Legal Definitions - account

In the context of legal rules governing secured transactions, particularly under Article 9 of the Uniform Commercial Code (UCC), an "account" refers to a right to receive payment of a specific amount of money from another party. This right typically arises when one party has provided goods, services, or other value, and payment is due or will become due.

Essentially, if a business or individual is owed money for something they've done or provided, that future payment obligation is often considered an "account." This distinction is crucial because businesses frequently use these rights to future payments as collateral when seeking loans or financing.

It's important to note that while an "account" is a right to payment, certain types of payment rights are specifically excluded from this definition under the law. These exclusions include, but are not limited to, money held in bank accounts (known as deposit accounts), certain investment holdings (investment property), or specific documents that combine a monetary obligation with a security interest in goods (chattel paper). These excluded items are treated differently under secured transaction laws.

Here are some examples to illustrate what constitutes an "account":

• Example 1: Freelance Design Services

  A freelance graphic designer completes a logo design project for a startup company and sends an invoice for $2,500, with payment due in 30 days. The designer has a legal right to payment of $2,500 from the startup.

  How it illustrates the term: This $2,500 payment obligation owed by the startup to the designer is an "account." The designer could potentially use this right to future payment as collateral if they needed a short-term loan before the invoice is paid.

• Example 2: Commercial Equipment Sales

  A manufacturing company sells a large piece of industrial machinery to a construction firm on credit, with the agreement that the construction firm will pay the full amount of $75,000 in 90 days.

  How it illustrates the term: The manufacturing company now possesses a right to payment of $75,000 from the construction firm. This future payment is an "account" for the manufacturer. They might, for instance, sell this "account" to a factoring company to get immediate cash, or use it as collateral for a bank loan.

• Example 3: Recurring Software Subscriptions

  A cloud-based project management software provider offers its service to a corporate client with an annual subscription fee of $12,000, billed monthly at $1,000. The client has committed to the service for the full year.

  How it illustrates the term: The software provider has a right to payment for each of the upcoming monthly $1,000 installments from its client. These future payment rights, representing money owed for services to be rendered over the subscription period, collectively constitute "accounts" for the software company.