the
law of the jurisdiction in the United States in which the
debtor has its major executive office in the United
States governs the perfection and the effect of
perfection or non-perfection of the security interest
through filing. In the alternative, if the debtor is
located in a jurisdiction which is not a part of the
United States or Canada and the collateral is accounts or
general intangibles for money due or to become due, the
security interest may be perfected by notification to the
account debtor. As used in this paragraph, "United
States" includes its territories and possessions and the
Commonwealth of Puerto Rico.
(d) A debtor shall be deemed located at his place
of business if he has one, at his chief executive office
if he has more than one place of business, otherwise at
his residence. If, however, the debtor is a foreign air
carrier under the Federal Aviation Act of 1958, as
amended, it shall be deemed located at the designated
office of the agent upon whom service of process may be
made on behalf of the foreign air carrier.
(e) A security interest perfected under the law of
the jurisdiction of the location of the debtor is
perfected until the expiration of 4 months after a change
of the debtor's location to another jurisdiction, or
until perfection would have ceased by the law of the
first jurisdiction, whichever period first expires.
Unless perfected in the new jurisdiction before the end
of that period, it becomes unperfected thereafter and is
deemed to have been unperfected as against a person who
became a purchaser after the change.
(4) Chattel paper. The rules stated for goods in
subsection (1) apply to a possessory security interest in
chattel paper. The rules stated for accounts in subsection
(3) apply to a non-possessory security interest in chattel
paper, but the security interest may not be perfected by
notification to the account debtor.
(5) Minerals. Perfection and the effect of perfection
or non-perfection of a security interest which is created by
a debtor who has an interest in minerals or the like
(including oil and gas) before extraction and which attaches
thereto as extracted, or which attaches to an account
resulting from the sale thereof at the wellhead or minehead
are governed by the law (including the conflict of laws
rules) of the jurisdiction wherein the wellhead or minehead
is located.
(6) Investment property.
(a) This subsection applies to investment property.
(b) Except as otherwise provided in paragraph (f),
during the time that a security certificate is located in
a jurisdiction, perfection of a security interest, the
effect of perfection or non-perfection, and the priority
of a security interest in the certificated security
represented thereby are governed by the local law of that
jurisdiction.
(c) Except as otherwise provided in paragraph (f),
perfection of a security interest, the effect of
perfection or non-perfection, and the priority of a
security interest in an uncertificated security are
governed by the local law of the issuer's jurisdiction as
specified in Section 8-110(d).
(d) Except as otherwise provided in paragraph (f),
perfection of a security interest, the effect of
perfection or non-perfection, and the priority of a
security interest in a security entitlement or securities
account are governed by the local law of the securities
intermediary's jurisdiction as specified in Section
8-110(e).
(e) Except as otherwise provided in paragraph (f),
perfection of a security interest, the effect of
perfection or non-perfection, and the priority of a
security interest in a commodity contract or commodity
account are governed by the local law of the commodity
intermediary's jurisdiction. The following rules
determine a "commodity intermediary's jurisdiction" for
purposes of this paragraph:
(i) If an agreement between the commodity
intermediary and commodity customer specifies that
it is governed by the law of a particular
jurisdiction, that jurisdiction is the commodity
intermediary's jurisdiction.
(ii) If an agreement between the commodity
intermediary and commodity customer does not specify
the governing law as provided in subparagraph (i),
but expressly specifies that the commodity account
is maintained at an office in a particular
jurisdiction, that jurisdiction is the commodity
intermediary's jurisdiction.
(iii) If an agreement between the commodity
intermediary and commodity customer does not specify
a jurisdiction as provided in subparagraphs (i) or
(ii), the commodity intermediary's jurisdiction is
the jurisdiction in which is located the office
identified in an account statement as the office
serving the commodity customer's account.
(iv) If an agreement between the commodity
intermediary and commodity customer does not specify
a jurisdiction as provided in subparagraphs (i) or
(ii) and an account statement does not identify an
office serving the commodity customer's account as
provided in subparagraph (iii), the commodity
intermediary's jurisdiction is the jurisdiction in
which is located the chief executive office of the
commodity intermediary.
(f) Perfection of a security interest by filing,
automatic perfection of a security interest in investment
property granted by a broker or securities intermediary,
and automatic perfection of a security interest in a
commodity contract or commodity account granted by a
commodity intermediary are governed by the local law of
the jurisdiction in which the debtor is located.
(Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97;
89-626, eff. 8-9-96.)
(810 ILCS 5/9-104) (from Ch. 26, par. 9-104)
Sec. 9-104. Control of deposit account.
(a) Requirements for control. A secured party has
control of a deposit account if:
(1) the secured party is the bank with which the
deposit account is maintained;
(2) the debtor, secured party, and bank have agreed
in an authenticated record that the bank will comply with
instructions originated by the secured party directing
disposition of the funds in the deposit account without
further consent by the debtor; or
(3) the secured party becomes the bank's customer
with respect to the deposit account.
(b) Debtor's right to direct disposition. A secured
party that has satisfied subsection (a) has control, even if
the debtor retains the right to direct the disposition of
funds from the deposit account. Transactions excluded from
Article.
This Article does not apply
(a) to a security interest subject to any statute
of the United States to the extent that such statute
governs the rights of parties to and third parties
affected by transactions in particular types of property;
or
(b) to a landlord's lien; or
(c) to a lien given by statute or other rule of law
for services or materials except as provided in Section
9-310 on priority of such liens; or
(d) to a transfer of a claim for wages, salary or
other compensation of an employee; or
(e) to a transfer by a government or governmental
subdivision or agency; or
(f) to a sale of accounts or chattel paper as part
of a sale of the business out of which they arose, or an
assignment of accounts or chattel paper which is for the
purpose of collection only, or a transfer of a right to
payment under a contract to an assignee who is also to do
the performance under the contract or a transfer of a
single account to an assignee in whole or partial
satisfaction of a preexisting indebtedness; or
(g) to a transfer of an interest or claim in or
under any policy of insurance, except as provided with
respect to proceeds (Section 9-306) and priorities in
proceeds (Section 9-312); or
(h) to a right represented by a judgment (other
than a judgment taken on a right to payment which was
collateral); or
(i) to any right of set-off; or
(j) except to the extent that provision is made for
fixtures in Section 9-313, to the creation or transfer of
an interest in or lien on real estate, including a lease
or rents thereunder; or
(k) to a transfer in whole or in part of any claim
arising out of tort; or
(l) to a transfer of an interest in a letter of
credit other than the rights to proceeds of a written
letter of credit.
(Source: P.A. 89-534, eff. 1-1-97.)
(810 ILCS 5/9-105) (from Ch. 26, par. 9-105)
Sec. 9-105. Control of electronic chattel paper. A
secured party has control of electronic chattel paper if the
record or records comprising the chattel paper are created,
stored, and assigned in such a manner that:
(1) a single authoritative copy of the record or
records exists which is unique, identifiable and, except
as otherwise provided in paragraphs (4), (5), and (6),
unalterable;
(2) the authoritative copy identifies the secured
party as the assignee of the record or records;
(3) the authoritative copy is communicated to and
maintained by the secured party or its designated
custodian;
(4) copies or revisions that add or change an
identified assignee of the authoritative copy can be made
only with the participation of the secured party;
(5) each copy of the authoritative copy and any
copy of a copy is readily identifiable as a copy that is
not the authoritative copy; and
(6) any revision of the authoritative copy is
readily identifiable as an authorized or unauthorized
revision. Definitions and index of definitions.
(1) In this Article unless the context otherwise
requires:
(a) "Account debtor" means the person who is
obligated on an account, chattel paper or general
intangible;
(b) "Chattel paper" means a writing or writings
which evidence both a monetary obligation and a security
interest in or a lease of specific goods, but a charter
or other contract involving the use or hire of a vessel
is not chattel paper. When a transaction is evidenced
both by such a security agreement or a lease and by an
instrument or a series of instruments, the group of
writings taken together constitutes chattel paper;
(c) "Collateral" means the property subject to a
security interest, and includes accounts and chattel
paper which have been sold;
(d) "Debtor" means the person who owes payment or
other performance of the obligation secured, whether or
not he owns or has rights in the collateral, and includes
the seller of accounts or chattel paper. Where the debtor
and the owner of the collateral are not the same person,
the term "debtor" means the owner of the collateral in
any provision of the Article dealing with the collateral,
the obligor in any provision dealing with the obligation,
and may include both where the context so requires;
(e) "Deposit account" means a demand, time,
savings, passbook or like account maintained with a bank,
as defined in subsection (1) of Section 4-105, other than
an account evidenced by a certificate of deposit;
(f) "Document" means document of title as defined
in the general definitions of Article 1 (Section 1-201),
and a receipt of the kind described in subsection (2) of
Section 7-201;
(g) "Encumbrance" includes real estate mortgages
and other liens on real estate and all other rights in
real estate that are not ownership interests;
(h) "Goods" includes all things which are movable
at the time the security interest attaches or which are
fixtures (Section 9-313), but does not include money,
documents, instruments, investment property, commodity
contracts, accounts, chattel paper, general intangibles,
or minerals or the like (including oil and gas) before
extraction. "Goods" also includes standing timber which
is to be cut and removed under a conveyance or contract
for sale, the unborn young of animals, and growing crops;
(i) "Instrument" means a negotiable instrument
(defined in Section 3-104), a non-transferable
certificate of deposit, a non-negotiable certificate of
deposit, or any other writing which evidences a right to
the payment of money and is not itself a security
agreement or lease and is of a type which is in ordinary
course of business transferred by delivery with any
necessary indorsement or assignment. The term does not
include investment property;
(j) "Mortgage" means a consensual interest created
by a real estate mortgage, a trust deed on real estate,
or the like;
(j-5) "Non-negotiable certificate of deposit" means
a written document issued by a bank, as defined in
subsection (1) of Section 4-105, that contains an
acknowledgement that a sum of money has been received by
the issuer and a promise by the issuer to repay the sum
of money, and is not a negotiable instrument as defined
in Section 3-104;
(j-7) "Non-transferable certificate of deposit"
means a non-negotiable certificate of deposit which may
not be transferred except on the books of the issuer,
with the consent of the issuer, or is subject to other
restrictions or conditions of the issuer on transfer;
(k) An advance is made "pursuant to commitment" if
the secured party has bound himself to make it, whether
or not a subsequent event of default or other event not
within his control has relieved or may relieve him from
his obligation;
(l) "Security agreement" means an agreement which
creates or provides for a security interest;
(m) "Secured party" means a lender, seller or other
person in whose favor there is a security interest,
including a person to whom accounts or chattel paper have
been sold. When the holders of obligations issued under
an indenture of trust, equipment trust agreement or the
like are represented by a trustee or other person, the
representative is the secured party;
-10t(n) "Transmitting utility" means any person primarily
engaged in the railroad, street railway or trolley bus
business, the electric or electronics communications
transmission business, the transmission of goods by
pipeline, or the distribution, transmission, or the
production and transmission of electricity, steam, gas or
water, or the provision of sewer service.
(o) "Uncertificated certificate of deposit" means an
obligation of a bank, as defined in subsection (1) of Section
4-105, to repay a sum of money it has received, that is not a
deposit account and is not represented by a writing, but only
by an entry on the books of the bank and any documentation
given to the customer by the bank.
(2) Other definitions applying to this Article and the
Sections in which they appear are:
"Account". Section 9-106.
"Attach". Section 9-203.
"Commodity contract". Section 9-115.
"Commodity customer". Section 9-115.
"Commodity intermediary". Section 9-115.
"Construction mortgage". Section 9-313 (1).
"Consumer goods". Section 9-109 (1).
"Control". Section 9-115.
"Equipment". Section 9-109 (2).
"Farm products". Section 9-109 (3).
"Fixture". Section 9-313 (1).
"Fixture filing". Section 9-313 (1).
"General intangibles". Section 9-106.
"Inventory". Section 9-109 (4).
"Investment property". Section 9-115.
"Lien creditor". Section 9-301 (3).
"Proceeds". Section 9-306 (1).
"Purchase money security interest". Section 9-107.
"United States". Section 9-103.
(3) The following definitions in other Articles apply to
this Article:
"Bank". Section 4-105.
"Broker". Section 8-102.
"Certificated security". Section 8-102.
"Check". Section 3-104.
"Clearing corporation". Section 8-102.
"Contract for sale". Section 2-106.
"Control". Section 8-106.
"Delivery". Section 8-301.
"Entitlement holder". Section 8-102.
"Financial asset". Section 8-102.
"Holder in due course". Section 3-302.
"Letter of credit". Section 5-102.
"Note". Section 3-104.
"Proceeds of a letter of credit". Section 5-114(a).
"Sale". Section 2-106.
"Securities intermediary". Section 8-102.
"Security". Section 8-102.
"Security certificate". Section 8-102.
"Security entitlement". Section 8-102.
"Uncertificated security". Section 8-102.
(4) In addition Article 1 contains general definitions
and principles of construction and interpretation applicable
throughout this Article.
(Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97;
90-665, eff. 7-30-98.)
(810 ILCS 5/9-106) (from Ch. 26, par. 9-106)
Sec. 9-106. Control of investment property.
(a) Control under Section 8-106. A person has control
of a certificated security, uncertificated security, or
security entitlement as provided in Section 8-106.
(b) Control of commodity contract. A secured party has
control of a commodity contract if:
(1) the secured party is the commodity intermediary
with which the commodity contract is carried; or
(2) the commodity customer, secured party, and
commodity intermediary have agreed that the commodity
intermediary will apply any value distributed on account
of the commodity contract as directed by the secured
party without further consent by the commodity customer.
(c) Effect of control of securities account or commodity
account. A secured party having control of all security
entitlements or commodity contracts carried in a securities
account or commodity account has control over the securities
account or commodity account. Definitions: "account";
"general intangibles". "Account" means any right to payment
for goods sold or leased or for services rendered which is
not evidenced by an instrument or chattel paper, whether or
not it has been earned by performance. "General intangibles"
means any personal property (including things in action)
other than goods, accounts, chattel paper, documents,
instruments, investment property, rights to proceeds of
written letters of credit, deposit accounts, uncertificated
certificates of deposit, and money. All rights to payment
earned or unearned under a charter or other contract
involving the use or hire of a vessel and all rights incident
to the charter or contract are accounts.
(Source: P.A. 89-364, eff. 1-1-96; 89-534, eff. 1-1-97;
90-665, eff. 7-30-98.)
(810 ILCS 5/9-107) (from Ch. 26, par. 9-107)
Sec. 9-107. Control of letter-of-credit right. A
secured party has control of a letter-of-credit right to the
extent of any right to payment or performance by the issuer
or any nominated person if the issuer or nominated person has
consented to an assignment of proceeds of the letter of
credit under Section 5-114(c) or otherwise applicable law or
practice. Definitions: "purchase money security interest".
A security interest is a "purchase money security
interest" to the extent that it is
(a) taken or retained by the seller of the
collateral to secure all or part of its price; or
(b) taken by a person who by making advances or
incurring an obligation gives value to enable the debtor to
acquire rights in or the use of collateral if such value is
in fact so used.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-108) (from Ch. 26, par. 9-108)
Sec. 9-108. Sufficiency of description.
(a) Sufficiency of description. Except as otherwise
provided in subsections (c), (d), and (e), a description of
personal or real property is sufficient, whether or not it is
specific, if it reasonably identifies what is described.
(b) Examples of reasonable identification. Except as
otherwise provided in subsection (d), a description of
collateral reasonably identifies the collateral if it
identifies the collateral by:
(1) specific listing;
(2) category;
(3) except as otherwise provided in subsection (e),
a type of collateral defined in the Uniform Commercial
Code;
(4) quantity;
(5) computational or allocational formula or
procedure; or
(6) except as otherwise provided in subsection (c),
any other method, if the identity of the collateral is
objectively determinable.
(c) Supergeneric description not sufficient. A
description of collateral as "all the debtor's assets" or
"all the debtor's personal property" or using words of
similar import does not reasonably identify the collateral.
(d) Investment property. Except as otherwise provided
in subsection (e), a description of a security entitlement,
securities account, or commodity account is sufficient if it
describes:
(1) the collateral by those terms or as investment
property; or
(2) the underlying financial asset or commodity
contract.
(e) When description by type insufficient. A
description only by type of collateral defined in the Uniform
Commercial Code is an insufficient description of:
(1) a commercial tort claim; or
(2) in a consumer transaction, consumer goods, a
security entitlement, a securities account, or a
commodity account. When after-acquired collateral not
security for antecedent debt.
Where a secured party makes an advance, incurs an
obligation, releases a perfected security interest, or
otherwise gives new value which is to be secured in whole or
in part by after-acquired property his security interest in
the after-acquired collateral shall be deemed to be taken for
new value and not as security for an antecedent debt if the
debtor acquires his rights in such collateral either in the
ordinary course of his business or under a contract of
purchase made pursuant to the security agreement within a
reasonable time after new value is given.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/Art. 9, Part 1, Subpart 2 heading new)
SUBPART 2. APPLICABILITY OF ARTICLE
(810 ILCS 5/9-109) (from Ch. 26, par. 9-109)
Sec. 9-109. Scope.
(a) General scope of Article. Except as otherwise
provided in subsections (c) and (d), this Article applies to:
(1) a transaction, regardless of its form, that
creates a security interest in personal property or
fixtures by contract;
(2) an agricultural lien;
(3) a sale of accounts, chattel paper, payment
intangibles, or promissory notes;
(4) a consignment;
(5) a security interest arising under Section
2-401, 2-505, 2-711(3), or 2A-508(5), as provided in
Section 9-110; and
(6) a security interest arising under Section 4-210
or 5-118.
(b) Security interest in secured obligation. The
application of this Article to a security interest in a
secured obligation is not affected by the fact that the
obligation is itself secured by a transaction or interest to
which this Article does not apply.
(c) Extent to which Article does not apply. This
Article does not apply to the extent that:
(1) a statute, regulation, or treaty of the United
States preempts this Article;
(2) another statute of this State expressly governs
the creation, perfection, priority, or enforcement of a
security interest created by this State or a governmental
unit of this State;
(3) a statute of another State, a foreign country,
or a governmental unit of another State or a foreign
country, other than a statute generally applicable to
security interests, expressly governs creation,
perfection, priority, or enforcement of a security
interest created by the State, country, or governmental
unit;
(4) the rights of a transferee beneficiary or
nominated person under a letter of credit are independent
and superior under Section 5-114;
(5) this Article is in conflict with Section
205-410 of the Department of Agriculture Law of the Civil
Administrative Code of Illinois or the Grain Code; or
(6) this Article is in conflict with Section 18-107
of the Public Utilities Act.
(d) Inapplicability of Article. This Article does not
apply to:
(1) a landlord's lien, other than an agricultural
lien;
(2) a lien, other than an agricultural lien, given
by statute or other rule of law for services or
materials, but Section 9-333 applies with respect to
priority of the lien;
(3) an assignment of a claim for wages, salary, or
other compensation of an employee;
(4) a sale of accounts, chattel paper, payment
intangibles, or promissory notes as part of a sale of the
business out of which they arose;
(5) an assignment of accounts, chattel paper,
payment intangibles, or promissory notes which is for the
purpose of collection only;
(6) an assignment of a right to payment under a
contract to an assignee that is also obligated to perform
under the contract;
(7) an assignment of a single account, payment
intangible, or promissory note to an assignee in full or
partial satisfaction of a preexisting indebtedness;
(8) a transfer of an interest in or an assignment
of a claim under a policy of insurance, other than an
assignment by or to a health-care provider of a
health-care-insurance receivable and any subsequent
assignment of the right to payment, but Sections 9-315
and 9-322 apply with respect to proceeds and priorities
in proceeds;
(9) an assignment of a right represented by a
judgment, other than a judgment taken on a right to
payment that was collateral;
(10) a right of recoupment or set-off, but:
(A) Section 9-340 applies with respect to the
effectiveness of rights of recoupment or set-off
against deposit accounts; and
(B) Section 9-404 applies with respect to
defenses or claims of an account debtor;
(11) the creation or transfer of an interest in or
lien on real property, including a lease or rents
thereunder, except to the extent that provision is made
for:
(A) liens on real property in Sections 9-203
and 9-308;
(B) fixtures in Section 9-334;
(C) fixture filings in Sections 9-501, 9-502,
9-512, 9-516, and 9-519; and
(D) security agreements covering personal and
real property in Section 9-604;
(12) an assignment of a claim arising in tort,
other than a commercial tort claim, but Sections 9-315
and 9-322 apply with respect to proceeds and priorities
in proceeds;
(13) a transfer by a government or governmental
subdivision or agency;
(14) a claim or a right to receive compensation for
injuries or sickness as described in Section 104(a)(1) or
(2) of Title 26 of the United States Code, as amended
from time to time; or
(15) a claim or right to receive benefits under a
special needs trust as described in Section 1396p(d)(4)
of Title 42 of the United States Code, as amended from
time to time. Classification of goods; "consumer goods";
"equipment"; "farm products"; "inventory". Goods are
(1) "consumer goods" if they are used or bought for use
primarily for personal, family or household purposes;
(2) "equipment" if they are used or bought for use
primarily in business (including farming or a profession) or
by a debtor who is a non-profit organization or a
governmental subdivision or agency or if the goods are not
included in the definitions of inventory, farm products or
consumer goods;
(3) "farm products" if they are crops or livestock or
supplies used or produced in farming operations or if they
are products of crops or livestock in their unmanufactured
states (such as ginned cotton, wool-clip, maple syrup, milk
and eggs) or if they are aquatic products as defined in the
Aquaculture Development Act, and if they are in the
possession of a debtor engaged in raising, fattening, grazing
or other farming or aquacultural operations. If goods are
farm products they are neither equipment nor inventory;
(4) "inventory" if they are held by a person who holds
them for sale or lease or to be furnished under contracts of
service or if he has so furnished them, or if they are raw
materials, work in process or materials used or consumed in a
business. Inventory of a person is not to be classified as
his equipment.
(Source: P.A. 85-856.)
(810 ILCS 5/9-110) (from Ch. 26, par. 9-110)
Sec. 9-110. Security interests arising under Article 2
or 2A. A security interest arising under Section 2-401,
2-505, 2-711(3), or 2A-508(5) is subject to this Article.
However, until the debtor obtains possession of the goods:
(1) the security interest is enforceable, even if
Section 9-203(b)(3) has not been satisfied;
(2) filing is not required to perfect the security
interest;
(3) the rights of the secured party after default
by the debtor are governed by Article 2 or 2A; and
(4) the security interest has priority over a
conflicting security interest created by the debtor.
Sufficiency of description.
For the purposes of this Article any description of
personal property or real estate is sufficient whether or not
it is specific if it reasonably identifies what is described.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-112) (from Ch. 26, par. 9-112)
Sec. 9-112. (Blank). Where collateral is not owned by
debtor.
Unless otherwise agreed, when a secured party knows that
collateral is owned by a person who is not the debtor, the
owner of the collateral is entitled to receive from the
secured party any surplus under Section 9-- 502(2) or under
Section 9--504(1), and is not liable for the debt or for any
deficiency after resale, and he has the same right as the
debtor
(a) to receive statements under Section 9--208;
(b) to receive notice of and to object to a secured
party's proposal to retain the collateral in satisfaction of
the indebtedness under Section 9--505;
(c) to redeem the collateral under Section 9--506;
(d) to obtain injunctive or other relief under
Section 9--507(1); and
(e) to recover losses caused to him under Section
9--208(2).
(Source: Laws 1961, 1st S.S., p. 7.)
(810 ILCS 5/9-113) (from Ch. 26, par. 9-113)
Sec. 9-113. (Blank). Security interests arising under
Article on Sales or under Article on Leases.
A security interest arising solely under the Article on
Sales (Article 2) or the Article on Leases (Article 2A) is
subject to the provisions of this Article except that to the
extent that and so long as the debtor does not have or does
not lawfully obtain possession of the goods
(a) no security agreement is necessary to make the
security interest enforceable; and
(b) no filing is required to perfect the security
interest; and
(c) the rights of the secured party on default by
the debtor are governed (i) by the Article on Sales
(Article 2) in the case of a security interest arising
solely under such Article or (ii) by the Article on
Leases (Article 2A) in the case of a security interest
arising solely under such Article.
(Source: P.A. 87-493.)
(810 ILCS 5/9-114) (from Ch. 26, par. 9-114)
Sec. 9-114. (Blank). Consignment.
(1) A person who delivers goods under a consignment
which is not a security interest and who would be required to
file under this Article by paragraph (3) (c) of Section 2-326
has priority over a secured party who is or becomes a
creditor of the consignee and who would have a perfected
security interest in the goods if they were the property of
the consignee, and also has priority with respect to
identifiable cash proceeds received on or before delivery of
the goods to a buyer, if
(a) the consignor complies with the filing provision of
the Article on Sales with respect to consignments (paragraph
(3) (c) of Section 2-326 before the consignee receives
possession of the goods; and
(b) the consignor gives notification in writing to the
holder of the security interest if the holder has filed a
financing statement covering the same types of goods before
the date of the filing made by the consignor; and
(c) the holder of the security interest receives the
notification within 5 years before the consignee receives
possession of the goods; and
(d) the notification states that the consignor expects
to deliver goods on consignment to the consignee, describing
the goods by item or type.
(2) In the case of a consignment which is not a security
interest and in which the requirements of the preceding
subsection have not been met, a person who delivers goods to
another is subordinate to a person who would have a perfected
security interest in the goods if they were the property of
the debtor.
(Source: P. A. 78-238.)
(810 ILCS 5/9-115) (from Ch. 26, par. 9-115)
Sec. 9-115. (Blank). Investment property.
(1) In this Article:
(a) "Commodity account" means an account maintained
by a commodity intermediary in which a commodity contract
is carried for a commodity customer.
(b) "Commodity contract" means a commodity futures
contract, an option on a commodity futures contract, a
commodity option, or other contract that, in each case,
is:
(i) traded on or subject to the rules of a
board of trade that has been designated as a
contract market for such a contract pursuant to the
federal commodities laws; or
(ii) traded on a foreign commodity board of
trade, exchange, or market, and is carried on the
books of a commodity intermediary for a commodity
customer.
(c) "Commodity customer" means a person for whom a
commodity intermediary carries a commodity contract on
its books.
(d) "Commodity intermediary" means:
(i) a person who is registered as a futures
commission merchant under the federal commodities
laws; or
(ii) a person who in the ordinary course of
its business provides clearance or settlement
services for a board of trade that has been
designated as a contract market pursuant to the
federal commodities laws.
(e) "Control" with respect to a certificated
security, uncertificated security, or security
entitlement has the meaning specified in Section 8-106.
A secured party has control over a commodity contract if
by agreement among the commodity customer, the commodity
intermediary, and the secured party, the commodity
intermediary has agreed that it will apply any value
distributed on account of the commodity contract as
directed by the secured party without further consent by
the commodity customer. If a commodity customer grants a
security interest in a commodity contract to its own
commodity intermediary, the commodity intermediary as
secured party has control. A secured party has control
over a securities account or commodity account if the
secured party has control over all security entitlements
or commodity contracts carried in the securities account
or commodity account.
(f) "Investment property" means:
(i) a security, whether certificated or
uncertificated;
(ii) a security entitlement;
(iii) a securities account;
(iv) a commodity contract; or
(v) a commodity account.
(2) Attachment or perfection of a security interest in a
securities account is also attachment or perfection of a
security interest in all security entitlements carried in the
securities account. Attachment or perfection of a security
interest in a commodity account is also attachment or
perfection of a security interest in all commodity contracts
carried in the commodity account.
(3) A description of collateral in a security agreement
or financing statement is sufficient to create or perfect a
security interest in a certificated security, uncertificated
security, security entitlement, securities account, commodity
contract, or commodity account whether it describes the
collateral by those terms, or as investment property, or by
description of the underlying security, financial asset, or
commodity contract. A description of investment property
collateral in a security agreement or financing statement is
sufficient if it identifies the collateral by specific
listing, by category, by quantity, by a computational or
allocational formula or procedure, or by any other method, if
the identity of the collateral is objectively determinable.
(4) Perfection of a security interest in investment
property is governed by the following rules:
(a) A security interest in investment property may
be perfected by control.
(b) Except as otherwise provided in paragraphs (c)
and (d), a security interest in investment property may
be perfected by filing.
(c) If the debtor is a broker or securities
intermediary a security interest in investment property
is perfected when it attaches. The filing of a financing
statement with respect to a security interest in
investment property granted by a broker or securities
intermediary has no effect for purposes of perfection or
priority with respect to that security interest.
(d) If a debtor is a commodity intermediary, a
security interest in a commodity contract or a commodity
account is perfected when it attaches. The filing of a
financing statement with respect to a security interest
in a commodity contract or a commodity account granted by
a commodity intermediary has no effect for purposes of
perfection or priority with respect to that security
interest.
(5) Priority between conflicting security interests in
the same investment property is governed by the following
rules:
(a) A security interest of a secured party who has
control over investment property has priority over a
security interest of a secured party who does not have
control over the investment property.
(b) Except as otherwise provided in paragraphs (c)
and (d), conflicting security interests of secured
parties each of whom has control rank equally.
(c) Except as otherwise agreed by the securities
intermediary, a security interest in a security
entitlement or a securities account granted to the
debtor's own securities intermediary has priority over
any security interest granted by the debtor to another
secured party.
(d) Except as otherwise agreed by the commodity
intermediary, a security interest in a commodity contract
or a commodity account granted to the debtor's own
commodity intermediary has priority over any security
interest granted by the debtor to another secured party.
(e) Conflicting security interests granted by a
broker, a securities intermediary, or a commodity
intermediary which are perfected without control rank
equally.
(f) In all other cases, priority between
conflicting security interests in investment property is
governed by Section 9-312(5), (6), and (7). Section
9-312(4) does not apply to investment property.
(6) If a security certificate in registered form is
delivered to a secured party pursuant to agreement, a written
security agreement is not required for attachment or
enforceability of the security interest, delivery suffices
for perfection of the security interest, and the security
interest has priority over a conflicting security interest
perfected by means other than control, even if a necessary
indorsement is lacking.
(Source: P.A. 89-364, eff. 1-1-96.)
(810 ILCS 5/9-116)
Sec. 9-116. (Blank). Security interest arising in
purchase or delivery of financial asset.
(1) If a person buys a financial asset through a
securities intermediary in a transaction in which the buyer
is obligated to pay the purchase price to the securities
intermediary at the time of the purchase, and the securities
intermediary credits the financial asset to the buyer's
securities account before the buyer pays the securities
intermediary, the securities intermediary has a security
interest in the buyer's security entitlement securing the
buyer's obligation to pay. A security agreement is not
required for attachment or enforceability of the security
interest, and the security interest is automatically
perfected.
(2) If a certificated security, or other financial asset
represented by a writing which in the ordinary course of
business is transferred by delivery with any necessary
indorsement or assignment is delivered pursuant to an
agreement between persons in the business of dealing with
such securities or financial assets and the agreement calls
for delivery versus payment, the person delivering the
certificate or other financial asset has a security interest
in the certificated security or other financial asset
securing the seller's right to receive payment. A security
agreement is not required for attachment or enforceability of
the security interest, and the security interest is
automatically perfected.
(Source: P.A. 89-364, eff. 1-1-96.)
(810 ILCS 5/9-150)
Sec. 9-150. (Blank). Secretary of State; rules. The
Secretary of State, under the Illinois Administrative
Procedure Act, may adopt rules necessary to administer the
Secretary of State's responsibilities under this Article.
(Source: P.A. 89-364, eff. 1-1-96.)
(810 ILCS 5/Art. 9, Part 2 heading)
PART 2. EFFECTIVENESS OF SECURITY AGREEMENT;
ATTACHMENT OF SECURITY INTEREST;
RIGHTS OF PARTIES TO SECURITY AGREEMENT
VALIDITY OF SECURITY AGREEMENT
AND RIGHTS OF PARTIES THERETO
(810 ILCS 5/Art. 9, Part 2, Subpart 1 heading new)
SUBPART 1. EFFECTIVENESS AND ATTACHMENT
(810 ILCS 5/9-201) (from Ch. 26, par. 9-201)
Sec. 9-201. General effectiveness of security agreement.
(a) General effectiveness. Except as otherwise provided
in the Uniform Commercial Code, a security agreement is
effective according to its terms between the parties, against
purchasers of the collateral, and against creditors.
(b) Applicable consumer laws and other law. A
transaction subject to this Article is subject to any
applicable rule of law, statute, or regulation which
establishes a different rule for consumers, including:
(1) the Retail Installment Sales Act;
(2) the Motor Vehicle Retail Installment Sales Act;
(3) Article II of Chapter 3 of the Illinois Vehicle
Code;
(4) Article IIIB of the Boat Registration and
Safety Act;
(5) the Pawnbroker Regulation Act;
(6) the Motor Vehicle Leasing Act;
(7) the Consumer Installment Loan Act; and
(8) the Consumer Deposit Security Act of 1987.
(c) Other applicable law controls. In case of conflict
between this Article and a rule of law, statute, or
regulation described in subsection (b), the rule of law,
statute, or regulation controls. Failure to comply with a
rule of law, statute, or regulation described in subsection
(b) has only the effect such rule of law, statute, or
regulation specifies.
(d) Further deference to other applicable law. This
Article does not:
(1) validate any rate, charge, agreement, or
practice that violates a rule of law, statute, or
regulation described in subsection (b); or
(2) extend the application of the rule of law,
statute, or regulation to a transaction not otherwise
subject to it. General validity of security agreement.
Except as otherwise provided by this Act a security
agreement is effective according to its terms between the
parties, against purchasers of the collateral and against
creditors. Nothing in this Article validates any charge or
practice illegal under any statute or regulation thereunder
governing usury, small loans, retail installment sales, or
the like, or extends the application of any such statute or
regulation to any transaction not otherwise subject thereto.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-202) (from Ch. 26, par. 9-202)
Sec. 9-202. Title to collateral immaterial. Except as
otherwise provided with respect to consignments or sales of
accounts, chattel paper, payment intangibles, or promissory
notes, the provisions of this Article with regard to rights
and obligations apply whether title to collateral is in the
secured party or the debtor.
Each provision of this Article with regard to rights,
obligations and remedies applies whether title to collateral
is in the secured party or in the debtor.
(Source: Laws 1961, p. 2101.)
(810 ILCS 5/9-203) (from Ch. 26, par. 9-203)
Sec. 9-203. Attachment and enforceability of security
interest; proceeds; supporting obligations; formal
requisites.
(a) Attachment. A security interest attaches to
collateral when it becomes enforceable against the debtor
with respect to the collateral, unless an agreement expressly
postpones the time of attachment.
(b) Enforceability. Except as otherwise provided in
subsections (c) through (i), a security interest is
enforceable against the debtor and third parties with respect
to the collateral only if:
(1) value has been given;
(2) the debtor has rights in the collateral or the
power to transfer rights in the collateral to a secured
party; and
(3) one of the following conditions is met:
(A) the debtor has authenticated a security
agreement that provides a description of the
collateral and, if the security interest covers
timber to be cut, a description of the land
concerned;
(B) the collateral is not a certificated
security and is in the possession of the secured
party under Section 9-313 pursuant to the debtor's
security agreement;
(C) the collateral is a certificated security
in registered form and the security certificate has
been delivered to the secured party under Section
8-301 pursuant to the debtor's security agreement;
or
(D) the collateral is deposit accounts,
electronic chattel paper, investment property, or
letter-of-credit rights, and the secured party has
control under Section 9-104, 9-105, 9-106, or 9-107
pursuant to the debtor's security agreement.
(c) Other UCC provisions. Subsection (b) is subject to
Section 4-210 on the security interest of a collecting bank,
Section 5-118 on the security interest of a letter-of-credit
issuer or nominated person, Section 9-110 on a security
interest arising under Article 2 or 2A, and Section 9-206 on
security interests in investment property.
(d) When person becomes bound by another person's
security agreement. A person becomes bound as debtor by a
security agreement entered into by another person if, by
operation of law other than this Article or by contract:
(1) the security agreement becomes effective to
create a security interest in the person's property; or
(2) the person becomes generally obligated for the
obligations of the other person, including the obligation
secured under the security agreement, and acquires or
succeeds to all or substantially all of the assets of the
other person.
(e) Effect of new debtor becoming bound. If a new
debtor becomes bound as debtor by a security agreement
entered into by another person:
(1) the agreement satisfies subsection (b)(3) with
respect to existing or after-acquired property of the new
debtor to the extent the property is described in the
agreement; and
(2) another agreement is not necessary to make a
security interest in the property enforceable.
(f) Proceeds and supporting obligations. The attachment
of a security interest in collateral gives the secured party
the rights to proceeds provided by Section 9-315 and is also
attachment of a security interest in a supporting obligation
for the collateral.
(g) Lien securing right to payment. The attachment of a
security interest in a right to payment or performance
secured by a security interest or other lien on personal or
real property is also attachment of a security interest in
the security interest, mortgage, or other lien.
(h) Security entitlement carried in securities account.
The attachment of a security interest in a securities account
is also attachment of a security interest in the security
entitlements carried in the securities account.
(i) Commodity contracts carried in commodity account.
The attachment of a security interest in a commodity account
is also attachment of a security interest in the commodity
contracts carried in the commodity account. Attachment and
Enforceability of Security Interest; Proceeds; Requisites.
(1) Subject to the provisions of Section 4-208 on the
security interest of a collecting bank, Sections 9-115 and
9-116 on security interests in investment property, and
Section 9-113 on a security interest arising under the
Article on Sales, a security interest is not enforceable
against the debtor or third parties with respect to the
collateral and does not attach unless:
(a) the collateral is in the possession of the
secured party pursuant to agreement, the collateral is
investment property and the secured party has control
pursuant to agreement, or the debtor has signed a
security agreement which contains a description of the
collateral and, in addition, a description of the land
when the security agreement covers (i) crops growing or
to be grown and is signed by the debtor prior to January
1, 1996, or (ii) timber to be cut;
(b) value has been given; and
(c) the debtor has rights in the collateral.
(2) A security interest attaches when it becomes
enforceable against the debtor with respect to the
collateral. Attachment occurs as soon as all of the events
specified in subsection (1) have taken place unless explicit
agreement postpones the time of attaching.
(3) Unless otherwise agreed a security agreement gives
the secured party the rights to proceeds provided by Section
9-306.
(4) A transaction, although subject to this Article, is
also subject to the "Consumer Finance Act", approved July 10,
1935, as now or hereafter amended; the "Retail Installment
Sales Act", approved July 28, 1967, as now or hereafter
amended; the "Motor Vehicle Retail Installment Sales Act",
approved July 28, 1967, as now or hereafter amended; Article
II of Chapter 3 of The Illinois Vehicle Code; Article IIIB of
the "Boat Registration and Safety Act", as now or hereafter
amended; and "An Act for the regulation of pawnbrokers, and
repealing a certain act therein named", approved June 9,
1909, as now or hereafter amended; and in the case of
conflict between the provisions of this Article and any such
statute, the provisions of such statute control. Failure to
comply with any applicable statute has only the effect which
is specified therein.
(Source: P.A. 89-228, eff. 1-1-96; 89-364, eff. 1-1-96;
89-626, eff. 8-9-96.)
(810 ILCS 5/9-204) (from Ch. 26, par. 9-204)
Sec. 9-204. After-acquired property; future advances.
(a) After-acquired collateral. Except as otherwise
provided in subsection (b), a security agreement may create
or provide for a security interest in after-acquired
collateral.
(b) When after-acquired property clause not effective.
A security interest 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. A security
agreement may provide that collateral secures, or that
accounts, chattel paper, payment intangibles, or promissory
notes are sold in connection with, future advances or other
value, whether or not the advances or value are given
pursuant to commitment. After-acquired property; future
advances.
(1) Except as provided in Subsection (2), a security
agreement may provide that any obligations covered by the
security agreement are to be secured by after-acquired
collateral.
(2) No security interest attaches under an
after-acquired property clause to consumer goods other than
accessions (Section 9-314) when given as additional security
unless the debtor acquires rights in them within 10 days
after the secured party gives value.
(3) Obligations covered by a security agreement may
include future advances or other value whether or not the
advances or value are given pursuant to commitment
(subsection (1) of Section 9-105).
(Source: P. A. 77-2810.)
(810 ILCS 5/9-205) (from Ch. 26, par. 9-205)
Sec. 9-205. Use or disposition of collateral
permissible.
(a) When security interest not invalid or fraudulent. A
security interest is not invalid or fraudulent against
creditors solely because:
(1) the debtor has the right or ability to:
(A) use, commingle, or dispose of all or part
of the collateral, including returned or repossessed
goods;
(B) collect, compromise, enforce, or otherwise
deal with collateral;
(C) accept the return of collateral or make
repossessions; or
(D) use, commingle, or dispose of proceeds; or
(2) the secured party fails to require the debtor
to account for proceeds or replace collateral.
(b) Requirements of possession not relaxed. This
Section does not relax the requirements of possession if
attachment, perfection, or enforcement of a security interest
depends upon possession of the collateral by the secured
party. Use or Disposition of Collateral Without Accounting
Permissible.
A security interest is not invalid or fraudulent against
creditors by reason of liberty in the debtor to use,
commingle or dispose of all or part of the collateral
(including returned or repossessed goods) or to collect or
compromise accounts or chattel paper, or to accept the return
of goods or make repossessions, or to use, commingle or
dispose of proceeds, or by reason of the failure of the
secured party to require the debtor to account for proceeds
or replace collateral. This Section does not relax the
requirements of possession where perfection of a security
interest depends upon possession of the collateral by the
secured party or by a bailee.
(Source: P.A. 77-2810.)
(810 ILCS 5/9-205.1) (from Ch. 26, par. 9-205.1)
Sec. 9-205.1. Listing by debtor of purchasers or
receivers of collateral. A secured party may require that
the debtor include as part of the security agreement a list
of persons to whom the debtor desires to sell or otherwise
dispose of the collateral. The debtor shall not sell or
otherwise dispose of the collateral to a person not included
in that list unless the debtor has notified the secured party
of his desire to sell or otherwise dispose of the collateral
to such person at least 7 days prior to the sale or other
disposition.
(Source: P.A. 83-69.)
(810 ILCS 5/9-206) (from Ch. 26, par. 9-206)
Sec. 9-206. Security interest arising in purchase or
delivery of financial asset.
(a) Security interest when person buys through
securities intermediary. A security interest in favor of a
securities intermediary attaches to a person's security
entitlement if:
(1) the person buys a financial asset through the
securities intermediary in a transaction in which the
person is obligated to pay the purchase price to the
securities intermediary at the time of the purchase; and
(2) the securities intermediary credits the
financial asset to the buyer's securities account before
the buyer pays the securities intermediary.
(b) Security interest secures obligation to pay for
financial asset. The security interest described in
subsection (a) secures the person's obligation to pay for the
financial asset.
(c) Security interest in payment against delivery
transaction. A security interest in favor of a person that
delivers a certificated security or other financial asset
represented by a writing attaches to the security or other
financial asset if:
(1) the security or other financial asset:
(A) in the ordinary course of business is
transferred by delivery with any necessary
indorsement or assignment; and
(B) is delivered under an agreement between
persons in the business of dealing with such
securities or financial assets; and
(2) the agreement calls for delivery against
payment.
(d) Security interest secures obligation to pay for
delivery. The security interest described in subsection (c)
secures the obligation to make payment for the delivery.
Agreement not to assert defenses against assignee;
modification of sales warranties where security agreement
exists.
(1) Subject to any statute or decision which establishes
a different rule for buyers or lessees of consumer goods, an
agreement by a buyer or lessee that he will not assert
against an assignee any claim or defense which he may have
against the seller or lessor is enforceable by an assignee
who takes his assignment for value, in good faith and without
notice of a claim or defense, except as to defenses of a type
which may be asserted against a holder in due course of a
negotiable instrument under the Article on Commercial Paper
(Article 3). A buyer who as part of one transaction signs
both a negotiable instrument and a security agreement makes
such an agreement.
(2) When a seller retains a purchase money security
interest in goods the Article on Sales (Article 2) governs
the sale and any disclaimer, limitation or modification of
the seller's warranties.
(Source: Laws 1965, p. 803.)
(810 ILCS 5/Art. 9, Part 2, Subpart 2 heading new)
SUBPART 2. RIGHTS AND DUTIES
(810 ILCS 5/9-207) (from Ch. 26, par. 9-207)
Sec. 9-207. Rights and duties of secured party having
possession or control of collateral.
(a) Duty of care when secured party in possession.
Except as otherwise provided in subsection (d), a secured
party shall use reasonable care in the custody and
preservation of collateral in the secured party's possession.
In the case of chattel paper or an instrument, reasonable
care includes taking necessary steps to preserve rights
against prior parties unless otherwise agreed.
(b) Expenses, risks, duties, and rights when secured
party in possession. Except as otherwise provided in
subsection (d), if a secured party has possession of
collateral:
(1) reasonable expenses, including the cost of
insurance and payment of taxes or other charges, incurred
in the custody, preservation, use, or operation of the
collateral are chargeable to the debtor and are secured
by the collateral;
(2) the risk of accidental loss or damage is on the
debtor to the extent of a deficiency in any effective
insurance coverage;
(3) the secured party shall keep the collateral
identifiable, but fungible collateral may be commingled;
and
(4) the secured party may use or operate the
collateral:
(A) for the purpose of preserving the
collateral or its value;
(B) as permitted by an order of a court having
competent jurisdiction; or
(C) except in the case of consumer goods, in
the manner and to the extent agreed by the debtor.
(c) Duties and rights when secured party in possession
or control. Except as otherwise provided in subsection (d), a
secured party having possession of collateral or control of
collateral under Section 9-104, 9-105, 9-106, or 9-107:
(1) may hold as additional security any proceeds,
except money or funds, received from the collateral;
(2) shall apply money or funds received from the
collateral to reduce the secured obligation, unless
remitted to the debtor; and
(3) may create a security interest in the
collateral.
(d) Buyer of certain rights to payment. If the secured
party is a buyer of accounts, chattel paper, payment
intangibles, or promissory notes or a consignor:
(1) subsection (a) does not apply unless the
secured party is entitled under an agreement:
(A) to charge back uncollected collateral; or
(B) otherwise to full or limited recourse
against the debtor or a secondary obligor based on
the nonpayment or other default of an account debtor
or other obligor on the collateral; and
(2) subsections (b) and (c) do not apply. Rights
and duties when collateral is in secured party's
possession.
(1) A secured party must use reasonable care in the
custody and preservation of collateral in his possession. In
the case of an instrument or chattel paper reasonable care
includes taking necessary steps to preserve rights against
prior parties unless otherwise agreed.
(2) Unless otherwise agreed, when collateral is in the
secured party's possession
(a) reasonable expenses (including the cost of any
insurance and payment of taxes or other charges) incurr