Continuous Perfection of Security Interests in Proceeds of Credit Sales of Inventory

Wednesday, January 1st, 1986 at 12:00 am by W. David East and Suzanne Byerly
W. David East and Suzanne Byerly, Continuous Perfection of Security Interests in Proceeds of Credit Sales of Inventory, 1986 Colum. Bus. L. Rev. 115

Secured financing of inventory is commonly used by businesses to raise working capital. In order for a creditor with a security interest in inventory to fully protect its interest, the creditor must also have a perfected security interest in proceeds from the sale or transfer of the collateral. Section 9-306(3) of the U.C.C. provides for the perfection of the security interest in proceeds with important distinctions in the manner of continuation of that perfection based on the differences between cash proceeds and various types of non-cash proceeds. The authors examine the various types of credit sales of inventory and discuss whether the proceeds of such sales may be non-cash proceeds, how the security interest in the proceeds arises, when it attaches and how it remains continuously perfected. This article considers proceeds in the form of checks, notes, accounts receivable, drafts, chattel paper, and proceeds arising from credit card sales. The discussion deals with the 1962, the 1972, and the 1978 versions of Article 9.

Author Information

W.David East, B.A., J.D., Baylor University; LL.M., George Washington University; Professor of Law, South Texas College of Law. Suzanne Byerly, B.A., West Virginia University; J.D., South Texas College of Law; Attorney-at-Law; Houston, Texas.