Prior Uniform Statutory Provision: None.

Purposes:

1. To state when a secured party whose collateral contributes to a product has priority over others who have conflicting claims in the same product.

2. This Section changes the law in some jurisdictions where a security interest in goods (e.g., raw materials) was lost when the goods lost their identity by being commingled or processed. Under this Section the security interest continues in the resulting mass or product in the cases stated in subsection (1).

3. This section applies not only to cases where flour, sugar and eggs are commingled into cake mix or cake, but also to cases where components are assembled into a machine. In the latter case a secured party is put to an election at the time of filing, by the last sentence of subsection (1), whether to claim under this section or to claim a security interest in one component under Section 9-314.

4. Subsection (2) is new and is needed because under subsection (1) it is possible to have more than one secured party claiming an interest in a product. The rule stated treats all such interests as being of equal priority entitled to share ratably in the product.

Cross References:

Sections 9-204(1), 9-303, 9-312(1) and 9-314.

Definitional Cross References:

"Goods". Section 9-105.

"Security interest". Section 1-201.