Also known as: purchase money collateral
Written by attorneys · grounded in primary & secondary sources — see below
Goods or software that secures a purchase-money obligation incurred with respect to that collateral.
Velvet Sweets consigns frozen cakes to MetroTaste Group under an agreement requiring payment only upon sale. Apex Bank holds a prior blanket lien on all inventory. When MetroTaste defaults, the cakes secure MetroTaste's obligation to pay their own contract price to Velvet Sweets. Velvet Sweets' interest therefore qualifies as attaching to purchase-money collateral.
Premier Manufacturing supplies two shipments of inventory parts to Pablo Perez on successive consignment terms. The second shipment secures the unpaid price of the first shipment as well. When Pablo defaults, the second shipment remains purchase-money collateral to the extent it secures the price obligation for the first shipment.
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Pacific Bank lends funds to Patrick Phan expressly to acquire proprietary dosing software. Patrick grants the bank a security interest in the software itself. The software therefore constitutes purchase-money collateral because it secures the obligation incurred to acquire rights in that same software.
A consignor's retained interest in goods delivered under a qualifying consignment secures the consignee's obligation to pay the price of those goods. The goods therefore qualify as purchase-money collateral to that extent.
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No. The obligation must be incurred with respect to the specific collateral claimed as purchase-money collateral. Financing software alone does not satisfy the requirement when the hardware was acquired through an independent consignment.
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Yes. The definition limits purchase-money collateral to goods or software that secure a purchase-money obligation incurred with respect to that collateral. Status exists only to that extent.
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